Logistics vacancies increase while delivery slows
Vacancy rates have increased in the logistics sector but rents are expected to rise following a slowdown in the number of units under construction, according to new figures from Colliers.
Q1 2024 saw the completion of 4.7m sq ft of speculative warehouse space, taking availability for 100,000-plus sq ft logistics units to 43m sq ft. This puts vacancy rates at 7.2%, up from 6.8% in the preceding quarter of Q4 last year.
However, Colliers has identified 8m sq ft of logistics space set to arrive on the market, which is down from 9.7m sq ft in the previous quarter. It says there are 16 facilities measuring between 100,000 sq ft and 200,000 sq ft being built in the UK, and four megasheds of more than 500,000 sq ft.
Vacancy rates have increased in the logistics sector but rents are expected to rise following a slowdown in the number of units under construction, according to new figures from Colliers.
Q1 2024 saw the completion of 4.7m sq ft of speculative warehouse space, taking availability for 100,000-plus sq ft logistics units to 43m sq ft. This puts vacancy rates at 7.2%, up from 6.8% in the preceding quarter of Q4 last year.
However, Colliers has identified 8m sq ft of logistics space set to arrive on the market, which is down from 9.7m sq ft in the previous quarter. It says there are 16 facilities measuring between 100,000 sq ft and 200,000 sq ft being built in the UK, and four megasheds of more than 500,000 sq ft.
Colliers is forecasting average industrial rental growth of 3.7% this year.
It expects take-up this year to be broadly in line with 2023, but predicts a new round of logistics development to begin next year following a drop in interest rates and a general election.
Major occupational deals so far this year include a 1.2m sq ft prelet to Yusen Logistics at SEGRO Logistics Park Northampton as well as a 500,000 sq ft prelet to Greggs at SmartParc Segro Derby.
Andrea Ferranti, head of industrial & logistics research at Colliers, said: “Occupier demand has been sustained in the first quarter of 2024. With 5.8m sq ft of warehouse space already taken up in the first three months of the year, in line with the last quarter, despite the continuing economic uncertainties, it’s clear that demand remains resilient.
“Although investors’ conviction towards the industrial sector is strong, elevated borrowing costs continue to challenge financial appraisals, making it challenging for speculative funding deals. Construction costs have stabilised, providing some certainty on that front, however, we do not foresee a generalised uptick in speculative development until there is clear evidence that borrowing rates are reducing.”
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