More than 4m sq ft of grade-A big-box industrial and logistics sublets have hit the market as major owner-occupiers such as Amazon make disposals, according to new research.
Data from BNP Paribas Real Estate showed that out of the 30m sq ft total supply of existing big box spaces available in Q1 this year, more than 4.1m sq ft has been released back into the market via subleasing.
The figures reflect measures taken by owner-occupiers to consolidate their properties at a time of market uncertainty, according to researchers from BNP PRE.
The news comes as industrial take-up for facilities measuring more than 100,000 sq ft reached 6.8m in Q1, down by 49% on the same quarter in 2022, and below the 10-year quarterly average.
The largest occupier deals of Q1 2023 include TK Maxx taking 454,130 sq ft at Crewe Commercial Park, Hello Fresh taking 434,000 sq ft at The Orchard in Derby and DSV taking 387,000 sq ft at Brackmills Gateway, Northampton.
By specification, build-to-suit space accounted for 44% of take-up, followed by speculatively developed locations (37%) and second-hand space (19%).
In terms of tenant types, 58% of activity was attributed to logistics players, followed by manufacturing (25%), and retail (16%).
The Midlands saw the highest take-up levels, with the East Midlands equating to 2.5m sq ft of all deals, followed by the West Midlands at 1.4m sq ft.
There is around 13.5m sq ft of industrial and logistics space under construction in the UK, more than 3m sq ft of which is available for build-to-suit.
The East Midlands has more than 4m sq ft in development, which BNP PRE said would not satisfy two quarters of demand, since it is the most popular location for logistical needs. A further 43m sq ft of proposed space is available at various stages of planning.
BNP Paribas Real Estate head of industrial and logistics agency Ben Wiley said: “Following the exponential rise in take-up over the past few years, a number of occupiers are taking a slight pause to review their options given the current economic and political challenges.
“Although demand has remained relatively resilient, decision-making is naturally taking longer than usual, and occupiers are exercising more caution than ever with regards to their leases. The majority are seeking price reductions or improved terms, which, to date, is still not transpiring with supply remaining tight.
“Since the start of the year, we have seen unprecedented levels of new enquiries coming through from a wide range of occupiers, particularly from new UK entrants – which we anticipate will continue well into next year. Conversely, a number of high-profile occupiers are consolidating their spaces, which in many cases was only taken in the last 24 months or never occupied. Encouragingly, there has been strong demand for these, partly due to the units’ stronger ESG credentials and EPC ratings.”
BNP Paribas Real Estate industrial markets researcher Eoghan Morgan said: “Our latest data suggests that logistics operators took over half of big box units last quarter, with deal activity further backing up the onshoring trend as occupiers seek to challenge the on-going supply chain issues.
“We’re seeing take-up of this nature directed toward those which offer a mix of manufacturing and distribution, making ‘last mile’ space that occupiers like Amazon are subleasing, extremely attractive to these tenants.”
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