Speculative sheds fail to keep pace with demand

Vacancy rates in the UK’s industrial market have hit a record low as supply tightens. A vacancy rate of 3.1% over the second and third quarters for units larger than 100,000 sq ft pointed to an undersupplied market, even given 18m sq ft of speculative development over the course of the year, said the team at Colliers. Vacancy rates range from 1.2% in Yorkshire and Scotland to 4.8% in the South East and North East. Annual rental growth hit a record high of 12.4%  in the third quarter, but the agency added that the leasing market is cooling and will deliver average annual rental growth of 4.7% to 2026. Len Rosso, head of industrial and logistics at Colliers, said: “There is currently 16.2m sq ft of speculative supply either under construction or where developers have announced construction works to start in early 2023. However, construction plans on some of these schemes may be revisited due to weaker land and capital values, which are challenging development appraisals.” The greatest amount of planned speculative space is in the South East, at 4.2m sq ft, followed by Yorkshire at 4m sq ft. The most underserved is Scotland, with only one unit of 126,960 sq ft. Andrea Ferranti, head of industrial and logistics research at Colliers, said: “Developers are struggling to bring sites forward fast enough to maintain a healthy supply/demand balance. Given the economic headwinds, it is plausible to expect a slowdown in occupational demand in 2023. However, the relative lack of supply will sustain rental growth over the foreseeable future, with average annual rental growth in the industrial sector forecasted to outperform other commercial real estate sectors to 2026.” To send feedback, e-mail tim.burke@eg.co.uk or tweet @_tim_burke or @EGPropertyNews Image © Scott Webb/Unsplash