Low availability of large distribution warehouses (100,000 sq ft +) has brought the Yorkshire Industrial market to a ‘crunch point’ which will result in higher prime rents moving into 2021, according to global real estate advisor Colliers International.
Latest insights from the Colliers International Industrial & Logistics Rents Map for the UK show prime rents for large distribution warehouses continuing to show significant resilience. Rob Whatmuff, director in Colliers’ Industrial & Logistics team in Yorkshire, predicted prices could be driven higher by a combination of lack of current availability and the upcoming delivery, albeit limited in number, of new speculative buildings in prime locations.
“The Yorkshire market is at a crunch point with a critically low supply for large distribution warehouses equal or greater than 100,000 sq ft,” said Whatmuff. “The majority large single unit transactions over the past couple of years have been build-to-suit, which has helped to keep vacancy levels low. The growth in e-commerce across the UK, further accelerated by the ongoing pandemic, has re-ignited the appetite for developers to look at speculative development in Yorkshire’s key logistics locations. The UK logistics market is proving once again to be almost economically countercyclical – seeing growth when other sectors of the market are faring less well, and we anticipate continued demand for Grade A buildings to drive new headline rents as occupiers compete to fulfil their requirements. This demand, coupled with the insatiable appetite from investors to increase their ownerships within the asset class, is providing developers with the confidence to speculatively build the product the market needs.”
“Recent notable leasing activity included Butternut Box, taking 151,000 sq ft of speculatively built space at Tritax Symmetry’s Symmetry Park Doncaster; Verona Tiles taking 106,000 sq ft of speculatively-built space at Nimbus Park Doncaster; Corecare Global acquiring 399,000 sq ft at Wakefield Europort; and, TJ Morris announcing a circa 800,000 sq ft warehouse at Unity, Doncaster. In addition, further sites in Leeds, Wakefield and Hull have recently been announced to provide multi-storey warehouse solutions, linked to the UK’s worst kept (and most acquisitive) ‘secret’ occupier, with other sites in the region also reportedly pipelined.
“As a result, take up reached 5.4 million sq ft in Q1-Q3 2020, the highest ever recorded. Prime rents are proving resilient in this challenging economic environment and if demand continues to be this elevated, it would not come as a surprise to see rents pressing beyond £6.25 per sq ft for larger distribution warehouses into 2021.”
Data from the latest Colliers Rents Map shows that prime industrial rents in Yorkshire for smaller units (20,000 to 100,000 sq ft) are at around £6.50 per sq ft, as achieved at Whitehall Point in Leeds, when 31,500 sq ft of space was let, prior to completion in March.
Simon Hill, Associate Director within Colliers’ Industrial and Logistics team in Leeds, added: “Quoting rents on new schemes have risen and we expect rents to consistently achieve in excess of £6.75 per sq ft over the next 12 months. We understand that an undisclosed occupier is under offer on a slightly smaller unit (17,000 sq ft) at Towngate Link, at what will be a new headline rent for this size of unit at £7.50 per sq ft.
“Rents for smaller warehouses are witnessing even more inflationary pressure due to limited development activity, with prime rents in the Leeds area at around £7.50 to £8.00 per sq ft. This is a 7.4% increase year on year.”
Whatmuff added that there was still strong appetite for land acquisition in Yorkshire to accommodate medium and large distribution warehouses, with headline land value per acre reaching in excess of £650,000. The most recent notable land acquisition in the region occurred when Tungsten Properties acquired 10 acres at Interchange 26 Bradford, J26 M62, at a price of £680,000 an acre.