Member Article

Online retailers drive surge in Yorkshire industrial market

The rapid growth of online retail across Yorkshire and the Humber fuelled a 51% increase in big box logistics take-up in 2018, according to LSH’s 2019 Industrial & Logistics Market Report.

Take-up across the region rebounded to 8.7m sq ft last year, 8% higher than 2017 and in line with the five-year average.

Big box logistics take-up increased to 3.4m sq ft. The largest deal in Yorkshire saw Clipper Logistics lease Sheffield 615, a refurbished 615,000 sq ft unit, on behalf of online retailer PrettyLittleThing.com.

Other standout deals included Premier Farnell taking 361,000 sq ft at Muse’s Logic Leeds, Jack Wills taking a 390,000 sq ft unit at Parkway Interchange, Sheffield, while ASOS took 190,000 sq ft at West Moor Park, Doncaster.

The report found that take-up was largely concentrated on second hand units, which accounted for 74% of the total space transacted.

There is a mixed picture when it comes to supply. Availability across the region was down by 5% to 15.6m sq ft at year-end. The issue is most critical at the small and medium end of the market with an abrupt 26% fall in unit availability.

However, the supply of mid box and big box space increased by 40% and 4% respectively as speculative development returned to the market.

Several large warehouses are scheduled for completion in 2019 including Barwood Capital’s 259,000 sq ft Super G in Glasshoughton and multiple units at Nimbus Park, Gateway 4 and G-Park, all of which are in Doncaster.

The availability of grade A mid box space more than doubled across Yorkshire and the Humber, with new speculative units easing supply shortages.

Prime rents remained stable across the region’s key markets during 2018, staying within the £5.75 to £6.25 per sq ft range. Secondary rents increased in Doncaster, Hull, Sheffield and Wakefield.

Scott Morrison, Director of Industrial & Logistics at LSH’s Leeds office, said:

“Until recently, the Yorkshire and Humber market has seen less speculative development than neighbouring regions such as the East Midlands and North West.

“Now Yorkshire has more mid box and big box options, thanks in part to an increase in developer confidence, with developers targeting areas which have the right demographics such as labour supply and power capacity. The delivery of high quality, speculative units may provide opportunities for new prime rental benchmarks to be set in 2019.”

Looking at the wider UK market, LSH found that 2018 was a record year for industrial and logistics investment volume. £8.4bn of assets changed hands, propelling the sector to outperform the rest of the commercial real estate market.

James Polson, National Head of Industrial and Logistics at LSH, commented:

“The hive of activity across the industrial and logistics sector continues unabated. The driver remains the UK’s evolving ecommerce sector, with investors and occupiers alike clamouring for stock.

“Looking ahead, investors looking to drive performance will now be banking on rental growth alone, as rising land values and record low yields mean that the era of yield compression has largely come to an end. However, with favourable rental growth prospects vis-à-vis other property sectors, UK industrial and logistics is still forecast to outperform the wider market over the next five years.

“As consumer shopping habits continue to fuel the growth in ecommerce and the evolution of UK distribution, the market is presenting significant opportunities for developers to create the properties that the sector needs.”

This was posted in Bdaily's Members' News section by Richard Abbott .