Nationwide overview

19 July 2017, by Richard Sullivan

With no sign of over development in the sector, the market is well positioned to ride out a short period of subdued occupier demand, when compared to the record levels of take-up achieved in 2016

 

Given the political uncertainty which engulfed the UK after the vote to leave the EU it was, in many respects, astonishing to see take-up levels reach record levels in 2016.

Into 2017 negotiations between the UK and the EU are now under way, inflation is increasing, and the residual impact of an unexpected General Election is still being felt. It should come as little surprise therefore that transaction levels in the sector have faltered.

Two key demand drivers however have not changed; the continued shift towards multi-channel retailing and the continued investment in, and growth, of the UK automotive manufacturing sector. And on the supply side, development remains restrained meaning that supply levels are still way below any previous peak.

Latent demand should see take-up levels increase into the second half of the year and there is no evidence to suggest a development boom is planned.

 

 
Amazon four level warehouse under construction at London Distribution Park

▲ Amazon four level warehouse under construction at London Distribution Park. Image Source: Oranmore Precast

Take-up

■ At a nationwide level take-up has reached 11.8m sq ft for the year to date, a fall of 4.2m sq ft on 2016, but 1% higher than the 10-year average. By deal count, however, the picture is less pleasing, with 47 transactions completed in the first half of the year, the lowest level since 2012.

■ The headlines were also bolstered by the news that Amazon has concluded a deal to purchase land and construct another 2.2m sq ft unit near Bristol, similar to what is already under construction in Tilbury. Savills research will continue to monitor deals of this type, which may suggest the evolution of a new sub class in the sector.

FIGURE 1

National take-up by deal count

 
Figure 1

Source: Savills Research

Supply and Pipeline

■ Total supply in the UK has risen 1.5m sq ft in 2017 to 28m sq ft. This has been driven in the most part by a slight increase in the number of speculative units reaching completion and now entering our supply statistics.

■ 3.6m sq ft of space is currently under construction and due for delivery in 2017 and into 2018.

FIGURE 2

Speculative developments announcements fall

 
Figure 2

Source: Savills Research

 

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Richard Sullivan

Richard Sullivan

Director
Industrial & Logistics

Savills Margaret Street

+44 (0) 20 7409 8125

 

Kevin Mofid

Kevin Mofid

Director
Commercial Research

Savills Margaret Street