The industrial & logistics market around London and the South East remains robust with take-up in the first half of the year at around 3.96 million sq ft, 70 per cent above the long-term average.

More often than not the recent success of the sector has been attributed to online retailers leasing space. While this sector continues to remain strong, 2018 has instead been dominated by a number of large freehold deals to the likes of Aldi, B&M and Lidl who between them have acquired land which is set to deliver approximately 3 million sq ft of distribution space across the South East.

These sites would usually be acquired by developers and primed for the delivery of speculative units. Consequently, it’s likely that along with investors they will be frustrated by the lack of opportunities, however this isn’t necessarily a bad thing. In fact, by taking the land off the market it will keep vacancy rates low and maintain sustained rental growth, which in turn will mean rising land values.

This shortage of employment land has been a reoccurring theme across London for many years as it continues to be lost, for the most part, to residential development, meaning restricted levels of supply has led to double digit rental growth in key locations across the region.

To counter this, the proposed London Plan, which looks to prevent the loss of industrial square footage, should in practice help to curb these losses. With residential demand still strong, will intensification of land use through multi-level warehouse units help to solve the problem?

In the meantime, occupiers who are less sensitive to location are now seeking out alternatives. Locations along the A1M are becoming increasingly popular, with developers already capitalising on this by embarking on a number of new-build schemes. For example, Gazeley has secured a pre-let to Zeus Packaging for 97,500 sq ft at G-Park in Biggleswade and has just speculatively built a further 105,000 sq ft of space on the adjacent plot as a result.

A similar story can also be seen down the M40 in both Banbury and Bicester, where db symmetry is speculatively building units of 160,000 sq ft and 333,000 sq ft respectively on the back of success in the scheme's earlier phases.

Overall, the picture across London and the South East remains a positive one. A healthy tenant mix, stable vacancy rates and sustained rental growth will ensure that this remains the same as we head towards the end of the year. What’s more, while the M1 corridor remains the primary distribution corridor, we are likely to see market conditions continue to shed light on new key locations.

Further information

Read more: Big Shed Briefing