Vacancy rate remains low at 6.37%; 1.14 years’ worth of supply left
K161 at Konect 62 in Knottingley, where Cole Waterhouse & Henderson Park, advised by Savills, has recently let 161,000 sq ft to Oakland International.
Savills has recorded an uptick in the available supply as second-hand space returns to the market; however, a large proportion of these are unsuitable for many occupier’s requirements, particularly surrounding ESG credentials. Savills expects, with continuing issues surrounding built-to-suit developments and their viability, many recent requirements will filter towards existing larger stock which will cause the vacancy rate to fall
Tom Asher, Director, Leeds
Supply
The addition of large units to the market has caused the supply of warehouse space to rise. There is now 9.71m sq ft of warehouse space across the two regions, with 8.42m sq ft available in Yorkshire and 1.29m sq ft in the North East. This results in a vacancy rate of 6.37%, providing 1.14 years of supply based on the five-year annual average take-up. The supply level in Yorkshire is increasingly dynamic, with some micro-locations experiencing oversupply while others face undersupply. Currently, the West Yorkshire market appears to be undersupplied compared to the South Yorkshire market. Savills advises developers to consider micro-market dynamics to realise rental growth potential.
Of the space on the market, 51% is classified as Grade A, 21% as Grade B, and 28% as Grade C. Occupiers are now realising the importance of securing good quality units for long-term resilience and are actioning lease terms to consolidate or improve their existing portfolios. By unit count, there are 23 units within the 100,000–200,000 sq ft size band, seven within the 200,000–300,000 sq ft size band, five within the 300,000–400,000 sq ft size band, four within the 400,000–500,000 sq ft size band, and two over 500,000 sq ft. Currently, the two largest units make up 12% of the available sq ft.
Take-up
Take-up in 2023 reached 4.55m sq ft across 23 transactions – a dip from previous years. Occupiers have understandably been cautious in the first half of 2024, with take-up reaching 2m sq ft across 13 transactions; 81% of activity occurred in Yorkshire whilst 19% in the North East. In terms of sq ft, this is a decline from the long-term H1 average; however, when looking at unit counts, the region is performing 30% ahead. This shows occupier activity continues but with a preference towards smaller unit sizes. Analysing take-up by specification shows 29% of space transacted was speculatively developed space, 6% was BTS space, and 65% second-hand space.
By unit count, there have been ten transactions within the 100,000–200,000 sq ft size band and three within the 200,000–300,000 sq ft size band. By sector, 31% of activity has stemmed from third-party logistics firms, 16% from wholesalers and 15% from manufacturers. The remainder was spread across various grocery and high street retailers.
Development pipeline
There are now just three units under construction in the wider region totalling 460,476 sq ft as developers pause consented developments. This will keep the vacancy rate lower as supply is absorbed. There are two in the 100,000–200,000 sq ft size band and one in the 200,000–300,000 sq ft size band.