There have been plenty of economic and political issues with the potential to impact adversely on the UK industrial and logistics market in 2019, but the 'stats' and general sentiment paints a positive picture.

In the UK, Brexit has dominated the political debate, so much so that a general election was called in December 2019. In a European context, economic growth in key markets such as Germany has stalled, and at a global level, there remains continued uncertainty regarding future trading arrangements between the USA and China.

As we move into 2020 with a government that has a strong working majority, we expect that occupiers will be freed from the shackles of uncertainty which may have delayed investment decisions in recent years. This could manifest itself in a number of ways including new entrants to the market, mergers and acquisitions or simply business investment to optimise supply chains for an omnichannel retail environment.

Take-up

Despite the aforementioned geopolitical uncertainty, it is pleasing to report that take-up for units over 100,000 sq ft has reached 34.21m sq ft across 136 separate transactions; both measures up on their long-term averages by 31% and 24% respectively.

Leading the pack geographically are the East Midlands, the South East and Yorkshire where new take-up records have been set.

Interestingly by size, the market rebalanced somewhat in 2019 with less space transacted for units over 500,000 sq ft, down 3.65m sq ft to 9.84m sq ft. This meant that the key driver of demand came from units between 100,000–200,000 sq ft which accounted for 35% of all the space transacted.

Another positive trend in our take-up stats was the fact that no one sector or occupier dominated, as has happened in previous years. Indeed, 2018’s largest occupier Amazon only accounted for 11% of the market this year.

Supply and Pipeline

Nationwide supply has risen by 3.92m sq ft and now stands at 35.79m sq ft, reflecting a vacancy rate of 6.65%. Given that we saw 8.88m sq ft of speculative space achieve practical completion in 2019, it is remarkable that vacancy increased by just 39bps. We are not forecasting any sharp rise in supply in 2020 as there is currently just 6.56m sq ft, across 30 units, under construction. However, given a generally more stable and positive economic outlook, we may see some further speculative development announcements during the course of 2020.

_{Read the articles within Big Shed Briefing below.}