Supply

The supply of units over 100,000 sq ft has increased in 2020, reaching 7.23 million sq ft through 30 separate units, a 15% increase from the end of 2019. However, due to the increased levels of BTS stock levels are rising faster than supply meaning the vacancy rate remains low at 6.45%. Moreover, using the five-year average, annual take-up there is just 1.08 years left of supply within the region.

The largest available unit on the market is DIRFT 535 totalling 536,991 sq ft, speculatively developed by Prologis. The current supply is skewed towards smaller sized units with 60% by unit count being within the 100,000–200,000 sq ft size band. The region currently has four units over 500,000 sq ft, more than any other region in the UK.

An increase in speculative development completions along with comprehensive refurbishments has caused the proportion of Grade A supply to rise to 73%, up from 63% at the end of 2019.

Take-up

A record 4.75m sq ft of space was transacted on H1 2020 with demand coming from a diverse range of occupiers, up 115% on the long-term H1 average. We’ve seen multiple large deals including Aldi committing to a 1.3 million build-to-suit development and Amazon signing for a 20-year lease at Nottingham 550. It should be noted the East Midlands has seen multiple short-term deals in response to Covid-19, 17% of space transacted in H1 2020 has been taken in leases totalling a year or below.

Build-to-suit transactions continue to dominate the market accounting for 60% of take-up in H1 2020 followed by 20% being Grade A speculatively developed and 20% being second hand quality.

The 500,000+ sq ft size band has seen the highest activity accounting for 64% of all space transacted through four deals. We anticipate further activity in this size range in H2 2020.

Development pipeline

There are currently just three units under construction which total 1.17m sq ft, all of which are based at Gazeley’s Magna Park South Lutterworth development.

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