Research article

The logistics market in London and the South East

Vacancy rate drops to 3.49%, the lowest level since 2016


Panattoni Park Luton where Savills are instructed to market 346,132 sq ft of speculatively developed space

Take-up in 2020 has been the best on record reaching 8.26m sq ft. The region is now severely undersupplied with just 0.61 years left given the five-year annual average take-up

Toby Green, Director, Head of London and South East

Supply

2020 has seen the strongest level of transactional activity ever recorded which has reduced the level of supply to 4.19m sq ft across 26 units, a 27% decrease on the level seen at the beginning of 2020.

Occupier preference towards Grade A space has shifted the quality balance of the available supply. Now, of the space on the market, 55% is classified as Grade A compared to 71% at the end of H1 2020. The largest unit on the market is Panattoni Park Luton 346, providing 346,132 sq ft of speculatively developed space.

The supply is skewed towards the smaller size bands, by unit count, 81% of the available stock is within the 100,000–200,000 sq ft size band and 12% is within the 200,000–300,000 sq ft size band. The remaining two units are within the 300,000–400,000 sq ft size band.

2020 continues to see a significant increase in freehold demand for large sites for the Data Centre and Film sectors, accounting for c.8% of take-up in 2020. These are removing Industrial & Logistics sites from the future development pipeline.

Take-up

2020 take-up totalled 8.26m sq ft, a 21% increase above the five-year average for the region and 160% above figures seen 10 years ago. The largest deal was Amazon committing to a 2.3m sq ft unit at Littlebrook in Kent.

Occupier preference continues to lean towards high-quality Grade A space totalling 87% of all take-up. Build-to-suit space dominated accounting for 52% of space transacted, followed by speculatively developed space at 28% with the remaining being second-hand space.

2020 saw 29 separate deals, a 19% decrease on 2019, but 18% above the long-term average. By unit count, 66% were within the 100,000–200,000 sq ft size band, 7% in the 200,000–300,000 sq ft size band, 14% in the 300,000–400,000 sq ft size band, 10% in the 400,000–500,000 sq ft, and 3% above 500,000 sq ft. With fewer transactions in 2020, the average deal size has increased substantially from c. 205,000 sq ft seen last year to c.285,000 sq ft in 2020.

Development pipeline

Developers have responded to the lack of supply with 16 units under construction totalling 2.72m sq ft, a 101% rise from the start of last year. Eight are in the South East at 1.6m sq ft and eight within the M25 totalling 1.12m sq ft. There are 12 units under construction in the 100,000–200,000 sq ft size band, three in the 200,000–300,000 sq ft size band, and a single unit in the 300,000–400,000 sq ft size band.

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