Supply

The supply of units over 100,000 sq ft has rapidly declined in the past year, standing at 3.42m sq ft across 17 separate units. This has pushed the vacancy rate to the lowest level on record at 2.98%, leaving just 0.34 years’ worth of supply in the region. Moreover, Savills is aware that c. 900,000 sq ft of the vacant supply is currently under offer, set to exchange in Q3 2021. This will compress the supply and vacancy rate further, pushing rental growth in the process.

The largest unit on the market is Magna Park Lutterworth South 1 comprising c.750,000 sq ft – it’s currently under offer due to exchange in Q3 2021.

The current supply is skewed towards smaller-sized units with 82% by unit count being within the 100,000–200,000 sq ft size band. Above 200,000 sq ft, there are only three units on the market, meaning that occupiers will increasingly be pushed to examine BTS options to satisfy such requirements.

Take-up

H1 2021 take-up has reached 5.08m sq ft across 20 separate transactions, with demand coming from a diverse range of occupiers, up 113% on the long-term H1 average.

Occupier preference continues to revolve around better quality units. In 2021, 81% of space transacted has been Grade A, with the remaining being Grade B space. In terms of specification, 57% of space transacted has been second-hand space, 33% speculatively developed space, with the remaining being built-to-suit space.

In terms of deal count, 50% have been within the 100,000–200,000 sq ft size band, 20% within the 200,000–300,000 sq ft band, with the balance for larger units. Savills has seen an uptick in requirements for larger units in 2021 which should mean the average size deal continues to increase from its current level of 254,000 sq ft.

Development pipeline

There are currently 14 units under construction, which total 3.43m sq ft. Pleasingly, 57% of these units are over 200,000 sq ft, which should help cater for the larger requirements in the market.

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