Supply

A strong speculative development pipeline has meant that supply in the region has remained broadly stable and shows a market in equilibrium. However, more recently, we have seen multiple units removed from the market due to reoccupation whilst increasing rental growth has enabled the redevelopment of Grade C stock, leading to a decline in the available supply.

Now, the region has 3.67m sq ft available across 25 units, a fall of 1.26m sq ft over 12 months which reflects a vacancy rate of 2.89%. In terms of Grade, 52% of the available supply is Grade A, and 24% is Grade B & C. By unit count, 88% of the available space is within the 100,000–200,000 sq ft size band, and 12% is within the 200,000–300,000 sq ft size band. Given occupiers’ preferences for existing good quality space, there remains the capacity in the region to deliver more units over 300,000 sq ft on a speculative basis.

Take-up

The second half of 2021 saw 4.8m sq ft of new leases signed, setting a new H2 take-up record, which, in turn, has meant that annual take-up has reached 7.34m sq ft, the fourth year in a row where take-up has exceeded 7m sq ft. In total, there were 43 separate transactions in the region which exceeds the previous record of 35, set in 2019, by 23%.

Perhaps the most interesting trend in the region, which make the take-up figures all the more impressive, has been the shift in deals away from the larger end of the market to be dominated by deals in the 100,000–200,000 sq ft category. Indeed, in 2021 just 15% of deals were for units over 400,000 sq ft, against a long-term average of 29%, whereas units under 200,000 sq ft accounted for 65% of take-up, the highest proportion of the market ever recorded.

Analysing the sub 200,000 sq ft segment paints a robust picture of demand, as whilst Amazon parcel hubs accounted for seven of the 36 deals in this size band, the demand has come from a wide range of industries including retailers, 3PLs, parcel companies and film studios. Whilst there has only been one deal over 500,000 sq ft; John Lewis taking the former Tesco unit in Milton Keynes which totals 621,579 sq ft, it should also be noted that MH Star, a Chinese e-commerce company, took the entirety of G Park Bedford which totals 534,000 sq ft across three units, such is the lack of supply in the larger size bands.

Development pipeline

There are now 23 units under construction across the region, totalling 3.6m sq ft. There are no units under construction over 350,000 sq ft, and 64% of the units due for delivery in 2022 are under 200,000 sq ft. Within the M25, just 667,000 sq ft is under construction.

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