Supply down by 33%; vacancy rate now 3.75%
Peterborough South, where Firethorn, advised by Savills, is delivering 473,000 sq ft of speculative development
The proximity to major UK ports and access to the rest of the UK continues to attract occupiers, with 2021 seeing a rise in European-based firms acquiring space. Supply has dropped significantly, resulting in a 16% increase in rents, a rise in the average lease length, along with a reduction in incentives offeredWilliam Rose, Director, Peterborough
The level of supply in the market has fallen by 33% in the last year. Currently, there is 985,000 sq ft available across three units. The largest unit on the market is at Suffolk Park, comprising c. 400,000 sq ft of Grade A space; it’s currently under offer. Now, 60% of the space on the market is Grade C (two units), and 40% is Grade A (one unit).
According to the three-year average annual take-up, there is just 0.41 years' worth of supply in the market. Further analysis demonstrates that all of the Grade C space available requires refurbishment or even demolition to accommodate modern occupiers. There is a single unit available within the 200,000–300,000 sq ft size band, comprising 242,850 sq ft, and two units available within the 300,000–400,000 sq ft size band, together totalling 742,454 sq ft.
The vacancy rate remains very constrained at 3.75%; this continues to push on rental growth and will lead to the modest forecast of 3.6% p.a in the next five years to be eclipsed.
Take-up in 2021 has reached 2.66m sq ft across six separate transactions; this is 10% above the three-year annual average and 136% above the long-term annual average.
As the market continues to be chronically undersupplied, consisting of mainly second-hand, low-quality stock, occupiers are continuing to go down the build-to-suit route to acquire space. In 2021, 49% of take-up was built-to-suit, 28% was second hand, and 23% was new speculatively developed space. In terms of Grade, it’s evident that occupier preference continues to revolve around better units as all space transacted this year was Grade A: 23% was Grade A speculatively developed space, and 77% was Grade A space.
In terms of deal count, transactions have been spread across the size bands, with 50% being within the 200,000–300,000 sq ft size band, 17% the 300,000–400,000 sq ft size band, and 33% in the 500,000 sq ft+ size band. The average deal size this year was 442,683 sq ft, up from 134,688 sq ft in 2010.
The recent announcement of the Freeport East site within the region has driven enquiries from a diverse range of occupiers, particularly on the Eastern stretch of the A14 and the existing designated sites within the Freeport boundary due to the vast array of benefits locating within them provides.
Currently, the region has seven units under construction, speculatively totalling 1.48m sq ft. There are three units within the 100,000–200,000 sq ft size band and four within the 200,000–300,000 sq ft size band. Occupiers will need to look to sites in order to satisfy larger requirements for good quality space.
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