Supply

There are now 26 units available over 100,000 sq ft in the East Midlands, totalling 5.37m sq ft – this equates to a vacancy rate of 4.25%. The largest unit on the market is Campus 450 at DIRFT, which provides 451,002 sq ft of Grade B second-hand space. Savills is aware that 12% of the current supply is under offer and due to exchange in Q1 2023.

The quality of the available supply has witnessed a shift in recent months as speculative schemes have reached PC. Now, 80% of the current supply is Grade A space, 17% is Grade B space, and 3% is Grade C space.

In terms of unit count, there are 16 units within the 100,000–200,000 sq ft size band, five within the 200,000–300,000 sq ft size band, four within the 300,000–400,000 sq ft size band and a single unit within the 400,000–500,000 sq ft size band.

It’s positive to see developers have responded to the chronically low levels of supply in the region. Now, as the majority of units are better quality, we are seeing a greater level of enquiries on existing stock from occupiers that could have gone down the build-to-suit route or into neighbouring regions. This has kept prime rents high at £9.75 psf.

Take-up

Take-up in 2022 has reached 8.31m sq ft across 27 transactions which is 40% above the long-term annual average. In terms of deal count, there are, on average, 20 transactions per annum. The average unit size transacted has increased to 307,645 sq ft from 268,804 sq ft a year ago which highlights the shifting occupier demand towards larger units.

Analysing transactional activity by specification shows a continued trend towards better quality units: 39% of space transacted in 2022 has been built-to-suit space, 28% has been pre-let speculatively developed space, 20% has been new speculatively developed space, and 13% has been second-hand space. The East Midlands continues to attract occupiers and is a popular location for occupiers seeking to consolidate their supply chains and maximise efficiencies.

By unit count, 33% of transactions were within the 100,000–200,000 sq ft size band, 26% were within the 200,000–300,000 sq ft size band, 15% in the 300,000–400,000 sq ft size band, 7% the 400,000–500,000 sq ft size band, and 19% over 500,000 sq ft. 3PLs have been most active, accounting for 53% of all space transacted, manufacturers 17%, the ‘other’ sector 13%, grocery retailers 10%, high street retailers 5%, and online retailers just 2%. This demonstrates resilience despite the fall in online retailer activity.

Development pipeline

There are currently 12 units under construction, totalling 2.82m sq ft, 40% of which is under offer. There are seven within the 100,000–200,000 sq ft size band, four within the 300,000–400,000 sq ft size band, and one over 500,000 sq ft.

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