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Vacancy rate at 7.35% forecast to fall to c.6% by Q4 2024
Recently completed unit for The Range at Gateway 14 Stowmarket where Savills advised Jaynic on a 1.2m sq ft bespoke build.
Record levels of inflation along with rising interest rates have caused many existing requirements in the region to be put on pause. As certainty has returned, we have seen occupier interest revive. Those deals that have happened in 2023 have been at market rents; incentives have, however, now pushed back to historical norms and average a month per year term certain
William Rose, Director, Peterborough
Supply
The level of supply in the market has risen 186% in the past 12 months to stand at 2.63m sq ft across nine units. Given the five-year average annual take-up, there is 1.14 years worth of supply in the region. The largest unit currently being marketed is Peterborough 736, comprising c.736,000 sq ft of Grade B second-hand space.
In terms of grade, 21% of space on the market is Grade A speculatively developed space, 23% is second-hand Grade A space, 38% is Grade B space, and the remaining 18% Grade C space. Whilst by unit count, there are two units available within the 100,000–200,000 sq ft size band, four within the 200,000–300,000 sq ft size band, two within the 300,000–400,000 sq ft size band, and one over 500,000 sq ft.
The vacancy rate currently stands at 7.35%. Savills modelling has analysed the various lease events, development pipeline and chance of company failure, which suggests the availability will peak at just 7.41% before falling into 2024. Our newest model, Savills rental growth prospects suggests 4.9% rental growth per annum over the next five years.
Take-up
Take-up in 2023 has reached 622,841 sq ft across four transactions – this is a 51% fall below the long-term annual average. The average unit size transacted in 2023 stands at 155,710 sq ft.
In terms of specification, 41% of space transacted has been second-hand space, 39% has been BTS space, and 20% has been pre-let speculatively developed space. By grade, 20% of take-up involved Grade A speculatively developed space, 39% Grade A space, 21% Grade B space, and 20% Grade C space.
By unit count, three transactions were within the 100,000–200,000 sq ft size band, and there was a single transaction within the 200,000–300,000 sq ft size band. Furthermore, Savills requirements data demonstrate a further shift towards smaller-sized units, unsurprising given the current global economic and political uncertainties.
Occupier demand has stemmed from third-party logistics firms, accounting for 60% of all take-up, parcel companies accounted for 20% of take-up and wholesalers at 20%.
Development pipeline
There is now no development pipeline. Occupiers seeking space within the region must either go down the BTS route to acquire space or acquire one of the nine existing units.