Supply falls from peak of 6.56m sq ft in recent months as deals complete
Viking Park Widnes, where EQT Exeter recently reached practical completion on 201,240 sq ft of speculatively developed space. Savills is the agent.
Savills’ vacancy rate model, which has analysed lease events, potential tenant failures, and the future development pipeline, indicates that the vacancy rate peaked at the predicted 7.01% in February. Savills expects it to fall below 6.5% by the end of the year, due to a lack of new development announcements and minimal risk of tenant failures
Jon Atherton, Director, Manchester
Supply
Comparing the level of vacant warehouse space from this time twelve months ago highlights a 12% increase. Monthly analysis suggests we are past the peak, which occurred in February. Currently, there is 6.28m sq ft available across 31 units. Using the five-year annual average take-up, this equates to just 1.15 years’ worth of supply. Savills’ internal requirements index supports this view, showing a significant uptick in the past quarter. Additionally, with almost 24% of the supply under offer, the vacancy rate is set to fall imminently.
In terms of grade, 45% of available space is Grade A speculatively developed space, 16% is second-hand Grade A space, 18% is Grade B, and the remaining 21% is low-quality Grade C, which is arguably better suited for redevelopment.
The majority of the supply consists of smaller units, leading occupiers seeking large developments to pursue BTS options. There are 25 units in the 100,000–200,000 sq ft size band, two in the 200,000–300,000 sq ft size band, four in the 300,000–400,000 sq ft size band, and two over 500,000 sq ft.
Take-up
Take-up in 2023 totalled 4.02m sq ft across 16 transactions, broadly in line with the long-term average. Occupiers in H1 2024 have paused due to economic and political uncertainties, resulting in take-up falling to 1.39m sq ft across six transactions. In the last two months, there has been an uptick in enquiries, causing 24% of the vacant supply to be placed under offer.
Analysing take-up by specification demonstrates an occupier shift towards better quality units, driven mainly by ESG performance and enhanced automation capabilities. So far, 2024 has seen 12% of activity in pre-let speculatively developed space, 60% in BTS space, and 28% in second-hand space.
In terms of deal count, there have been three units transacted in the 100,000–200,000 sq ft size band, two in the 200,000–300,000 sq ft size band, and one in the 400,000–500,000 sq ft size band. On average, there are eleven transactions annually in the 100,000–200,000 sq ft size band, three in the 200,000–300,000 sq ft size band, two in the 300,000–400,000 sq ft size band, one in the 400,000–500,000 sq ft size band, and one over 500,000 sq ft. Manufacturers have dominated activity in 2024, accounting for 80% of all activity followed by wholesalers at 20%.
Development pipeline
There are currently eleven units being speculatively developed, totalling 2.65m sq ft. There are six units in the 100,000–200,000 sq ft size band, two in the 200,000–300,000 sq ft size band, one within the 300,000–400,000 sq ft size band, one in the 400,000–500,000 sq ft size band, and one over 500,000 sq ft.