Sharp drop in industrial stock supply
YORKSHIRE saw the steepest fall in industrial supply of any UK region during 2014 with overall availability falling to just 5%.
Overall 2014 was a record-breaking year for the UK industrial and logistics sector, says Lambert Smith Hampton, as take-up reached new heights, investment activity hit previously unseen levels and speculative development returned.
However, Yorkshire and the Humber saw take-up fall to 7.6m sq ft after a record 2013 and was 28% below the five-year average. Nevertheless supply continued to fall across the region from 7.4% to 5.2% with Sheffield seeing its availability rate halving to 4.4%.
Significant deals in the region included Great Bear Distribution taking 412,519 sq ft at LPP in Sheffield, Lawcris Panel Products acquiring the freehold of the 155,282 sq ft Blue Steel 45 building in Leeds and WH Malcolm taking 135,172 sq ft at Latitude 135 in Castleford.
Simon Rhodes, head of industrial and logistics for Yorkshire and the Northeast, said: “While there remains some limited availability across the region, demand is likely to outstrip good quality supply in 2015 which could see a further hardening of rents as they move beyond pre-2008 levels in some areas.
“However, looking to the medium term we are now seeing more speculative development underway on schemes in the Aire Valley Enterprise Park and along the M62 corridor providing much-needed stock for what remains an incredibly active market.”
According to the latest edition of the company’s annual Industrial & Logistics Market report, take-up nationally rose 8% to 103.3m sq ft as a result of robust economic expansion and the continuing structural change in the logistics sector caused by the growth of online shopping.
The strong recovery in demand has put the supply of industrial stock under acute pressure and started to influence the nature of occupier activity: despite considerable demand, grade A take-up was actually the lowest on record last year.
With economic growth forecast to strengthen and with availability tightening, Lambert Smith Hampton predicts that prime and secondary rents in many markets will surpass their pre-recession highs in the next 12 months and up to 4.4m sq ft of new space could commence construction on a speculative basis during 2015.
In the investment market, a record £6.6bn of industrial assets changed hands in 2014, highlighting the sector’s positive fundamentals. As prime yields harden, the authors expect investors to move further up the risk curve to secure higher returns and to increasingly consider development to secure scarce stock.
Steve Williams, national head of industrial and logistics at Lambert Smith Hampton, said: “The market has experienced unprecedented levels of demand and we expect this to continue for the remainder of the year, with speculative development satisfying only part of the pent-up demand for grade A space.
“Continued restriction of supply will see rents drive on to heights not seen since 2007/08.”
