Another record-breaking quarter for UK Logistics take-up in Q3 2020
Take-up of UK Logistics space in Q3 2020 has surpassed the record-breaking take-up level in Q2 to reach a total of 13.33m sq ft, according to the latest research from global real estate advisor, CBRE.
This is 111% higher when compared to Q3 2019, which saw take-up totalling 6.31m sq ft. The continuation of strong sector performance through Q3 2020 takes the total space acquired in the first three quarters of the year to 32.57m sq ft. This compares to the last strongest full year performance when take-up reached 31.78m sq ft in 2018.
A total of 45 deals have completed in Q3 2020, compared with 21 for Q3 2019 representing an increase of 114%. The average unit size was slightly smaller at 296,171 sq ft, compared to 300,709 sq ft for the same period in 2019.
The first six months of the year saw take-up activity concentrated in the East Midlands, the South East and Yorkshire & the North East. However, Q3 has seen demand and take-up spread more evenly across the UK. The East Midlands led the way with 21.1% but was narrowly followed by the West Midlands at 20.0%, the South West at 18.5%, the South East at 15.3%, the North West at 13.8% and Yorkshire & the North East at 11.3%.
At sector level, pure online retail continues to account for the largest proportion of take-up at 33.3%, reflecting the shift in shopping trends towards online throughout Covid-19. There was strong representation from third-party logistics operators accounting for 27.4%, general retail at 16.0% and food retail at 6.2%.
Short-term lettings started to tail off throughout the quarter, something that was more prevalent in Q2 due to Covid-19 requirements. The anticipated continuation of this requirement has not come to fruition, however a trend that is now materialising is the take-up of existing speculative and second-hand warehouses.
In Q3 2020 speculative take-up accounted for 34.0% and second hand at 26.3%. Build-to-suit units still led demand, but at 39.7% this is some 20% lower than the figure of 60.0% in Q3 2019. This shows that requirements from occupiers are becoming focussed on securing existing buildings rather than waiting for bespoke design and build solutions to be constructed.
The extraordinary level of take-up seen in Q2 has now been exceeded in Q3. To put the numbers into context, the past six months take-up exceeds the annual total for eight of the past ten years. Concerns around Covid-19 and Brexit have not supressed demand, and consumers in the UK have fundamentally changed the way they shop.
The sudden rise in e-commerce due to the pandemic will have a lasting effect and has concentrated five years growth of online sales within just six months. This has altered the logistics expansion plans of retailers and accelerated their needs, pushing them to take readily available space. With supply struggling to cope with the abrupt increase in demand, we expect the industrial and logistics sector to continue to outperform the other property sectors.