UK logistics sector continues to reach new heights with third record-breaking quarter in 18 months
Take-up of UK logistics space in Q2 2021 surpassed the record level of take-up achieved in Q3 2020 of 13.3m sq ft to reach a total of 15.4m sq ft, marking the third record-breaking quarter in the past 18 months, according to the latest research from global real estate advisor, CBRE.
This is over 20% higher than Q2 2020, which saw take-up totalling 12.8m sq ft. Following a quieter but healthy Q1, the total take-up for the first half of 2021 stands at 20.6m sq ft. This represents a 7% increase when compared to H1 2020, which saw take-up totalling 19.24m sq ft.
A total of 55 deals completed in Q2 2021, an unprecedented number of deals to have closed in one quarter, representing a 52% increase compared to Q2 2020 which saw 36 deals close. This brings the total number of deals completed in the first half of 2021 to 80. The average unit size for Q2 2021 was 279,887 sq ft compared to 388,076 sq ft for the same period in 2020, highlighting that a larger volume of transactions took place across smaller units throughout the quarter.
Yorkshire and the East Midlands dominated at a regional level for Q2 2021, with both regions achieving record-breaking take-up figures of over 5m sq ft, accounting for 66% of total take-up collectively. This was followed by the West Midlands and the South East at 11%, and the North West and South West at 9% and 3% respectively.
In Q2 2021, speculative take-up led demand at 40% followed by second hand at 32%. Built-to-suit units accounted for 28%, a substantial decrease from circa 55% in Q2 2020. This suggests that occupiers are favouring units that are immediately available for occupation over the longer lead-in time for built-to-suit developments.
Available supply (built and under construction units) continues to decrease, with less than 15m sq ft of big-box logistics space currently being marketed in the UK, a 43% decrease on the same period last year. Of this, readily available space accounts for less than 9.5m sq ft, representing a record low vacancy rate of 2%.
The logistics sector continues to break boundaries with no slowdown in sight and given that there is 15.6m sq ft currently under-offer across 43 units, we anticipate that Q3 will follow suit. Occupiers are astute in securing available space as they are becoming increasingly aware of the lack of stock coming to market. Ultimately, the pressure release valve will be in the form of increased rental levels.
The market is rapidly reaching a point where stock levels will be wholly insufficient to meet demand. Based on the past 12 months of take-up, the market will physically run out of available big-box warehousing by the end of the year. The only way to replenish the supply pool is to build more, but due to difficulties with both obtaining planning consents and accessing construction materials, this will not be a simple task.