Big drop in warehouse demand from last summer
Occupier demand and take-up for logistics and industrial space fell in 2022 from a record high the previous year, but was still one of the strongest years on record, according to data from real estate services firm Cushman & Wakefield.
THE DATA reveals occupant take-up for UK logistics and industrial space (units of 50,000 sq ft or more) reached 54.5 million sq ft during 2022, down from a record of 70.6 million sq ft in 2021. Despite this notable fall, the 2022 value remains significantly ahead of the pre-pandemic long term average (33 million sq ft) and surpassed the previous record of 53 million sq ft set during 2020.
The fall in occupant demand was observed during the second half of the year, having seen the first six months fall just 2.8% below the equivalent period 12 months previously.
The data reveals a mixed picture regarding sources of demand. Manufacturing space grew by 30% on 2021 levels, a result of manufacturers undertaking nearshoring and reshoring initiatives, bolstering capabilities within the UK to shore up supply chains. Major firms taking space during the year included Stellantis (Peugeot), Taylor Wimpey and British Salt (Part of Tata).
Third party logistics operators remained particularly active, requiring just 9.5% less space than during the previous year.
The largest fall in demand was observed within the e-commerce and post-and-parcel subsectors. Both observed demand falling by more than 50% when compared with 2021 levels. This reflects the fall in parcel volumes in the UK as a result of the cost-of-living crisis, along with operators reassessing the level of space required.
Cushman & Wakefield head of UK Logistics & Industrial Richard Evans, says: “The sector demonstrated its resilience during the second half of 2022, performing robustly despite the fierce challenges facing both occupiers and landlords. Inflationary pressure, low consumer confidence, and financial instability has led to some friction within the market. These challenges are likely to persist through 2023, and will undoubtedly have an impact on market activity. However, the market remains substantially more active than pre-pandemic days, and has seen promising signs from key sectors such as manufacturing, and retail.”
Availability
Availability has continued to increase which has helped ease supply constraints, and now stands at just over 56.5 million sq ft nationally. Supply shortages are most acute in the Grade B category where availability remains limited, now standing at just 12.4 million sq ft down from 20.1 million sq ft during Q2 2021. Speculative space also remains in demand accounting for just under 30% of total take-up. Of the 13 million sq ft of speculative space completed in 2021, just under 1.5 million sq ft remains available. This has meant limited occupier choice for high-quality new stock.
Edward Cornwell, International Partner in the UK Logistics & Industrial Capital Markets team, Cushman & Wakefield, adds: “Widespread uncertainty, and instability within the wider financial markets saw overall volumes impacted following a strong start to 2022, with Q4 seeing the lowest quarterly volume since 2012. Having undergone a phase of significant repricing (close to 150 bps), it is likely we will begin to see the sector firmly back on the list for investors including UK / European institutions as we proceed through 2023, owing to the sector’s resilience and strong market fundamentals.”
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