Warehouse occupation ticks up

By Liza Helps, Property Editor Logistics Matters

Net absorption of warehouse space, which measures the amount of space occupied  minus the amount vacated, was positive. Approximatley 2.5 million ft2 more space was occupied than vacated according to real estate analyst CoStar.

CoStar Director of Market Analytics, Grant Lonsdale said: “Although demand by this metric remains sharply down on the 10 million ft2 quarterly average recorded in 2020–22, last quarter’s figure should provide the industry with a confidence boost amid weaker leasing activity, consolidation and a jump in the amount of sublease space being marketed.”

This sentiment is echoed by Gerald Eve in its Prime Logistics report, which noted that occupier take-up in units over 50,000 ft2 was 11.1m ft2 in Q3, up 12% on Q2. “This was the first increase in quarterly demand in a year and put a stop to the post-pandemic downward trend since the peak in Q4 2021.

“Demand is still subdued though, down 25% on the year and 17% below the 10-year average. The challenging and uncertain economic backdrop has made it difficult for occupiers to business plan with any confidence, and an increased number of occupiers have mothballed units. Activity continues to be focused on the best quality space, both new-build and refurbished secondary.”

Among the major occupiers that have expanded was Amazon. The online retail giant opened a 2 million ft2, fulfilment centre at Wynyard Park in Stockton-on-Tees after vacating older facilities totalling 1.1 million ft2 in Gourock, Doncaster and Hemel Hempstead earlier this year.

Another huge expansion saw discount grocer Lidl commencing operations at its 1.2 million ft2 facility in Luton, its largest regional distribution centre in the world. 

Home Bargains occupied its 830,000 ft2 Omega West facility, Maersk took  into 685,000 ft2 at Segro Logistics Park East Midlands Gateway and DX’s reopening of warehouses previously occupied by Tuffnell’s were other key contributors to last quarter’s pick-up in net absorption.

This offset the impact of Wilko’s collapse, which resulted in the closure of two distribution centres totalling 2.3 million ft2 in Worksop and Newport.

According to Gerald Eve: “On a rolling annual basis, occupier demand is now back to the pre-pandemic trend, though business plans continue to be hampered by a challenging economic backdrop.”