Demand for British goods puts increasing pressure on constrained UK industrial space
The UK has a little over one year’s worth of industrial space left as the growth in ecommerce and a renewed demand for British goods put increasing pressure on the country’s industrial stock, according to new data from global real estate advisors, Colliers International.
“Following the outcome of the European referendum, there has been stronger demand for industrial space from the manufacturing sector due to the weakening value of sterling encouraging a surge in demand for British goods. The sector now accounts for 27 per cent of the market, up from 19 per cent in 2016; second only to retailers and wholesalers who account for 33 per cent of demand,” explains Bo Glowacz, Senior Research Analyst, Research and Forecasting at Colliers International.
The state of play
- UK industrial availability has fallen on average 62 per cent since 2009; with London (down 63 per cent), Yorkshire and Humber (down 70 per cent) and the West Midlands (down 72 per cent) amongst the worst affected. Industrial supply is likely to fall further due to continued demand from e-tailers, lower levels of speculative starts., as well as the loss of industrial commercial land for other uses such as residential.
- Overall, H1 2017 industrial take-up over 100,000 sq ft has slowed 15 per cent year-on-year to 13 million sq ft from record levels in 2016, amid the slowdown in consumer spending and the uncertainty generated by the recent snap general election. However, H1 take up remains in line with both the five and the 10-year averages.
Prospects for the sector
- The supply of industrial space has also been adversely affected, reducing from 3.6 years in 2009 to just 1.3 years in 2017 in the UK. The worst affected regions are the West Midlands (down to 1.1 years from 3.9 years in 2009) and London (down to 8 months from 2.2 years in 2009).
- Despite the reduction in availability and supply, just 17 million sq ft of industrial space is under construction. Speculative schemes account for just 28 per cent of all UK developments under construction and completions are expected to fall by 60 per cent in 2017, to 3.5 million sq ft.
- The industrial sector continues to attract strong investor interest as H1 2017 investment volumes £3.4 billion, exceeding H1 2016 by 13 per cent.
“There are vast opportunities within the sector as it continues to perform well for investors with rising rental values and potential for further growth. The lack of supply can only present opportunities for developers as there’s clearly occupational demand,” concluded Len Rosso, Head of Industrial & Logistics at Colliers International.
