UK Big Box warehouse market remains positive despite reduced take-up in first half of 2017

JLL has published its H1 2017 UK Big Box Industrial & Logistics research which reveals the following:

  • Total occupier take-up in H1 2017 was 35% down on H2 of 2016, following a record year in 2016; but still 2% higher than the long term average;
  • Grade A available supply rose in the first six months of the year, 24% up on the end of 2016;
  • Prime headline rents rose in a number of markets over the first six months of 2017;
  • Prime logistics yields in London sharpened in the first half of this year as the logistics market continues to remain highly attractive to investors.

Commenting on JLL's new research, Tessa English, associate director, UK Research, said: "Manufacturers were the most active source of warehouse take-up in the first half of this year, making up 35% of the total, but retailers were comparatively subdued. Grade A availability increased over the first six months of 2017, following a pick-up in both new and good quality secondhand supply. Nationally, our vacancy rate ticked up from 5% at the end-2016 to 6% at mid-2017."

Regionally JLL's research shows that overall availability of Big Box supply represented a national vacancy rate of 6% during H1 2017. The Greater South East, South West, Wales, North East, North West and Scotland all have vacancy rates below the national average.

Richard Evans, lead director Logistics & Development, JLL UK, added: "There are a few large requirements in the market at present and we expect this to translate into deals during the second half of 2017, however overall we anticipate demand this year to be lower than last. With a dwindling vacancy rate of 6% nationally at the end of June, we expect to see the continuing trend of occupiers signing for Build to Suit warehouse units. There will be some further big box speculative development this year but we expect that it will be at a lower rate than that delivered to the market in 2015 and 2016. Our forecasts suggest that distribution rents overall will grow by 2.9% per annum nationally over the next five years, with growth stronger in core locations."

Joel Duncan, director National Investment, JLL UK, concluded: "Investor demand will remain strong for the remainder of 2017, however it is likely to be held back by a lack of available stock in the market. Given the strong demand for UK logistics, there is potential for yields to sharpen in the second half of the year. We believe the logistics sector looks set to continue to outperform both the offices and retail markets over the next five years."

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