Stagnant year in sector but region could benefit from stock shortage

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THE industrial property market has remained virtually stagnant in 2011 due to weakening consumer confidence affecting demands for space from retailers – one of the main drivers of the logistics market, according to new research.

In the third quarter of the year, Yorkshire and Humber accounted for only four per cent of the UK industrial leasing activity for buildings over 100,000 sq ft. However, the region accounted for 17 per cent of the availability in the UK, figures from Jones Lang LaSalle’s Big Box logistics market research.

The agent said it could lead to businesses in the North West and the Midlands, which currently face a shortage of quality logistics stock, moving across the border to Yorkshire.

The Big Box survey, which only looks at buildings over 100,000 sq ft, said, nationally, 15 warehouses and distribution centres, totalling 3.8m sq ft, was snapped up by occupiers in quarter three, 23 per cent up on the second quarter but 53 per cent lower than the 8m sq ft transacted in the same period last year.

Richard Harris, director of Jones Lang LaSalle’s national industrial and logistics team, said: “This reduction in demand is causing lengthening empty periods in the available stock and increasing holding costs for landlords. The increase in holding costs, because of empty building rates, security, maintenance and insurance, means that landlords are willing to offer greater rental incentives to attract occupiers.

“In the few deals to have been completed since January on new and secondary logistics properties, headline rents have generally held up and in agreeing terms in this way, landlords can protect their investment value and tenants can maximise any incentive package.”

Richard Harris said that the level of supply in Yorkshire and Humber can meet short-term demand and it is likely that there will be no speculative development for the foreseeable future until logistics space requirements increase.

He said: “While the overall number of retailers active in the market has fallen, a number of leading food and non-food retailers have live requirements for distribution centres in the UK which could come to the North. These reflect a range of factors including store expansion, growth in internet sales and the re-design of distribution networks.

“Take-up in other parts of the country, most notably the North West and Midlands, has not been as sluggish as in Yorkshire and Humber, and these areas now face a shortage of quality logistics stock to an extent that occupiers will not be able to meet their needs in those areas and Yorkshire and Humberside, with its central location and good motorway network, will become an option.”

The biggest demand for industrial space is currently for sub-100,000 sq ft buildings. Pre-stressed concrete firm CCL and Harrison Spinks, a bed manufacturer, recently bought units at Park 2000, off Dewsbury Road, in Leeds.

CCL has invested in a 35,000 sq ft warehouse while Harrison Spinks has added a 23,000 sq ft unit to its property holdings in the area in deals advised by GVA and Lambert Smith Hampton.

Adam Peacock, industrial and logistics agent at LSH, said: “The two deals represent a huge boost for Leeds, and Park 2000 in particular. It is positive to see that some companies are pressing ahead with expansion plans in the face of adverse market conditions, and goes to show that there is still an appetite for well located, modern, high quality industrial buildings within the Leeds area.”