Competition growing for prime space

The report by real estate advisers DTZ concluded that in most UK locations, falling levels of availability combined with a lack of speculative development was creating competition for prime space.

Martin Davis, head of UK Research, said: “With downward pressure now on incentives, the prospect is for the industrial market coming more into balance in 2011, particularly at the prime end.”

Overall take-up in the fourth quarter was slightly down from the previous quarter, at 5.8 million sq ft, with availability of prime space falling to 37 million sq ft.

Transactions were dominated by retailers and third party logistics operators, together accounting for 91 per cent of all take-up.

Consolidation was the key driving force behind activity in Q4 as retailers sought to rationalise their distribution hubs, often into a single, centrally located unit, said DTZ.

This trend was particularly evident in the North West, which saw the largest volume of transactions, with further demand anticipated in 2011. Despite output growth in the manufacturing sector during the quarter, this did not translate into demand for industrial space.

The report said that decreasing supply and continuing demand for prime space are indications that the market is recovering, although demand is still well below historical norms.

Take-up in the final quarter totalled 390,000 sq ft in Yorkshire and Humberside making an annual total of 3m sq ft.