Demand rises for large sheds in first half

THE take up of large sheds in Yorkshire and the Humber rose in the first half of 2016 despite the uncertainty surrounding the EU referendum, according to new research.

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More than 1.3m sq ft of space in sheds over 50,000 sq ft was let in the region - 24.5 per cent more than the same period last year.

The figure was boosted by the letting of Logicor’s 556,000 sq ft unit at Sherburn-in-Elmet to L&G Homes in February.

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The largest industrial letting in the first half of 2015 was half the size - 246,000 sq ft at Balby Carr Bank in Doncaster.

Colliers International said demand for industrial space was driven by the retail sector.

The firm has been involved in 410,000 sq ft of disposals across all size ranges in the region. In addition, the team has provided strategic acquisition advice on over 1.1 million sq ft of space.

Rob Whatmuff, Colliers’ director of industrial and logistics, said: “We’ve had a very positive start to the year.

“Larger deals activity has been driven by the retail sector and this trend is set to continue as online retailing and ecommerce fuels the need for warehouse and distribution space.

“Despite economic uncertainty following the EU referendum results, there remain a number of active requirements in the market.”

However, demand for sheds over 100,000 sq ft is muted and Mr Whatmuff said there are currently no large scale speculative build projects, over 100,000 sq ft confirmed to start on site before the end of the year.

Mr Whatmuff added: “Occupier demand in general remains consistent to pre-Brexit levels, with Colliers already advising key clients on H2 acquisitions, totalling circa 900,000 sq ft across Yorkshire.

“However, despite this demand, because of the general economic uncertainty post referendum, we don’t expect the majority of developer sentiment to change across the mid to large unit range until next year.

“The exception to this at present is Verdion’s iPort scheme at Doncaster which, due to the success of the two previously speculative units being let to Fellowes and Amazon, and other strong interest in the site from major brand occupiers, other speculative development is highly likely in the near future. At present iPort is setting the regional benchmark as a logistics development.”

For mid-sized units, ranging from 10,000 sq ft to 50,000 sq ft, the lack of available stock has been felt in the market this year and is demonstrated in the half year data. Leasehold activity in Yorkshire & the Humber decreased from 1.2 million sq ft in the first half of 2015 to 774,924 sq ft by end of June 2016.

The picture is similar for the freehold market, with an 83 per cent decrease in sales.

Simon Hill, associate director for Colliers International in Leeds, who oversees the mid-range market, said: “There continues to be a limited supply of good quality small and medium sized units. Units which have been brought to the market in 2016 so far have been met by strong demand, particularly from manufacturing and trade sectors, and we are currently fielding requirements from a number of occupiers, including; Selco, Siemens, APlant, Element and Screwfix, who we advise on a national basis.”

He added: “In response to this severe lack of space, we have to be more creative to seek out opportunities which wouldn’t ordinarily be considered, particularly for trade counter premises, instead considering alternative types of property in prominent areas.”

Lack of space is also driving up rents, according to Colliers International. Mid-sized sheds are reaching £5.80 per sq ft and big sheds now tip £5.50.

The majority of industrial lettings for West Yorkshire during the first half of the year was for second-hand space, according to Knight Frank’s Logic Report.

Across the region, 1.2m sq ft of industrial units over 50,000 sq ft was taken up, seven per cent above the same period last year. Tom Lamb, industrial property partner at Knight Frank in Leeds, said: “Demand is a mixture of third-party logistics and parcel delivery and retailers for the larger product in the region, but with a continued appetite in the mid-sized range from local manufacturing firms.”

He added: “Supply levels are diminishing - with any speculative development or quality product coming to the market being taken quickly. This is specific to the small and mid-sized range of sizes. For larger sheds in excess of 100,000 sq ft, the market is more subdued with several quality speculative buildings still unoccupied.

“Wilton Developments are speculatively developing the next phase of the Aire Valley development, which includes a 60,000 sq ft detached unit and a terrace of two 10,000 sq ft units – one of which is already understood to be under offer.

“The east of Leeds remains well served by employment land with Muse Developments having a further 100 acres of development land following recent successful lets to Amazon and John Lewis and subsequent sales.”