Online retailers lead ‘unprecedented’ demand for warehouse space

Online retailers led an ‘unprecedented’ demand for warehouses in the second quarter of the year taking over 55 per cent of the space in Yorkshire and the North East, according to new research.

Workers in the warehouse at Amazon in Doncaster. Picture: Charlotte Graham

The two regions saw the largest share of UK logistics take-up, achieving record-breaking take-up levels compared to previous quarters, figures from CBRE show.

Following a subdued couple of quarters, Yorkshire and the North East dominated at a regional level for the second quarter of 2021, with both regions achieving figures of more than five million sq ft, accounting for 66 per cent of total take-up collectively and comprising 12 deals over the quarter.

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This was followed by the West Midlands and the South East at 11 per cent and the North West and South West at nine per cent and three per cent respectively.

The first half of 2021 has already surpassed the annual take-up totals of every year over the past decade, except for 2018 and 2020.

With huge demand has come a lack of supply, according to CBRE. Available space in the Yorkshire and North East regions is at an all-time low of less than 500,000 sq ft following a 69 per cent quarter-to-quarter drop. All completed speculative units are either occupied or under offer.

Looking at the wider national picture, take-up of UK logistics space in Q2 2021 surpassed the record level of take-up achieved in Q3 2020 of 13.3m sq ft to reach a total of 15.4m sq ft, marking the third record-breaking quarter in the past 18 months, the research reveals.

A total of 55 deals completed in Q2 2021, an unprecedented number of deals to have closed in one quarter, CBRE said, representing 52 per cent increase compared to Q2 2020 which saw 36 deals close. This brings the total number of deals completed in the first half of 2021 to 80. The average unit size for Q2 2021 was 279,887 sq ft compared to 388,076 sq ft for the same period of 2020, highlighting that a larger volume of transactions took place across smaller units throughout the quarter.

In Q2 2021, speculative take-up led demand at 40 per cent followed by second hand at 32 per cent .

This suggests that occupiers are favouring units that are immediately available for occupation over the longer lead-in time for built-to-suit developments.

Mike Baugh, senior director, UK industrial and logistics at CBRE Leeds, inset, said: “The performance of the Yorkshire & NE market in H1 2021 has been incredible, leaving the region with no existing grade A stock over 100,000 sq ft.

He added: “A number of significant deals have been concluded in Q2, highlighting the strong appetite for the region within the occupier market.

“We are looking forward to seeing further positive news for the region in Q3 and the rest of 2021”

Paul Farrow, head of UK industrial and logistics at CBRE, said: “The logistics sector continues to break boundaries with no slowdown in sight and given that there is 15.6m sq ft currently under-offer across 43 units, we anticipate that Q3 will follow suit.

“Occupiers are astute in securing available space as they are becoming increasingly aware of the lack of stock coming to market.

“Ultimately, the pressure release valve will be in the form of increased rental levels.”

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James Mitchinson