Rising Demand triggers boom in Speculative Industrial Development

Posted on 25 August, 2015 by Kirsten Kennedy

Increased demand for industrial and logistics space has led to speculative development rising by more than 400 per cent when compared to the first half of 2014.

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According to DTZ, the total take-up in the first half of the year was 16.7 million sq ft, surpassing the long term average by 954,000 sq ft. Retail occupiers led the surge on 36 per cent, largely in the shape of non-food retailers, followed by manufacturing companies on 28 per cent.

The figures also show that 8.4 million sq ft of Grade A accommodation was snapped up in H1, outstripping secondary space for the first time on record.

Head of UK Research at DTZ, Ben Clarke, expects this trend to continue throughout the rest of the year. He says; “A really strong first quarter of 2015 saw 11.4 million sq ft of take-up recorded, which was more than double the 5.3 million sq ft in the three months that followed.

“That Q2 figure was the lowest quarterly take-up since the opening months of 2009 but we expect take-up to bounce back over the rest of the year given the number of outstanding requirements yet to be satisfied.”

The strong demand saw speculative industrial development continue to rise during the first half of the year, with 3.6 million sq ft added to the market. This represents a huge 400 per cent increase on the 701,000 sq ft recorded in the first half of 2014. In addition there is currently an additional 4.4 million sq ft of speculative development under construction, with more to follow.

Simon Lloyd, Head of Industrial Agency at DTZ, said: “Nearly all the speculative schemes under construction are within the confines of the M1/M6/M25 corridors.

“This allows companies fast and easy access to most of the country, including ports and airports, as well as the main customer centres, such as London and Manchester.

“A further 2.4m square feet of speculative development is proposed which includes four buildings totalling 422,000 sq ft near Bristol – this would add much-needed availability to a space-constrained region, and is the first sign of large scale development plans outside of the M1/M6/M25 corridors.”

But even allowing for this development pipeline, Lloyd believes that increased demand will inevitably continue to drive rental growth in the sector going forward.




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