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Positive outlook for UK Industrial & Logistics real estate market

According to JLL’s Q3 2015 Big Box Industrial & Logistics research

​​JLL has launched its Q3 2015 Big Box Industrial and Logistics research.  Commenting on the firm’s research, Jon Sleeman, Director UK Logistics & Industrial Research at JLL, said: “Grade A industrial space take-up in the UK totalled 4.9 million sq ft during Q3 2015 bringing the total for the first three quarters of the year to 13.5 million sq ft, slightly higher than the level of demand recorded in the first three quarters of 2014 (13.1 million sq ft).   Overall Grade A available supply at the end of September 2015 (13.3 million sq ft) was 19% up on the end of June 2015 (11.2 million sq ft).”

JLL’s research also highlights that despite a pick-up in new availability, at the end of September 2015, available new space was still 72% lower than its most recent peak at March 2008 (28.8 million sq ft).  Jon Sleeman continued: “Aside from this recent uplift in availability, a direct result of a pick-up in speculative development over the course of 2015, the availability of new space has been on a downward trend for the last six years. This reflects the take-up of speculatively developed space over this period and the fact that very little new space has been delivered to the market since 2009.  At the end of September 2015 there were 25 industrial units speculatively under construction and available nationally totalling 4.8 million sq ft. One further unit is under construction but has been let before practical completion.” 

In terms of industrial space sector take-up, retailers accounted for the largest share of Grade A take-up in Q3, with a 48% share of the total.  Logistics companies accounted for 28% and manufacturing companies accounted for 19%.  

Jon Sleeman concluded: “The UK industrial investment market remains very hot with a weight of money targeting the sector from both domestic and international investors.  At the end of Q3 2015, prime distribution yields in the South East, assuming a 15-year lease and an open market rent review, stood at 4.75%, but were around 4.50% in London.  Regional prime yields stood at 5.00%.  Prime yields remained unchanged at the end of Q3 compared with the end of Q2, however London single let yields have moved in 25 basis points (bps) over the last 12 months and South East and Regional single-let yields have moved in 50 bps over the same period.”

Notes to Editors

JLL’s UK Big Box Industrial and Logistics research focuses on Grade A quality big box logistics properties, which includes both new and good quality second-hand space. The data refer to units of 100,000 sq ft and over.