10 million sq ft of Big Box speculative floorspace to be completed in 2019 as occupier take-up remains robust, says JLL
Retailers most active source of take-up as e-commerce continues to drive demand
JLL has today published its H1 2019 UK Big Box Industrial & Logistics Market research, which reveals the following:
- Occupier take-up of Grade A logistics floorspace in the first half of 2019 totalled 9.7million sq ft, 6% higher than the ten-year half yearly average, H2 2009 – H1 2019 (9.1 million sq ft). However, take-up in H1 was lower than both the first and second halves of last year’s strong statistics
- Retailers accounted for the largest share of take-up in the first half of this year, with a 50% share of Grade A take-up. E-commerce continued to drive demand accounting for 31% of total Grade A take-up in H1 2019
- Grade A available supply including speculative space under construction increased over the first six months of 2019 to total 26 million sq ft at mid-year, following a pick-up in both new and good quality second-hand supply. This was 10% higher than at the end of 2018 and 29% up on the same time a year ago
- Nationally, distribution rents are forecast to grow by 3.1% this year
- The investment market remains robust with the logistics sector forecast to outperform both the office and retail markets over the next five years
Jon Sleeman, director Industrial & Logistics research at JLL, commented: “Whilst occupier take-up in the first six months of 2019was lower than we saw in both the first and second halves of last year, overall the market remained robust. More floorspace was taken up in H1 2019 than we initially expected at the end of last year and overall and Grade A take-up exceeded the half yearly average over the last ten years by 6%. However, solid demand was coupled with a notable increase in Grade A available supply which rose to around 26 million sq ft. Despite a slowdown in speculative developments in the first half of the year, we expect availability to rise further, with 10 million sq ft of floorspace due to be completed by the end of 2019, the highest level of completions since 2008.”
The research also found that regionally, the Greater South East accounted for the largest share of take-up in H1 2019 at 31%. This was followed by the East Midlands taking a 23% share and Yorkshire & Humberside, accounting for 19% of total demand.
Ed Cole, Head of Logistics, commented: “E-commerce continued to drive demand for logistics floorspace, where 31% of all Grade A take-up in H1 2019 was e-com related. This drive in demand comes from retailers looking to improve their supply chains to meet growing consumer demand for goods to be delivered anytime and anywhere. There are a pipeline of e-com related deals in the market which we expect to result into take-up in H2 2019 and we don’t see this trend slowing.”
Commenting on the current investment market, Joel Duncan, director Industrial & Logistics investment, at JLL said: “Despite the political uncertainty, the UK industrial and logistics market continues to present attractive opportunities for investors. In particular, investor demand has been strong for pre-let assets with long income streams and good covenants. We expect investor focus will remain on prime UK locations as well as the most well specified assets, during the remainder of 2019.”
JLL (NYSE: JLL) is a leading professional services firm that specializes in real estate and investment management. Our vision is to reimagine the world of real estate, creating rewarding opportunities and amazing spaces where people can achieve their ambitions. In doing so, we will build a better tomorrow for our clients, our people and our communities. JLL is a Fortune 500 company with annual revenue of $16.3 billion, operations in over 80 countries and a global workforce of over 91,000 as of March 31, 2019. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated.