Strong H1 for Big Box market despite uncertainty, says JLL
JLL has today published its H1 2020 UK Big Box Industrial & Logistics Market research, which reveals the following:
- Occupier take-up of Grade A logistics floorspace in the first half of 2020 totalled 9.7million sq ft, this was in line with the first half of 2019 where 9.6 million sq ft was taken up, but 6% below H2 2019 (10.3 million sq ft)
- Retailers accounted for the largest share of take-up in the first half of this year, accounting for 63%
- E-commerce also drove a large share of demand, accounting for 27% of total take-up
- There were 2.4 million sq ft of short-term lettings of 12 months or less in the first half of this year as companies reacted quickly to the impacts of COIVD-19 and acquired space on a short-term basis – this was in addition to the 9.7 million sq ft of long-term deals recorded.
- At the end of H1 2020 there was 25.4 million sq ft of Grade A space available across the UK, which is 7% lower than the end of 2019 when 27.2 million sq ft was available
- At the end of June there was 4.9 million sq ft of big box logistics floorspace speculatively under construction nationally
- At the end of the first half of 2020, the modern logistics vacancy rate stood at 8%, which is lower than the end of 2019 when it stood at 9%
Tessa English, director industrial and logistics research at JLL, commented: “H1 2020 has been an unprecedented six months, and with a huge amount of economic uncertainty, the logistics market has demonstrated the importance of supply chains and the continuing demand for logistics floorspace to keep the nation moving.
Within 9.7 million sq ft of long-term deals and 2.4 million sq ft of short term deals recorded in H1 2020, occupational demand was robust. The overall vacancy rate also fell in the first six months of this year, which is very promising given the tough economic period we are going to be facing, and with a pipeline of deals expected to complete in the second half of this year, we are looking forward with a much more positive sentiment for the market.”
Regionally, the Greater South East (South East, East and London) accounted for the largest share of take-up in H1 2020 at 44% of the total. This was followed by the East Midlands which took a 20% share and Yorkshire & Humberside, which accounted for 13% of total demand.
Ed Cole, head of logistics at JLL, added: “This pandemic has accelerated a structural shift that had already been taking place in the market further highlighting the importance of e-commerce and the need for retailers to embrace omnichannel. 27% of all Grade A floorspace taken up in H1 2020 was for dedicated e-com fulfilment, partly reflecting the immediate impact of this pandemic but also taking account of the longer-term demand from consumers who are seeing the benefits of online shopping and its convenience. This has already translated in to demand for logistics space from retailers but also parcel delivery companies, which will no doubt continue. A number of parcel operators have stated that they are operating at levels higher than their usual peaks and they have taken space quickly to adapt to this elevated demand.
“The global pandemic has also put pressure on the pharmaceutical industry and shown the importance of having medical supplies and PPE equipment close to source. Structurally companies will need to consider the levels of stock they hold in the UK going forward and how well placed they are to address future spikes in demand including the potential need for reshoring of production and manufacturing.”
JLL (NYSE: JLL) is a leading professional services firm that specializes in real estate and investment management. JLL shapes the future of real estate for a better world by using the most advanced technology to create rewarding opportunities, amazing spaces and sustainable real estate solutions for our clients, our people and our communities. JLL is a Fortune 500 company with annual revenue of $18.0 billion, operations in over 80 countries and a global workforce of more than 94,000 as of March 31, 2020. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit jll.com.