Take-up of UK big box space reaches all-time high in 2020

London, 5 January 2020 – The UK logistics market posted a massive increase in take-up in 2020 according to JLL, despite the global pandemic. Big box take-up involving Grade A units of 100,000 sq ft and over reached 35.8m sq ft, the highest year on record and the first year that JLL has recorded over 30 million sq ft of take-up. This was an increase of 64% on 2019’s figures of almost 20m sq ft, and was 43% higher than the 5-year annual average.

JLL, who had a 40% share of the take-up over 2020, also reports that 42% of floorspace taken up was e-commerce related, whilst parcel operators accounted for 6% of the demand. There was also a rise in short-term deals, with an additional 3.6m sq ft of Grade A space being let on leases of under one year.

Ed Cole, head of logistics, JLL commented: “In what was a highly turbulent year for the economy as the COVID-19 pandemic struck, the logistics market not only weathered the storm but was required to out-perform as the nation became even more reliant on supply chain delivery. Through the acceleration of exiting trends in e-commerce in particular, 2020 saw its biggest year to date in terms of growth and demand for floorspace with take-up of Grade A space including all lease lengths hitting a remarkable 39.4m sq ft for the year, the highest year on record by considerable distance.

Looking forward to this year, we remain very positive about the logistics market and expect high levels of activity to continue with the same demand drivers playing out in tandem with the economy starting a rebuilding process as we recover from the pandemic. We are already aware of a number of live requirements active across the market which will translate into further take-up this year and overall we are anticipating another year of robust demand for logistics floorspace with supply struggling to keep up.”

Commenting on the current investment market, Joel Duncan, director of capital markets, JLL said: “Despite a year of uncertainty, the UK logistics market continued to present attractive opportunities for investors in 2020 and remained the most resilient sector in the UK property market. With the dramatic change in consumer behaviour because of Covid 19 and the significant jump in occupational take up, the market saw a significant weight of capital enter the market and chase a finite amount of opportunities. This subsequently helped push yields below where they were at the start of 2020. Our preliminary figures estimate that industrial investment volumes could have reached close to £7.5 billion in 2020 which was 29% up on 2019 and c.4% up on the five year average. We expect investor focus will remain on prime UK locations as well as the most well specified assets during 2021 and the appetite in the market to continue.”

At the end of 2020 there was 23.2 million sq ft of Grade A floorspace available, of which 5.7m sq ft was speculatively under construction. Supply at the end of 2020 was 15% down on 12-months earlier. Supply represented a vacancy rate of 7% at the end of 2020, which was lower than at the end of 2019 when it stood at 9%. Excluding the floorspace that was speculatively under construction at the end of 2020, the vacancy was around 5% at the end of the year.

Oliver Jones, a senior research analyst at JLL said: “In what was a stand-out year for the sector, the drive for online shopping contributed heavily to demand from major e-commerce operators and parcel companies for space. Parcel operators accounted for 6% of space taken last year. This figure underestimates the activity of parcel operators generally because as well as investing in Grade A facilities of 100,000 sq ft and over, many were active in expanding their networks of smaller depots. With the vacancy rate falling to 7% at the end of 2020 and with nearly a fifth of the available floorspace under offer, there is already a good level of demand for floorspace as we enter 2021. As a result, we expect, Grade A supply to tighten in some regions across the country.”