Big Box boom propels region towards all-time high as 5m sq ft of Big Box space taken up in H1
More than five million sq ft of Big Box space was taken up across the Midlands, in the first half of 2017, as manufacturers led the drive to acquire modern distribution and logistics units.
Analysis of the industrial market by property consultants JLL identified soaring demand for units of 100,000 sq ft and over throughout the region.
In recent years, online retail has consistently been the biggest single user of such space, but this time manufacturers topped the table, with 34% of the deals, according to the agents’ Birmingham-based industrial and logistics director, Carl Durrant.
Lettings to logistics operators took second place with 30%, and retailers were back in third with 26% of the six-month total.
Durrant says 2017 will set an all-time high for Big Box lettings in this region, if the second half matches the level of transactions completed in the first. Durrant said:
“We’ve seen a lot of weak national economic data this year, but these figures underline the long-term strength of the industrial and logistics market in the Midlands,”
“Nationally, demand fell back in the first half, but the opposite was true in this region. The H1 take-up matched the figures for H2 in 2016, and were also up a very impressive 25% on H1 last year, so it’s very likely that this could be an all-time record year.
”It was also very pleasing to note that almost 60% of the space taken up across the entire UK was here in the Midlands.”
The Big Box units let during the first half were evenly split between the East and West of the Midlands, with 3m sq ft of new schemes and the remainder made up of good-quality second-hand stock.
Of the new space, the JLL data showed 80% had been constructed to client specifications (known as Built-To-Suit) with 600,000 sq ft brought forward on a speculative basis.
Observers of the Big Box scene in the Midlands have repeatedly expressed concern, in recent years, that the gap between demand and supply had widened too far.
However, Durrant reports a sharp increase in available new space, between last December and the end of June 2017. He added:
“Supply was a third higher in just six months, which I can’t recall happening before, after a surge in speculative development – particularly in the West Midlands.
“As a result, the vacancy rate in this region has edged above the national figure of 6%, with 8% in the East Midlands and 7% in the West. At the end of June, 22 Big Box units were under construction nationally, and 16 of those were in this region.”
Looking ahead, the JLL director is bullish about both rents and the delivery of new space.
“I think close to 3m of Big Box units could be brought forward in the next 12 to 18 months in the Midlands, on a speculative basis” said Durrant. “We also see rents growing across the distribution and logistics sectors, at an annual average of close to 3%, between now and 2021.
“However, I expect prime rents to show even stronger growth, and I believe the very best returns will come from prime distribution space which is connected to strategic infrastructure networks.”