Big-box demand fell in H1 2012, but an upturn is forecast for H2 – Jones Lang LaSalle
Take-up of big-box logistics and industrial property in the UK is expected to be higher in the second half of 2012 after a decline during the first six months of the year. Jones Lang LaSalle’s latest research into this market indicates that occupier demand for Grade A industrial units of 100,000 sq ft or more fell during H1 2012 compared with the previous half-year, but the amount of deals done during Q3 and the number of active requirements remaining in the market suggest a higher level of activity in H2.
Take-up of Grade A big-box units in H1 2012 was 4.1m sq ft, compared with 6.2m sq ft in H2 2011 and 6.9m sq ft in H1 2011, JLL says. The firm notes that some of the decline in activity was in new floorspace but says that this may be partly due to a lack of available supply. It points out that the amount of available new floorspace at the end of June was the lowest since the firm’s records began in 2005, at 9.2m sq ft.
The North West accounted for the largest share of take-up in H1 2012, at 24% of the total Grade A floorspace transacted. Take-up of industrial units in the West and East Midlands each accounted for a 20% share, while the figure for the South East was only 3%. Logistics companies took up around 46% of the total, while the share taken up by retailers, at 29%, was lower than the average figure for the past five years. Manufacturing companies accounted for 18% of total take-up, with a couple of large automotive industry deals boosting this figure.
Despite the lower demand from occupiers, the amount of available industrial units and logistics properties fell during the first half of this year, with availability declining by 1% to 25.9m sq ft at the end of June compared with 26.2m sq ft at the end of 2011. “The overall level of availability at the end of June 2012 represented a vacancy rate of around 12% compared with our estimate of the Grade A built stock,” the firm adds.
No new speculative development was started or completed during the first half of the year, JLL says, which means that just one speculative scheme has been developed during the past three years. “Given existing demand uncertainties a return to speculative development on any significant scale looks highly improbable in the short term, although with new supply now at a low level in a number of markets, selective speculative development in certain core markets, such as the South East or Midlands’ ‘Golden Triangle’ cannot be ruled out,” JLL says.
Headline rents remained unchanged during the first half of 2012, but there were differences in the rents achievable and the terms available for existing, speculatively built properties, and new, build-to-suit facilities, JLL notes.
