Avison Young’s latest Big Sheds Market Review confirms record annual take-up of big sheds in 2018 within the UK, which amounted to 31.9 million sq. ft. some 28% up on the five year average of 24.9 million sq ft.
The largest take-up volumes were in the East Midlands, more than half of which was at East Midlands Gateway and Corby. There was also a record level of take-up outside the traditional prime logistics market in Yorkshire and the North East, where the two largest deals of the year were located in Darlington and Durham.
As online retail sales peak at 21% of all retail sales, big shed deals for e commerce occupiers contributed to 28% of all take-up. Third party logistics companies accounted for a similar amount of take-up, with many serving online retail contracts.
Much of this can be attributed to labour cost and availability increasing in occupiers’ priorities, as well as the changes in logistic networks, as the demands on last mile delivery intensify.
Danny Cramman, Director, Avison Young Newcastle comments: “There remains a lack of grade A standing stock in the north east, particularly in the larger size ranges. Well located strategic sites will benefit as the market moves towards design and build solutions. The region also saw significant rental growth in the industrial sector.”
Current availability of modern big sheds amounts to 25.8 million sq. ft. just over a years’ supply, based on the five year average take-up rate.
Distribution Investment volumes reached £4bn during 2018 in line with the five year average. Tritax Big Box REIT took 16% of all transactions and dominated the largest single-let transactions: £147m Integra 61 in Durham and £121m Link 66 in Darlington.
Industrial assets continue to attract strong investor interest although there has been a sentiment shift and more moderate activity is likely in the first half of this year until a clearer picture of Brexit becomes apparent.
The supply / demand dynamics continue to put pressure on rental values for industrial property. Average net effective prime rents for the 13 locations Avison Young monitor have increased by 5.4% over the past 12 months.