The South East Reasons to be Optimistic! We spoke to Tim Harding, Director of
Industrial & Logistics at Colliers on the current state of the industrial & logistics market and some of the key trends he’s noticed this year:
To say It’s been an interesting few years for the I&L market is quite the understatement! Whilst the
record take-up we witnessed between
2020 and 2022 has cooled somewhat in the last couple of years, it would be fair to say that I&L occupational demand has remained pretty robust despite the economic headwinds it’s had to navigate in recent times.
Colliers recorded approximately 24m sq ft of UK take-up in warehouses 100,000 sq ft + in 2023, just shy of the 10 year average level, pre-covid. We expect 2024 to be ahead of this figure, with some of the reasons why explained in this article.
As expected with a minor slow-down in leasing activity last year, supply of buildings had been creeping upwards. We are however now noticing this begin to stabilise. According to Colliers, In Q2 2024 availability of UK units sized 100,000+ sq ft stood at c. 43.5 million sq ft, down from approximately 44.6 million sq ft in Q1. The Q2 figure equates to a vacancy rate of 7.3%.
Looking ahead, we estimate that there is only around 4m sq ft of speculative warehouses scheduled for completion by the end of the year, and around 5m sq ft under construction with scheduled Practical Completion in 2025. Given the levels of take-up we are still witnessing, we expect prime availability to decrease further over the next 12 to 15 months, unless a significant uptick in development activity arises next year.
The resurgence of the ‘mega-box’ has been a key feature in 2024, with some standout deals taking place such as Yusen Logistics signing for 1.2m sq ft at Segro Logistics Park Northampton, Nike and Bleckmann committing to 1.3m and 590,000 sq ft respectively at Magna Park Corby, Brakes signing for 465,000 sq ft in Hemel Hempstead and several more large transactions rumoured to be under offer.
At the other end of the scale though, it’s been encouraging to see ‘mid-box’ demand holding up as well as it has this year. The popularity of locations that sit within the wider South-East region but offer fast connectivity to the rest of the UK on the M40, M1, A1 and M11 corridors has been a key feature.
In Biggleswade, Warburtons have committed to a 65,000 sq ft low site density hub at Symmetry Park whilst over in Dunstable, Signature Flat Breads have taken the speculative 89,000 sq ft building Vision 90.
The same can be said for locations closer into London. Bridge Industrial have leased a new 50,000 sq ft building in Uxbridge to Logistics operator Nippon Express, Goodman have agreed a 55,000 sq ft pre-let at London Brentwood Commercial Park with Wayland Games and 59,000 sq ft in Weybridge has been leased to Britannia Row Productions.
The market has also continued to see healthy rental growth, with record rents being set in many of these markets. According to the latest MSCI Rental Growth stats, The South-East Region recorded industrial rental growth of 6.4% in the 12 months’ to Q2 2024. We expect steady rental growth to remain over the next couple of years amidst a balance of solid occupier demand and healthy levels of supply.
Reasons therefore to be optimistic!
S.R. Wood & Son – A Personal Market View from Jacob Wood
CP Monthly: Please give me some background on S.R. Wood & Son.
Jacob Wood: It was established in 1981 by my grandfather Stephen R Wood and soon thereafter joined by my father Stephen J Wood in 1989. I joined in 2020.
We cover a geographical area from Leighton Buzzard in the west, through Dunstable, Luton, across to Hitchin in the east and within about a 10-mile radius of these towns.
We are rather agency focussed, although lease advisory (rent reviews, lease renewals, schedules of condition and the like) is becoming a larger part of our day-to-day work. We can also prepare leasehold or freehold valuations for a variety of purposes.
CP Monthly: How has business been since the lifting of Covid-19 restrictions? Jacob Wood: We’re really busy, all of the time. Certain sectors of the market are certainly better than other right now.
CP Monthly: What do you mean by that?
Jacob Wood: Well if I focus on agency, the occupational retail market is performing quite well, such that most of the shops you see on our website have been placed under offer. The industrial market is rather good too. But it’s no secret that the office market has performed poorly over the last few years. Then there’s the investment and development market, which is a little slower than we would like… I suppose this is because they’re so closely tied to economic and fiscal conditions, which let’s face it, are a little wobbly right now!
CP Monthly: What are some other trends in the market that you are noticing? Jacob Wood: I’m noticing how many tenants are benefitting from ‘prescribed’ security of tenure having been allowed to hold over after the expiry of a lease. Oftentimes we are then instructed to implement an outstanding lease renewal but the landlords don’t usually appreciate the implications of having let their tenant hold over.
CP Monthly: What are the implications?
Jacob Wood: The Landlord & Tenant Act 1954 is a piece of legislation. Part II of that Act refers to the security of tenure provisions that a commercial tenant is protected by. All commercial tenancies over 6 months are automatically protected by The Act (subject to certain criteria). This is often colloquially referred to as a ‘renewable lease’ because it means once the lease expires, the tenant is allowed to remain in the property into perpetuity (forever) paying the same rent. There are ways of increasing the rent or securing vacant possession by serving certain Notices, but that’s a whole other matter.
Most landlords will understand the basic principle of the ’54 Act, but what many don’t realise is that if they allow their tenant to remain in occupation beyond the expiry of a lease that is excluded from The Act, the tenant’s occupancy will then become protected by The Act.
When the outstanding lease renewal is then implemented, if the uplift in rent is financially un-viable for the tenant and an agreement cannot be reached, they may serve S.27 Notice upon the landlord and vacate subject to just 3 months’ notice. You can quickly see why the landlord is then on the back-foot during negotiations (although sometimes this can be used strategically to get a tenant out of a property if a better tenant is lined up).
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COMMERCIAL PROPERTY MONTHLY 2024
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