Savills stresses need for more speculative development

Savills stresses need for more speculative development

Savills has stressed the importance of more speculative developments in the UK warehouse market as the industrial and logistics sectors continue to grow. 

Speaking at the Shedmasters event at MIPIM 2017 in Cannes, the firm announced that following unprecedented levels of warehouse take-up in 2016, supply has fallen by up to 20% in the past 12 months and now stands at just 26.4 million sq ft (2.452 million sq m) across the UK. This, coupled with a 55% decrease in speculative delivery in 2017, means that stock levels are now critically low.

According to Savills, the UK warehouse market (units of 100,000 sq ft +) saw the highest level of take-up ever recorded in 2016, hitting 34.6 million sq ft (3.214 million sq m) by the end of the year. This increase can largely be attributed  to the  ongoing demand from occupiers and, in particular, online retailers looking to fulfil their supply chain requirements.

As a result of continued economic uncertainty, Savills notes that speculative development has remained muted, with just 3.8 million sq ft (353,031 sq m) across 17 units set to be delivered this year. Notable schemes include DB Symmetry’s four geographically spread sites in Swindon, Blyth, Middlewich and Bicester, which will account for as much as 17% of the total figure for 2017.

This is in contrast to 2016, when 8.6 million sq ft (798,966 sq m) came on to the market, representing a significant decrease of 55%. Furthermore, 82% of the  schemes coming forward are for sub 200,000 sq ft (18,580 sq m) units, despite 69% of requirements seeking space of that size or above.

Richard Sullivan, national head of industrial and logistics at Savills, said: “The industrial and logistics sector had a phenomenal 2016 with unparalleled levels of take-up, however, as a result stock levels are shrinking rapidly and can no longer keep pace with current levels of  demand. A degree of caution around speculative development is to be expected and welcomed; however there is no doubt that based on continued unresolved requirements in the market, there is a growing need for more speculative announcements.”

Whilst a number of larger second hand units are set to return to the market in 2017, Savills is anticipating that the industrial landscape will once again be dominated by the built to suit sector, similar to 2016 when 50% of deals fell into this category.

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