Chronic lack of warehouse supply in East of England
There is less than a year’s worth of Grade A warehouse supply (units of 100,000 sq ft +) available in the East of England, according to Savills’ latest Big Shed Briefing.
This can be attributed to the recent uptick in transactional activity, which means just 1.26 million sq ft remains across six units.
Savills notes that just 15 per cent of supply in the East of England is classed as Grade A, compared to 45 per cent this time last year.
Further analysis shows that 41 per cent of supply is currently not fit for purpose and unlikely to be able to accommodate modern occupier requirements.
At present, there are only two units under construction at Gateway Peterborough totalling 611,000 sq ft, which are due to complete imminently.
Looking ahead, occupiers will need to rely on sites such as Jaynic’s Gateway 14 in Stowmarket, in order to satisfy requirements for good quality space. However, the scheme will not be ready for occupation until 2022.
William Rose, director in the business space team at Savills Peterborough, said: “Warehouse supply in the East of England remains chronically low and is likely to impact future take-up.
“What’s more, there have been no transactions for second hand space in the first half of the year, highlighting occupier preference for better quality units.
“We know that demand remains high, particularly from online retailers who are well placed to capitalise on evolving consumer habits following the COVID-19 lockdown, but despite the East being a key strategic location there is simply nowhere for them to go.”
East of England take-up has also decreased by 27 per cent compared to H1 2019, totalling 1.04 million sq ft. Build-to-suit accounted for the largest proportion at 71 per cent, whilst the remaining 29 per cent was speculatively developed.
The demand for new stock has been demonstrated by a number of recent transactions that have seen this type of space snapped up by occupiers. Key deals include Unipart and M H Star taking both speculative units at Suffolk Park and Kingston 189 going under offer during lockdown.
Rose adds: “Whilst take-up is considerably above the long-term average, there is simply no opportunity to improve on this without much needed development.
“The speed in which the recently built speculative units have been taken proves that confidence remains in the local market, so now is undoubtedly the time to build much needed, good quality warehouse space.”