UK spec-build set to double
05 May 2022
THE VOLUME of speculative logistics and industrial warehouse space under construction in the UK is estimated to double in 2022, says real estate services firm Cushman & Wakefield.
In 2021, the total level of speculative space being developed was just over 12 million sq ft, and the majority was already let. Whereas in 2022, Cushman & Wakefield estimates almost 27 million sq ft of warehouse space will be built, the majority of which will be under construction and available to let.
Cushman & Wakefield head of UK logistics & industrial Richard Evans, said: “The volume of warehouse space under construction is unprecedented. It is a testament to the sustained levels of demand for this type of asset over recent years, largely catalysed by the pandemic and the shift in how we shop and consume goods and services.
“Investor sentiment is strong and confidence in the sector isn’t waning. The figures also underline the fact that logistics and warehouse space is now a maturing asset class with investors prepared to speculate on building stock without pre-letting. Despite some challenges ahead for occupiers and developers in light of the wider economic and geopolitical climate, the sector is expected to continue to perform strongly relative to other sectors.”
Cushman & Wakefield’s research also shows that, as of the end of the first quarter of this year, a total of 15.8 million sq ft has been let, up from 13.3 million sq ft in the same period 12 months ago and 6.4 million sq ft in 2020.
From an availability perspective, the total space on the market was 48.6 million sq ft which is marginally up from the last quarter of 2021 at 44.3 million sq ft. This is the first increase in availability since the beginning of 2020, with the increase primarily due to more speculative units under construction. However, almost half of all available stock is currently under offer.
Investment activity totalled £6.2 billion in the first quarter of the year and follows a record £17 billion transacted in 2021. The first quarter total is only slightly behind the pre-pandemic annual volume average of £7.7 billion.
Ed Cornwell, Head of UK Logistics & Industrial Capital Markets at Cushman & Wakefield, said: “Many investors continue to seek scale and of the 116 transactions in the quarter, the 10 largest deals accounted for 56% of total volume. Overall, there remains a lot of focus from overseas capital, notably North American and Singaporean investors who are currently amongst the most active in the market.
“We expect investors to continue to actively target the sector, driving volumes, pricing and returns - as well as competition for all asset types.”