The Industrial Market Commentary
Demand for industrial floor space edged up to 22.1 million sq ft from 20.7 million sq ft in the 6 months to the end of Q3 2023 despite the continued concern about growth and the economy. Following the lull in demand during the early part of the year, most sectors of the market saw an upturn during the second and third quarters, indicating a perceived improvement in occupier confidence.
This increase in the number of requirements registered on our database has however yet to convert into transactions, with letting activity remaining slow, resulting in only 3.5 million sq ft of space having been acquired over the course of the first 9 months of the year. This implies that activity for 2023 as a whole is likely to be circa 4.5 – 5.0 million sq ft, the second consecutive year where letting activity has fallen below the long run take up average of 7 million sq ft.
The main slowing in activity has been in the Big Box sector where only three deals have completed. The largest being at Panattoni Park, Aylesford where a 650,000 sq ft pre-let was agreed. The other two deals were at DP World’s London Gateway which continues to attract significant interest from occupiers due in part to its Freeport status.
In contrast the Mid-Box sector (50,000-99,000 sq ft) has been comparatively active with eight deals totalling just under 550,000 sq ft completing. The main focus in this sector has been on new units, with Clarins pre- letting 89,000 sq ft at the second phase of Midas in Harlow whilst Fixfast took 64,450 sq ft at Click, Aylesford.
Unsurprisingly, total availability crept up from Q1 2023 due in part to a number of new developments having completed during the summer, but also due to a modest increase in second hand supply as occupiers release surplus space into the market. The 100,000 sq ft plus size band has seen the greatest increase in Grade A stock bringing the total in the Big Box sector at Q3 2023 to 3.1 million sq ft, with 70% in new buildings. Whilst this takes the total current availability rate across the Glenny region up to 4.1% it remains below the long run average for the Eastern M25 market, which stands at 5%.
From an occupiers perspective this increase in Grade A availability provides improved choice of EPC compliant buildings and will assist them in the rationalisation of supply chains ahead of the proposed tightening of energy efficiency regulations.
In terms of rents, whilst values across the board have “paused for breath” they are still well in advance of their pre-pandemic levels and the continued strong demand for space should ensure growth in the future.