The Industrial Market Commentary
Industrial rents continued to surge in the period to the end of Q1 2022, with prime rents on average across the Eastern M25 growing by 31.5% over the past 12 months and 50.9% since the start of the pandemic. Rents in East London have now moved above £30 per sq ft, standing at £32.50 per sq ft at the end of Q1 2022, with several other Greater London locations challenging the £30 threshold.
The main driver behind this strong rental growth has been the supply chain crisis, which has been highlighted by Brexit and the economic problems emerging from lockdown. Leasing activity in the Eastern M25 industrial market has been strong reaching 8.8m sq ft in 2021, the highest level recorded since the peak years of 2007/08.
The demand for industrial and logistics floor space touched record levels in the second half of 2021 (28.6m sq ft) and has been maintained into the current year, with 26.1m sq ft of active requirements at the end of Q1 2022, some 70% higher than pre pandemic levels. Big Box demand has been at the centre of this upswing, as both domestic and international retailers, logistics operators and last mile delivery companies have vied for the limited stock of modern distribution space.
There has been 2.9m sq ft of Big Box take up over the past 15 months following on from the record breaking 4.2m sq ft of space acquired in 2020. London Gateway has acted as a major magnet for larger requirements, accounting for just under 2m sq ft of take up in eight transactions since the start of the pandemic.
Supply has tried to keep pace, with developments delivering 6.3m sq ft of new stock over the past two years but most of this new stock has been absorbed and Grade A supply stands at just 2.4m sq ft at the end of Q1 2022, with almost 63% of this space south of the river. The overall availability rate in the Eastern M25 market is now down to 3.3%, which equates to 9.5m sq ft of space, only marginally above the low point recorded in 2017.
The continued imbalance between supply and demand will keep the pressure on rents through 2022/23.