Knight Frank: shed market back to pre-pandemic levels
The latest Industrial LOGIC report compiled by the firm said that West Yorkshire bounced back from a 2022 lull to record 1.6m sq ft let in 2023, with 1.3m sq ft taken up in South Yorkshire.
Knight Frank concluded that in 2023, the bulk of transactions in South Yorkshire was in the sub-250,000 sq ft segment, with distribution firms dominating over half of the year’s take-up of 1.3m sq ft.
In West Yorkshire, take-up recovered from the record low level of 909,000 sq ft posted in 2022 to 1.6m sq ft last year, mainly due to a steady delivery of new speculative space to the market.
Knight Frank expects demand right across the size spectrum in 2024 with a continued focus on quality and prime locations.
Headline rental growth is expected to remain positive and move forward, with average growth of 3.3% forecast for 2024 for Yorkshire & the Humber – with a 4.06% forecast for Sheffield and 3.48% forecast for Leeds.
Across Yorkshire, occupiers continued to prioritise quality and ESG standards with new builds and second hand, good quality grade A space proving most popular.
On the South Yorkshire and North Derbyshire, Rebecca Schofield, head of the Yorkshire industrial team and recently made a proprietary partner of the firm – said: “2023 take-up was more in line with pre pandemic transaction levels, with the majority of units let being sub-250,000 sq ft.
“There was a shortage of larger transactions last year with third-party logistics companies (3PLs) almost absent from the market. Many had their own surplus ‘grey’ space to back fill, which was their main focus.”
Looking ahead, Schofield added: “We have started to see a number of new requirements enter the market across the size spectrum, which we hope to see move forward during the first half 2024. We have seen demand for space from 3PLs, end occupiers and manufacturers.
“The region has seen a number of new development completions, along with second-hand stock returning to the market, resulting in a healthy supply of buildings, giving occupiers a wider choice. The requirements in the market appear serious about acquiring premises but decision making is taking a little longer,
Key occupier deals in South Yorkshire last year included Gem Imports acquiring 186,000 sq ft at Arrow 186 in Barnsley; Butternut Box taking 132,750 sq ft at Symmetry Park in Doncaster, and JLA acquiring 109,000 sq ft at Mirastar’s new Catalyst development at Junction 33 of the M1.
West Yorkshire & the Humber
Iain McPhail, partner at Knight Frank Leeds, said: “We have witnessed a ‘flight to prime’ from occupiers over the last 12 months, with well-located developments with good motorway links and high ESG credentials attracting a good deal of interest, for example, Leeds Valley Park and Velocity Point, both in Leeds.
“While occupiers continued to display a sense of cost conservatism, the steady delivery of new, speculative space to the market towards the last quarter of 2023 has created more choice and contributed to a gradual recovery in take up from its record low in 2022.”
Key deals in this market segment included Advanced Supply Chain’s pre-let of 230,000 sq ft at Super B Cleckheaton; XPO’s move to 211,364 sq ft at Voltaic in Wakefield; IFCO’s 153,323 sq ft pre-let at Prism Park in Wakefield; and Siemens Mobility pre-letting 94,841 sq ft at Point 36 in Goole.
Supply is now reaching the market once again, with around 13.m sq ft of new-build space reaching completion in Q4 2023.
McPhail said: “A significant volume of new build space reached practical completion during the final quarter of 2023. Consequently, the supply of immediately available space steeply rose to 4.2m sq ft by year-end, increasing the vacancy rate from 4.3% in Q3 to 6.3% in Q4. However, 22% of this available space is currently under offer.”
He added: “Several new build mid-box units are under offer in the region, which will see quoting rents increase again from £8.75 per sq ft to circa £9.50 per sq ft in early-mid 2024.
“Similar to South Yorkshire, after a quiet 2023 from the 3PL market in the region, we are starting to see more contract-led requirements return, so expect more activity in this sector.
“New development is being hindered by the absence of speculative institutional funding with the exception of Baytree Developments two-unit proposed speculative development in south Leeds which should commence shortly.
“Consequently, we expect the medium-term pipeline of units over 50,000 sq ft to remain constrained in the region, adding to the view that rental growth may continue to steadily rise.”