Avison Young’s latest analysis of Big Box data for 2020 highlights industrial sector’s resilient position.

The UK industrial and logistics market recorded a significant increase in take-up in 2020, despite the global pandemic. Take-up of large grade A warehouses, at > 100,000 sq ft, amounted to 38.4 million sq ft during 2020, 40% above the five-year average.

Activity was dominated by the two main sectors, non-food retail (39%) and third-party logistics (36%), driven by the growing demand on ecommerce supply chains. Retail – food (10%) also saw a greater share of activity in 2020, whereas manufacturing (7%) was well down on recent years. A large proportion of third-party logistics demand has been to service the NHS and other healthcare requirements.

Key deals included four 2 million sq ft deals to Amazon – Littlebrook, Dartford; Panattoni, Swindon; Follingsby Max, Gateshead; and Gateway 45, Leeds. Further significant deals were 1.3m sq ft at Interlink South in Bardon to Aldi and 800,000 sq ft at Unity in Doncaster to T J Morris.

Design and build take-up accounted for 47% of activity and the eight largest deals of 2020. However, in some areas this was significantly lower than in previous years, as many organisations favoured the immediate availability of existing space. Take-up of speculative developments has more than doubled compared to recent years, accounting for 11 million sq ft. However, second-hand units have also experienced high demand, leading to a large proportion of vacant stock being absorbed in 2020. Availability of units > 100,000 sq ft has declined to 26.2 million sq ft at the end of 2020, down from 31.3 million sq ft a year ago. It is likely the market will see a resurgence of speculative development to respond to ongoing demand.

The past year also recorded an upward pressure on rents, and as a consequence land prices are expected to increase due to higher rental expectations and yield compression.

Due to its central location and availability of a wide range of buildings and land, the East Midlands has been the dominant region for the past three years and accounted for 10.7 million sq ft of activity in 2020. Almost all other regions also performed well above average, with take-up in London and the South East contributing 26%, followed by Yorkshire and the North East at 17%. Meanwhile, the West Midlands accounted for 12%, in line with the 5-year average, reflecting a limited choice of assets and a greater concentration on manufacturing.

Andrew Jackson, Principal & Managing Director, Industrial at Avison Young, said:
“In contrast to some other commercial real estate sectors, the UK industrial and logistics market experienced a record year in 2020. An accelerated change in consumer behaviour favouring ecommerce, coupled with substantial healthcare occupier demand, drove significant activity in the market.

As one of the most resilient property sectors, we expect this strong performance to continue in 2021, buoyed by an ever-growing demand from domestic and overseas investors, with prime yields moving below 4%.”

Andrew Jackson

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