Rob Whatmuff is Director at Colliers International and joint agent on Integra 61 with Avison Young
LOWEST UK AVAILABILITY ON RECORD SIGNALS OPPORTUNITIES FOR OVEN READY SITES
North East Sees 56% Increase In Half Year Take-Up
Due to the acceleration of online shopping resulting from the pandemic, between 6 and 10 years of online commerce development has been brought forward in just 1 year. 2020 saw a record annual online commerce share of total retail sales and while there will inevitably be some decline, our research indicates that this consumer shift will not be reverted.
As a result of occupiers’ need for faster fulfilment operations, tenant demand soared and there was 16.1m sq ft take-up across the UK in Q2 2021. This is 39% ahead year on year and a new quarterly record for the sector. This takes the total for the first six months of the year to 24.6m sq ft, marginally higher than last year’s six monthly reading. There is also a lot of space under offer or awaiting planning permissions and this, coupled with future expected demand, will result in a strong 2021.
Given the extraordinary demand that we have witnessed over the past 18 months, Q2 supply is down 26% year-on-year to stand at 25.2 million sq ft. Despite the fact that these figures include speculative warehouse space due for practical completion by the end of Q3, the market currently exhibits the lowest level of availability on record.
In the North East, take-up has increased by an even larger percentage, with 2.7m sq ft transacted in the first half of 2021 representing a 56% increase on the year-on-year figures. Amazon accounted for a significant proportion of take-up when they received planning permission for a 2m sq ft warehouse in the Tees Valley in Q2 this year.
Grade A availability is non-existent and this is where strategic sites with oven-ready plots will come to the fore, such as Citrus Durham’s £300m Integra 61 development which is already home to Amazon’s new 2 million sq ft Fulfilment Centre and has a further 1 million sq ft of design and build opportunities available. Speed of delivery is also key in meeting high occupier demand and with fully serviced plots, Integra 61 can have units ranging from 1,200 sq ft up to 500,000 sq ft available within 52 weeks of deal completion.
Due to the supply and demand imbalance in the North East, the region witnessed strong rental growth. According to the latest quarterly MSCI data for Q1 2021, industrial rental growth in the North East accelerated in Q1 by 0.8%, this compares to 1.6% recorded for the 12-month period to the end of March this year.
Looking forward, we envisage occupiers continuing to invest in their supply chains as the need to expand online fulfilment operations will not taper over the next 12 months. Due to the pandemic, 2020 saw annual online commerce share of total retail sales reach 27.9% and in this respect, Colliers is forecasting an annual e-commerce share of total retail sales of 29% by the end of 2024. According to our analysis, this would mean that the UK could need an extra 50m sq ft of logistics space. This presents an opportunity for developers with well-located sites and serviced plots to help accommodate this demand.