Leading global property consultancy Knight Frank’s latest Logic Report has revealed that the steady delivery of new speculative space in West Yorkshire during 2023, (which was notably absent during 2022), was providing more opportunities for occupiers and driving a gradual increase in take-up levels and quoting rents in the region.
Despite the wider UK economic challenges, the third quarter of 2023 saw take-up reach 417,800 sq ft across five deals (units 50,000 sq ft-plus), bringing the year to date total to almost 1.4 million sq ft.
Iain McPhail, partner and specialist in industrial property at the Leeds office of Knight Frank, explained: “Activity so far this year has surpassed the total for 2022 by 54%
A further 11% of all existing available space is under offer and with recent news of Siemens signing to a new 94,000 sq ft pre-let in Goole, we expect to see further transactions between now and the end of the year.
A key deal in Q3 was the letting of OP65, Overland Park, Morley in Leeds, to Leadbeater Transport, at a new headline rent of £8.75 per sq ft. The 65,755 sq ft new build is rated EPC A+ and BREEAM Excellent.
Iain continued: “Distribution firms continue to grow their share of the market and account for 75% of the annual total. This is up from 52% over the comparable period last year . Manufacturers comprise a further 15% of the 12-month total to end of Q3.
“We are starting to see a return to a pre-pandemic market, illustrated by positive take-up but further evidenced by the shrinkage in e-commerce requirements and 3PLs looking to fill ‘grey-space’ in their own property portfolio.
“Whilst the supply of immediately available space rose by 42% during Q3, to stand at 2.8 million sq ft, this was entirely driven by the return of second-hand space including the 556,000 sq ft ‘Sherburn 550’ warehouse in Selby. Consequently, the vacancy rate has increased from 3% in Q2 to 4.3% in Q3. Second-hand grade B and C stock comprises 76% of all available space in the region. In contrast, the supply of new, high-quality space declined, with only two units over 50,000 sq ft immediately available to occupiers. A further 1.4 million sq ft of space remains under construction speculatively.”
He continued: “The existing available space and units under construction equates to about 16 months' supply against the region’s five-year average annual take-up and beyond the development that is on site, the speculative pipeline is limited due to the absence of institutional funding and available industrial sites, which is hindering new development.
“As a result, we expect the medium-term supply pipeline of units over 50,000 sq ft to remain constrained in our region. We may also see an uptick in design and build activity, with several prime development sites in the region being granted reserved matters planning consent for large-scale distribution centres, including Switch 490 (490,118 sq ft) at Wakefield Europort, which is a 23-acre industrial development site located adjacent to Junction 31 of the M62.”
Prime rents in both Leeds and Wakefield for units over 50,000 sq ft are 17% higher than this time last year, currently at £8.75 per sq ft. Prime new build mid-box units are now quoting up to £8.95 per sq ft with ‘big box’ (over 350,000 sq ft) guide rents, regionally ranging from £7.75 - £8.25 psf.