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Yorkshire and Humberside: Take up in Q4 2012 was really encouraging and this combined with a strong start to 2013 according to DTZ

wantspacegotspace.co.uk - Yorkshire and Humberside: Take up in Q4 2012 was really encouraging and this combined with a strong start to 2013 according to DTZDTZ,  has released the findings of its Property Times UK Industrial Q4 2012 report which covers the market for properties over 50,000 sq ft. The report revealed that industrial take-up totalled 8.5 million sq ft in Q4, a 56% increase on the previous quarter and the highest level since Q2 2010.  Grade A take-up was particularly strong at 4.25 million sq ft, accounting for 50% of total take-up.

UK take-up for 2012 as a whole reached 28.3 million sq ft, this is 9% less than 2011 and 15% less than 2010, mainly as a result of a subdued third quarter. The North West and East Midlands accounted for 26% and 20% of 2012 take-up respectively.

Continuing the trend witnessed in previous quarter, many occupiers have focused on freehold and leasehold build-to-suit deals in order to satisfy their requirements due to a lack of prime stock. As a result, build-to-suit deals accounted for over 2.2 million sq ft of take-up in Q4 2012; equivalent to 26% of total take-up and the highest level since DTZ started monitoring this trend in early 2011.

DTZ Research also found that the profile of occupiers had changed considerably from Q3 2012. Retail demand increased from 28% in Q4 2011 to 43% in Q4 2012.The four largest occupier deals in Q4 2012 totalled 2.7 million sq ft and were all completed by retailers.

Regional proportions of grade A space remain at historically low levels, with over half the regions grade A space constituting less than 10% of total availability. The North West and North East retained their status as the regions with the lowest amount of available grade A space.

Mike Baugh, Industrial Director in DTZ’s Leeds office commented: “Grade A availability fell nearly 8.5% in Q4, to 14 million sq ft as strong take-up of this grade eroded existing supply. The availability of existing grade A stock is insufficient to satisfy an increasing number of requirements in the market, forcing many occupiers to turn to freehold and leasehold build-to-suit deals particularly in the most popular locations. While we noted an increased interest in bespoke deals in Q2, we have seen this demand translate into actual take-up in Q3 and to a greater degree in Q4.

“Rents on existing grade A stock over 50,000 sq ft remain flat as existing availability is mostly concentrated in pockets where similar sized buildings provide local competition, holding rents and incentives largely static. Industrial rental growth forecasts average 1.3% per annum until 2017. DTZ expects that growth will be driven by the combination of tight supply and the release of pent up demand. Industrial growth lags behind both the office and retail sector but is an improvement for landlords on the stagnation witnessed over the previous five years.”

Regional Overview

In Yorkshire & Humberside, take-up in Q4 reached its highest level since Q3 2010 at 1.1 million sq ft across five deals. Take up for 2012 as a whole was very similar to 2011 at 2.1 million sq ft. The majority of take-up was made up by a significant deal for 750,000 sq ft of grade A space to accommodate The Range’s new distribution centre at Nimbus Park, Doncaster.  Grade A availability stands at 3.4 million sq ft, incentives have reduced for prime buildings between 50-100,000 sq ft due to the lack of supply of units in this size bracket in the region. The lack of existing grade A stock will also facilitate a trend towards occupiers having to consider design and build options, especially in West Yorkshire.

Mike Baugh continues: “Take up in Q4 2012 was really encouraging and this combined with a strong start to 2013, particularly in West Yorkshire, will hopefully lead to optimism within the industrial market.  Supply levels for existing stock in the region continues to decline and although there are signs of small scale speculative development, occupiers searching in certain locations and size ranges may have to start considering design and build options to satisfy their requirements.”

In the North West, take-up in Q4 was very strong totalling 2.6 million sq ft across 14 deals.  Second hand space contributed to the majority of the figures.  Occupier demand remains robust and occupiers looking for quality accommodation are obliged to seek land purchases or design and build solutions, demonstrated by B&M Bargains proposed 500,000 sq ft build-to-suit at Liverpool International Business Park, Speke and Brake Brothers committing to a 170,000 sq ft pre-let at Miller/HCA Omega scheme in Warrington.

Take-up in London, South East and East in Q4 of units over 50,000 sq ft exceeded 750,000 sq ft across ten deals, with the majority of take-up being for grade B buildings. Transactions were primarily driven by consolidation and occupiers taking the opportunity to upgrade their accommodation at reduced costs.  Take-up for 2012 as a whole reached 4.4 million sq ft, an 11% decrease from 2011.

There were two grade A owner occupation deals in Q4, drinks retailer Whiskey Exchange acquired 65,000 sq ft at Lightning in Park Royal and automotive firm EGR purchased 60,300 sq ft at Alpha in Milton Keynes. This erodes the availability of existing grade A space to 3.2m sq ft, a 28% decline since Q4 2011.

In Scotland, Q4 take-up reached 144,000 sq ft across two deals. This lack of occupier activity due to ongoing uncertainty is characteristic of the year as a whole, 2012 take-up totalled 756,000 sq ft, 74% less than 2011. Grade A availability remains limited at 1.5 million sq ft, which is driving the pre-let market. The outlook for take-up is promising; a number of oil and gas organisations have ongoing requirements in Aberdeen, where occupier demand continues to outstrip supply. This has generated significant growth in both land and rental levels over the past 12-18 months.

Q4 take-up reached 1.5 million sq ft in the West Midlands, a 15% increase on the equivalent period in 2011. Take-up was driven primarily by three large pre-let deals at Midpoint and Holford Industrial Park in Birmingham and ProLogis Park Ryton in Coventry.  

Grade A supply stands at 2.5 million sq ft, a 45% drop since Q4 2011. However, the shortage of prime land is in selective locations, for example the lack of prime sites is more acute in the Birmingham area, but more freely available in Coventry.

Take-up in the North East reached a subdued 229,000 sq ft, a 70% decline on the equivalent period in 2011. However, 2012 take- up reached 2.1 million sq ft, a 20% increase on 2011. The largest Q4 letting saw Capita Business Services Ltd take 167,000 sq ft of grade B space at Stead House in Darlington in a move to improve the quality of its accommodation. The North East has the second lowest regional prime availability level in the UK. DTZ expect two grade A buildings to come back to the market in Q1 2013 extending to 235,000 sq ft.

In the East Midlands, Q4 take-up increased to 1.9 million sq ft, the highest level since Q1 2010. The most significant deal was the 1,000,000 sq ft pre-let of grade A space to Sainsbury’s for a distribution centre at DIRFT II, Daventry. Another grade A deal saw Wolseley Group take 142,000 sq ft at Measham.  Grade A availability fell to 1.1 million sq ft, a 65% drop since Q4 2011.

In Q4 only one major letting was completed in the South West but it was significant, with retailer Oak Furniture Land taking 302,000 sq ft of grade A space at DC2 in Swindon. As a result, the existing grade A supply has been further eroded, falling 32% from the previous quarter to 636,000 sq ft. The take-up outlook is promising with a reasonable level of occupier demand in the market; active requirements include Herman Miller pursuing a 180,000 sq ft build-to-suit in Wiltshire, Schlumberger seeking 100,000 sq ft of existing space in Gloucester and Stapleton Tyres seeking 100,000 sq ft in Avonmouth. Additionally, Asda has now started on site for a 615,000 sq ft build-to-suit in Avonmouth.

No lettings above 50,000 sq ft occurred in Wales in Q4. While interest in smaller units is robust, demand for larger units is restricted by a lack of suitable availability. Total availability increased to 11.1 million sq ft as some larger secondary properties came onto the market . 340,000 sq ft became available at Ardagh Facility, Dragon Parc in Merthyr Tydfil and the BBC released 65,000 sq ft at Treforest Industrial Estate.

Posted by The Editor (wantspacegotspace) on 6th April 2013 (updated 08/04/2013)

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