Occupiers in the retail sector drove the recover in take-up of logistics space during the final quarter of 2010, says Gerald Eve in its latest bulletin on the prime logistics market. Total logistics take-up was around 10m sq ft in Q4 2010, which the firm says is the highest recorded in its key distribution regions since the last quarter of 2007.
Gerald Eve says the retail sector took up a total of 15.7m sq ft last year, the largest amount of annual take-up in the sector for a decade. And around 4.7m sq ft of this was pre-let, which Gerald Eve says shows how the spike in take-up of new, mostly speculatively developed stock has eaten into the amount of available new or refurbished space.
The firm also notes that manufacturing occupiers returned to average annual levels of activity in 2010, with take-up of about 7.5m sq ft. It says letting activity from this sector was weighted towards the second half of last year, both in terms of the size of the space taken and the number of transactions recorded.
The total availability rate for Gerald Eve’s regions at the end of Q4 2010 was 16.8% compared with 16.4% the previous quarter. It compares with the 17.2% seen in Q4 2009. Most of the space released to the market during the second half of 2010 was second-hand, the firm notes, with around 6m sq ft of such space added to the market during H2 2010. “Total availability is expected to remain elevated as tenant demand focuses on good quality space and the release of unwanted regional distribution space is returned to the market as a result of the recent pre-lets on large national distribution centres by major retailers,” it adds.
Gerald Eve notes that a significant overhang of second-hand stock has persisted as companies have been consolidating operations and focus on improving efficiency. The imbalance between new and second-hand stock has been worsened by the lack of new development, it notes, with only 5m sq ft of space completed during the year. “2011 is expected to be similarly subdued in terms of development,” it adds, “with purpose-builds again driving headline figures”.
The firm says the large requirements for space in the market will help to maintain headline take-up figures in 2011, but cautions on the outlook for consumer spending in 2011. “Whilst this is the most positive bulletin we have released for two years, there are strong economic pressures expected for the first half of 2011, which will undoubtedly suppress performance,” it notes.