Big box vacancies shrink as quarterly take-up improves

The vacancy rate for the big box logistics market has reduced compared with the previous quarter, while take-up has been bolstered by some big requirements during the three-month period, according to DTRE. The agent’s latest findings show that the vacancy rate narrowed to 6.8% at the end of Q2, from 7.2% in the first quarter. Overall supply stood at just over 51m sq ft, 21m sq ft of which amounted to new or speculatively built space. The remainder was classified as second-hand. Take-up grew by 11% on Q1 this year to reach nearly 6.4m sq ft, taking the H1 total to 12.1m sq ft. The figure is up on 11.6m sq ft in H1 last year and is broadly in line with the pre-Covid average. Occupiers signing for space include Nike, which took 1.3m sq ft at GLP’s Magna Corby scheme. There were seven deals for spaces exceeding 300,000 sq ft, which DTRE said was more than any other Q2 outside of the pandemic years. Researchers cited momentum for locations between 300,000 sq ft and 400,000 sq ft, which at the turn of the year accounted for nearly a third of all grade-A supply. Deals at Ergo 354 in Fradley, Staffordshire (Super Smart Services), Unit 1, Orwell Logistics Park in Ipswich (EDF Energy) and MPS9, Magna Park South in Lutterworth, Leicestershire (CEF) all boosted take-up and helped to reduce the vacancy rate. However, take-up of units between 100,000 sq ft and 300,000 sq ft totalled just 2.3m sq ft in Q2, which was 29% less than the pre-Covid average. Second-hand units of between 100,000 sq ft and 200,000 sq ft saw “virtually no lettings at all”, which DTRE said reflected the preference for newer, sustainable and future-proofed assets. Trading volumes in Q2 jumped by 62% to £1.8bn, compared with Q1 this year. The biggest deal completed was Tritax’s acquisition of Abrdn’s UKCM, which included £270m of logistics properties. Elsewhere, researchers found that industrial rents grew at twice the speed of the office and retail markets in May. The industrial and logistics sector is now seeing real terms rental growth, with rents outstripping CPI inflation by 429bp, driven by lower vacancy rates. DTRE predicted a “much busier market for the remainder of the year” and increased rental growth as demand outstrips supply. Photo © Marcin Jozwiak/Unsplash