The UK’s industrial and logistics property market was in a good place as we finished 2023. Pricing has stabilised across the year and demand has remained strong. There are challenges in the sector that must be taken into account, but also significant opportunities in 2024 that occupiers can take advantage of.
If you are looking for industrial and logistics property to rent, it may pay to move sooner rather than later. Vacancy rates are set to remain muted according to analysis from Cluttons. The market fundamentals are strong and there are not enough properties to meet demand, leading to positive overall asorption rates.
The growing popularity of e-commerce alongside changing supply chains and the push to Net Zero has forced vacancy rates downwards to just 3.9%. Even the amount of new space scheduled to hit the market in the first half of 2024 will not be enough to meet demand. Consequently, competition for these spaces will only grow fiercer.
For example, the vacancy rate for small-to-medium sized industrial spaces around Manchester is just 2.9%, and BNP Paribas analysis shows that the Midlands “big box” market is outperforming the rest of the UK. Sites like Hay Hall Business Park in Tyseley on the outskirts of Birmingham should therefore be of great interest for anyone looking to rent a large industrial space in the area.
What types of properties are the most popular? Grade A space is always the most in demand, but another factor to look at is sustainability. If you can secure a highly energy efficient space which can demonstrate a Very Good or Excellent BREEAM rating then it will make your life a lot easier when it comes to ESG reporting. Likewise, if you choose to rent an industrial property with its own renewable energy supply, like F Lloyd (Penley) in Wrexham, you will gain another advantage.
The scale of the opportunity presented by Grade A sustainable office space is clear. DHL and Selfridges are just two of the big names actively looking to secure new warehouse space that will allow them to achieve Net Zero in operation.
With the overall construction rate of new industrial space remaining relatively low, it is likely that rents will continue to rise in the future. This can be seen as a challenge for businesses facing rental growth of 6.9% on average for industrial and logistics property year-on-year.
However, as with the previously discussed points, it can also be seen as an opportunity for businesses who can move sooner rather than later. Rather than facing higher rents, you will actually be able to secure what will be a low market rent compared to where projections are pointing in one, three or five years’ time.
2023 brought many challenges in the industrial and logistics property sector, but it is also a time of opportunity for businesses who can make a move now and get ahead of the market. Over the next year we expect construction rates will keep lagging behind and demand for the best space growing in turn.
Looking for a new industrial and logistics warehouse property to rent? Browse our available sites and get in touch with the team today by clicking here.
