Real estate advisors reveal 30 per cent jump in ‘big-box’ take-up

Recent analysis by real estate advisors Avison Young of the industrial and logistics sector has highlighted a notable uptick in the take-up of ‘big-box’ units over 100,000 sq ft of grade-A space.

The first half of 2024 saw total take-up of 10.9 million sq ft, marking a 30 per cent increase compared to H1 2023 reflecting improving market sentiment.

Avison Young says that whilst activity remains below the five-year H1 average, the comparison is skewed due to the exceptional demand seen during the global pandemic.

The Midlands accounted for 68 per cent of H1's leasing activity as the region continues to be a hotbed of activity for both occupiers and investors, particularly locations within the 'Golden Triangle'.

Avison Young reports overall big-box supply has decreased to 47.4 million sq ft, across 207 units, down from 48.1 million sq ft at the end of Q1 (209 units).

Of the available units, 35 per cent have been speculatively developed, as there continues to be a limited number of new units under construction, with the rest being second-hand.

Notably, current supply leans heavily towards smaller ‘big box’ units (ranging from 100,000 to 399,999 sq ft) accounting for 91 per cent of available inventory by number of units, posing a challenge for fulfilling mega-shed requirements.

Beyond the big-box market segment, the broader industrial sector is demonstrating resilience.

Diverse demand for industrial buildings, including manufacturing facilities, open storage, self-storage, and data centres, is sustaining strong rents while rental growth prospects on last-mile, mid-box and multi-let schemes that have shown resilience, despite global economic challenges, are attracting investor interest.

A key driver of demand is the exponential growth in data usage, fuelled by technological advancements, widespread adoption of cloud services, and the rise of big data analytics. This trend is particularly strong in regions with robust tech ecosystems and reliable power supplies.

The resurgence in domestic manufacturing, propelled by reshoring initiatives, is also boosting occupational demand.

The Midlands, with its industrial heritage and skilled workforce, is well-positioned to benefit further, along with other key UK locations including the North East and the South West where Jaguar Land Rover's planned new gigafactory in Bridgwater exemplifies this positive trend.

The Avison Young analysis, however, also points out that planning constraints, including lengthy approval processes and stringent regulations, hinder the timely delivery and construction of new facilities. This could lead to a shortfall of new grade-A units, especially in high-demand regions like the Midlands, where current supply relative to the five-year average demand remains under 16 months.

As demand for industrial units suited for data centres and advanced manufacturing rises, landlords are positioned to capitalise on the opportunity to increase rents, enhancing the industrial sector's attractiveness to investors.

Andrew Jackson, managing director, Industrial and Logistics at Avison Young UK, said:

“Despite elevated stock levels and a notable imbalance in available shed sizes, prime headline rental growth remains robust, especially in the best locations.

“Regions experiencing the most significant year-on-year growth include the North West, London and the South East, and the East and West Midlands, where prime rents now punch into double digits at £10.25 psf.

“This encouraging uptake underscores the strong demand and investment potential within the industrial sector, particularly in key strategic locations.

“Furthermore, the new government’s growth focus and £7.3 bn National Wealth Fund will help spur development of advanced manufacturing such as gigafactories.”