Research article

The logistics and industrial market in the East Midlands

Article

Contacts & Related Research

Abstract

We are seeing continued rental growth in the region which is narrowing the historic gap with the West Midlands

Nickel 28 South Normanton being developed by Thorngrove and Richardson

Nickel 28 South Normanton being developed by Thorngrove and Richardson

Table 2

TABLE 2 | Key stats
Source: Savills Research

Supply

  • The supply of warehouse space in the region has, in the most part, remained stable over the last three years at between four and five million sq ft, and currently stands at 4.19m sq ft, across 19 units giving a vacancy rate of 4.6%.
  • Whilst total supply levels have remained broadly constant the make up of existing unit supply has changed dramatically over the last four years. Indeed, at the start of the third quarter of 2015 just 17% of supply was considered grade A, whereas currently 61% of all stock on the market is considered grade A.
  • Likewise, the size ranges of existing unit supply have also changed as developers have reacted to increasing unit sizes demanded by tenants. At the start of 2015 69% of stock on the market was between 100,000 and 200,000 sq whereas now just 29% of the units on the market are in that size range. The largest unit on the market in the region remains Quantum at Magna Park at 411,613 sq ft.
Figure 6

FIGURE 6 | Supply by grade
Source: Savills Research

Take-up

  • The occupational market in the area continues to set records with 4.01m sq ft of space transacted at the half year point. This is just 200,000 sq ft shy of the total amount of space transacted in 2017 and 146% higher than the long term H1 average and also the highest amount ever for a first half of the year.
  • It is positive to note that whilst there have been four build to suit deals agreed in 2018 totalling nearly 2 million sq ft at East Midlands Gateway there have actually been 11 deals in total making it the best Q1 ever by deal count demonstrating strong demand across grades and sizes.
  • Away from East Midlands Gateway Prologis achieved success as their speculatively developed unit DC 115 at DIRFT was let to Panic Transport, giving a void from PC of just seven months.
Figure 7

FIGURE 7 | East Midlands take-up
Source: Savills Research

Figure 8

FIGURE 8 | Speculative announcements
Source: Savills Research

Development pipeline

  • There is 2.35m sq ft currently under construction across nine units, with an average size of 261,000 sq ft.
  • However, with a number of developers quoting £6.75 – £6.95 per sq ft on units under 200,000 sq ft, we expect that the region will see strong rental growth, especially given the aforementioned lack of smaller units in the region.