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The UK logistics market demonstrated a good degree of resilience in 2009 despite the economic downturn. With prime yields showing signs of a sustained recovery, there was a widespread improvement in investor sentiment, according to CB Richard Ellis’ recent 2009 UK Logistics MarketView.
In 2009, £1.4 billion was invested in distribution warehouses in the UK, compared to a slightly lower level of £1.3 billion in 2008. There was rapid compression of prime yields in the latter half of 2009, driven by the strong reemergence of demand from UK institutions in the sector. Investment activity was largely focused in the South of the UK, with both the South East and Greater London regions each taking a 26% share of total transaction volumes.
David Rolwegan, Associate Director, CB Richard Ellis (Scotland), commented: “In Scotland the occupier market remained relatively active throughout last year. 2009 saw a number of larger deals, particularly worthy of note was Co-op’s agreement to take over 500,000 sq ft at Prologis Park M8 and a couple of lettings at nearby Eurocentral accounting for another 136,000 sq ft. 2010 is already off to a good start with another 165,000 sq ft let at Eurocentral in January.
“Speculative development continues to be rare, although some developers are making noises and with the amount of new build accommodation dwindling this will come as good news to the occupiers who continue to seek quality space.
“With Scotland escaping the empty rates legislation coupled with the shortage of new space available, rents north of the border have not been under such significant downward pressure. However, we will also need to see a sustained improvement in the availability of debt finance to make large scale speculative development viable.”
Across the UK, the occupier market had a relatively positive performance in 2009, although supply over the past 12 months has increased significantly as a result of second-hand space being released to the market, fuelled by the collapse of key occupiers such as Woolworths. At the end of December availability of buildings of 100,000 sq ft plus was 55.4 million sq ft compared to 34.9 million sq ft in 2008 in total.
The total take-up of logistics space across the UK of 100,000 sq ft plus was 12.5 million sq ft in 2009, only 15% lower than the 14.3 million sq. ft. let in 2008; although there was a significant reduction in top-tier lettings, and lettings for space in excess of 500,000 sq ft dropped from 22% in 2008 to just 4% in 2009, indicating that occupiers are choosing to wait until the overall outlook becomes clearer before engaging in significant transactions. | 