Big Box Bulletin
A review of occupier and investment activity in the UK big shed market.
In Q3 2024, take-up of big-box* space totalled 4.5 million sq ft. This result takes year-to-date volumes to 15.6 million sq ft, 21% ahead of last year, signalling that sentiment has seen encouraging improvement and is translating into deals. Take-up volumes for the quarter do, however, remain below their five-year (Q3) average, but the comparison is skewed due to the exceptional demand during the global pandemic. By geography, the Midlands remains the hotbed of activity, especially prime locations within the 'Golden Triangle' that account for 51% of all leasing activity this year.
Grade-A supply at the end of Q3 2024 totals 49.9 million sq ft (spread across 217 units) - an uplift of 5% from the previous quarter. While 41% of all available units are speculative, there has been a marked slowdown in new speculative starts. However, as they become absorbed, the new ESG-focused stock pipeline looks thin over the next 12-15 months. The remainder are secondhand, and only a few new units are under construction. Current supply leans heavily towards smaller units (100,000 - 399,999 sq ft), which comprise 91% of available inventory by number of units. This makes larger requirements challenging to satisfy while reducing average deal sizes.
Investment into the single-let big-box distribution market has been limited this year, with investors remaining cautious amid macroeconomic headwinds. Q3's result of £195.5 million was no different, meaning volumes are 72% below the five-year Q3 average. However, with a newly elected Labour government, falling inflation, now 1.7% ( Headline CPI), and further anticipated interest rate cuts, having already seen a 25-bps in September, an economic recovery is expected in Q1 2025. We anticipate this will spur more activity, as it is already doing across the multi-let asset classes, as investors still believe in the robust fundamentals of the sector.
*Grade A units above 100,000 sq ft.
