JLL: Gradual pick-up in occupier demand and take-up activity in logistics/industrial in 2013 (UK)

Latest Industrial and Logistics research released by Jones Lang LaSalle shows that the total take-up of floor space across GB in Q3 2012 (18.8 mln ft²) fell by 15% compared with Q2, and was 22% lower than the same quarter a year ago. In the first nine months of 2012 take-up totalled some 58.6 mln ft².

Jon Sleeman, Industrial research director at Jones Lang LaSalle: "Total take-up in the first three quarters of 2012 was 20% lower than that recorded in the same period last year, which reflects both fragile economic conditions and limited good quality supply in certain markets. Based on this evidence, we predict that the total level of take-up in 2012 overall is likely to undershoot last's level by around a fifth."

At the end of September 2012, total available supply across GB stood at 332.8 mln ft², of which almost three-quarters was in units below 100,000 ft². Available supply was 0.7% lower than at the end of September 2011. Compared with recent levels of take-up, this equates to just over three years' worth of demand.

Regionally the largest fall in availability in the six months to September 2012 was recorded in the East Midlands (-10.6%) whereas the largest increase was recorded Wales where availability rose by 8.3%. Nationally, 16% of total availability comprised new/refurbished stock for units from 1,000 to 99,999 ft².

As at November 2012 there was around 558,000 ft² of industrial floorspace under construction speculatively in 13 schemes nationally. This is lower than recorded at May 2012 where approximately 783,000 ft² was speculatively under construction and well down on the peak level recorded in mid-2007 – 15.5 mln ft². Around two-thirds of this floorspace under construction is in London.

Some £462 mln (approx. €568 mln) was invested in the UK industrial market in Q3 2012. At the start of December prime yields for multi-let estates were around 5.75% in London and the South East and 7.25% in the major regional markets.

Our Outlook for 2013
- We anticipate a modest recovery in UK economic growth next year, although high personal debt , fiscal tightening and weak Eurozone growth will hinder UK growth prospects

- We will see a gradual pick-up in occupier demand and take-up activity next year as the gradual economic growth starts to take affect

- With limited speculative development taking place nationally, the availability of prime new and good quality supply is likely to fall. However the availability of poorer quality supply will increase as occupiers release this space in favour of more modern properties.

- There will be rental growth in the next 12 months, although this is likely to be confined to a small number of core markets, such as West London, parts of the Thames Valley 'Western Corridor' and certain prime regional markets

- Investor demand for multi-let stock will continue to focus on prime stock particularly in London and the South East. We expect prime yields to remain unchanged in the short term with secondary yields expected to drift out further.

Source: Jones Lang LaSalle

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