Online retailing underpins strong industrial occupier demand in H2 2016
Industrial occupier demand strengthened during the last six months of 2016, underpinned by the continued shift to online retailing, which saw internet-based sales increase to 17% of all UK retail sales in December 2016.
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According to Knight Frank’s latest LOGIC report, a total of 21.7 million sq ft of units above 50,000 sq ft were acquired during H2 2016; up 34% on H1 2016 and 14% ahead of the five-year bi-annual average. This brought the volume of total take-up for the whole of 2016 to 37.9 million sq ft, up from 35.6 million sq ft in 2015.
The Midlands remained the regional focus of industrial activity in H2 2016, while London and the South East also saw a doubling of take-up to 4.8 million sq ft. Again, this increased activity was boosted significantly by the 2.2 million sq ft letting to on-line retailer Amazon at St Andrew’s Tilbury.
On the supply side, the shortage of new and good quality second hand space across all size ranges is driving occupiers to commit to space through pre-letting or Design & Build options.
In the investment market, appetite for industrial stock remains strong, with investors continuing to be attracted to the sector’s strong income component and positive market fundamentals. A total of just over £2.9bn of industrial assets changed hands during H2 2016, according to Property Data, bringing the total out-turn for 2016 to £5.9 bn, up 6% on the volume in 2015.
The outlook for 2017 is positive. The shift to on-line retailing shows no signs of abating, with internet-based sales projected to double by 2023. Although Brexit had impacted on speculative development, compounding the demand/supply imbalance, recent speculative schemes have re-positioned rents ahead of historic prime levels, and we expect rental growth continue throughout 2017.
Read the LOGIC: UK Overview - H2 2016