The region has experienced the highest increase in rent levels in the UK for industrial and logistics space in the first half of 2016, according to the latest research by Colliers International.
Warrington continued to be a particularly strong location for the industrial market, as rents rose by 13.6% compared to the same period in 2015. Nationally, rents increased by 3.7% to an average of £6.22/sq ft, the highest since before the recession.
The North West saw the highest rise of all the UK regions at 10.6%, taking rents to £5.88/sq ft.
The research compiled by the industrial and logistics team at the North West offices of Colliers International in Manchester and Liverpool showed that the ongoing shortage of available distribution space and good quality space, remained the defining feature of the region’s industrial and logistics market.
There is currently seven million sq ft of units of more than 100,000 sq ft in the North West, with the majority of that space being second-hand and of poor quality. Based on average take-up levels, the total availability of new and refurbished space of over 100,000 sq ft would be occupied in little more than five months.
Colliers said that this overall shortage of suitable product, even of second-hand quality, is forcing occupiers wanting to expand to entertain all available options.
Consequently, the North West saw a 14% rise in rent for second hand units of 10,000 sq ft to 30,000 sq ft over the past year, to an average of £5/sq ft.
Take-up of available space throughout the North West in the first half of 2016 amounted to about six million sq ft, of which 1.79 million sq ft involved units bigger than 100,000 sq ft; a level of transactional activity down on the first half of 2015 which Colliers attributed to the lack of available locations.
The dominant player in the North West remained Amazon, with the online shopping giant taking an additional 265,350 sq ft at Manchester’s Airport City in a deal with Stoford and Mountpark to extend its footprint to 654,000 sq ft. Amazon also took 170,000 sq ft at Lancashire Business Park, Leyland, in a transaction with Lancashire County Developments, part of Lancashire County Council.
The largest deal in the first half of 2016 was achieved by Bolton-based online appliance retailer AO.com securing the lease on 386,753 sq ft of space at Crossflow 380, Crewe, from Prologis. This represented a substantial addition to the 360,000 sq ft already occupied by AO.com in the Cheshire town.
John Sullivan, director of industrial and logistics at Colliers, said: “The fact that the North West outperformed all other regions in terms of rental growth in the first half of 2016 reflects the classic economic scenario of supply and demand – there is increasing demand in the region from occupiers facing an ongoing shortage of space and people are therefore willing to pay top dollar for what is available.
“Larger deal activity continues to be driven by the retail sector and this trend is set to persist as online retail and ecommerce fuels the requirement for warehouse and distribution space
“While we’re obviously encouraged to see a return to speculative development of ‘big sheds’ for the first time since the economic downturn, this trend remains at a formative stage and we face the ongoing issue of available new and refurbished space being occupied by the end of the year if average take-up levels were to persist.
“Although it remains too early to accurately predict what economic repercussions there will be of the Brexit vote when the UK actually agrees the terms of its departure from the EU, we’re not seeing any discernible negative sentiment following the referendum decision with a number of active requirements in the market and occupier demand in general remaining at pre-Brexit levels.”