B8 Real Estate’s bi-annual market report showed the value of transactions tripling and occupier take-up almost doubling compared to the same period last year.
Using the company’s data of its own deals and those made elsewhere, B8RE said that 49 investment deals worth £648m were made in the first six months of 2021. During that same period last year, the company only noted 25 deals totalling just £194m.
Occupational take-up of units of more than 90,000 sq ft reached a record of 3.3m sq ft, according to B8RE. In the first half of 2020 take-up was just 2.3m sq ft.
Demand is continuing to grow, according to the report. B8RE cited the growth in e-commerce, increases in stock levels by companies to avoid supply disruption and the reshoring of manufacturing operations as the reasons for the market’s strength.
But demand could soon outpace supply, the report warns. Good quality sheds of more than 90,000 sq ft are down 48% from last year. B8RE also said rents were increasing significantly at multi-let estates.
“Occupier demand in the North West is at record levels across all unit sizes with Covid and, to some degree, Brexit helping to increase demand,” said B8RE lettings team member Will Kenyon. “The issue facing the market now is supply. With few existing units coming back available and no obvious signs of this changing, rents will continue to increase. The current shortage of building materials and increased construction costs will only add to this problem.”
The land value for prime development sites is more than £1m an acre, according to B8RE. The company said that yields were also at historically low levels, ranging from 3.5% to 3.75% for prime logistics facilities.
Looking at the entirety of the report, B8RE investment team member John Burrows said that it was clear that demand for industrial assets had only intensified.
“Of all the property sectors, the industrial market looks best placed to weather the long-term economic impact of Covid,” Burrows said. “Given the continued growth of e-commerce, on-shoring of manufacturing processes and relatively restricted development pipeline, the current market dynamic looks set to continue.”
B8RE has been issuing market updates for the North West since January 2013.