That figure is thanks to a bumper Q2. Occupier activity reached 14.4m sq ft in second quarter of 2021, the highest ever quarterly take-up period in terms of square footage signed for.
Take-up in Q2 is up 82% on Q1 this year (7.9m sq ft), bouncing back to the heady heights seen throughout 2020. The return to form in Q2 had been expected as a record amount of under offer stock exchanged.
The period of growth in the logistics sector remains buoyed by the increased penetration of retail spend online. It remains to be seen if these habits become entrenched post COVID-19. ONS data shows that the monthly percentage of retail spend online is beginning to depress in line with the easing of national lockdown measures.
3PL operators have been the largest contributors to take-up in Q2, commanding 25% of the space taken by occupiers. Pure play online occupiers continue to play an important part of that growth, contributing over 5.2m sq ft of take-up since the start of 2021.
Some of the largest transactions include Staples taking 528,108 sq ft in Corby, Buy it Direct signing a 523,404 sq ft lease at EMDC, Derby and Amazon’s deal for 512,850 sq ft of space at Wakefield 515, Knottingley. This appetite means we can expect rents to continue to climb as space becomes more scarce.
As we hit the midway point of a second year of extraordinary growth in the sector, a shortage of supply of standing stock is beginning to manifest. As the demand for best in class sheds continues to drive the market, there remains a shortening gap between amount of Grade-A new stock and lower grade second hand warehouses available on the market. Occupiers are still indicating their preference to secure high quality space, inferring that there will be increased appetite for prospective build-to-suit units.
The percentage of Grade-A stock on the market has dipped below 50% of all currently available space for the first time in eight quarters; Grade-B units now command over 42% of all stock currently on the market. Data shows that second hand warehouses are still being taken. In 2021 60% of all transactions have been completed for second hand warehouses – that is above the ten year average of 45% of annual take-up.
Rents continue to chalk up incremental gains, owing to continued positive absorption dynamics. Twelve-month rental growth to the end of June averaged 2.9% according to MSCI.
An additional 2.7m sq ft of warehouse space has been delivered this year, with 10.4m sq ft currently under construction. With a potential materials shortage, some of these developments may leak into the early stages of 2022, exacerbating the potential supply conundrum.