With one quarter still to go, 2020 take-up already stands at 34.6m sq ft, surpassing the previous annual record set in 2016. Over 10m sq ft is believed to be under offer, meaning 2020 take-up is on track to hit 45m sq ft. This is a remarkable success story in the midst of a global pandemic.
Reflecting the response to the virus, 12% of deals in 2020 have had lease lengths under 5 years. That said, short-term COVID-19 related requirements tailed off as Q3 progressed.
35% of Q3 take-up relates to online-only retail. Amazon continue to grab the headlines, agreeing another five deals in Q3, including 2.3m sq ft at Symmetry Park Swindon and 532,500 sq ft at Hinckley Park, Leicestershire. Amazon has taken 11.2m sq ft of big-box space in 2020 so far.
Amazon are not alone however. Following a surge in sales, meal kit providers such as HelloFresh and Gousto more than doubled their warehouse capacity in Q3. The latter pre-let 307,807 sq ft at Mountpark Warrington Omega II, and took Chillbox, a 196,178 sq ft newly refurbished cold store facility in West Thurrock, Essex. BNP advised on the Chillbox deal.
By tapping into consumer desire for convenience and healthy living, meal kits will play an increasingly important role in the wider move to online food shopping, particularly as supermarkets look to capitalise on the trend.
With occupier preferences focused on high quality, the availability of Grade A space is coming under pressure. The shortage is most acute in the North West and M62 corridor, where there is now less than a years' worth of supply due to strong transactional activity and limited new build delivery.
Nationally, 4.9m sq ft of speculative space was delivered during the first nine months of 2020, but nearly 40% of this was either pre-let or leased within six months of completion.
A further 2.6m sq ft is under construction and due for delivery by the end of the year, including 1.4m sq ft across three big-box units at GLP's Magna Park Lutterworth in the East Midlands.
Difficulties in obtaining construction finance and delays in the planning process mean there is
unlikely to be a marked increase in speculative delivery in 2021. With few new project announcements in Q3, there is less than 5m sq ft currently proposed for completion next year.
Rents are holding firm on the back of positive absorption dynamics and a healthy vacancy rate of 6.2%. Historically, rental growth has not turned negative until vacancy rates enter double digits. According to MSCI, industrial and logistics saw annual rental growth of 1.8% in September, the only sector to achieve positive growth.