According to the latest Logic Industrial Property report from the Leeds office of property consultancy Knight Frank, a robust 678,200 sq ft of take-up was recorded in the West Yorkshire and Humber region during Q3 2024, bringing the total take-up figure to a three-year high of 1.9 million sq ft (units over 50,000 sq ft) this year.
Iain McPhail, partner in Knight Frank’s Yorkshire Industrial & Logistics team, said: “The industrial and logistics market in West Yorkshire & the Humber continues to perform well, with the take-up totals of 2022 and 2023 surpassed with one quarter still to go. In addition, a further 400,000 sq ft of space was under offer as per the end of September.”
He explained: “New speculative schemes delivered to the West Yorkshire & the Humber market over the past year have been a significant factor in fuelling take-up volumes. Five speculatively built units have been signed up so far this year, accounting for 25% of take up so far.
“A notable transaction in Q3 was the letting of the 64,809 sq ft Unit 1 Interchange 26 in Cleckheaton to food supplier, Deli Fresh. This set a new headline rent for units over 50,000 sq ft in the region, at £9.20 psf.
“Prime headline rents in Leeds continue to grow and are currently tracking at 5.1%, while prime rents across the region have grown by 38% over the past three years, driven by the dearth of new supply.
“Also of note was the letting of K61, Konect 62 (60,912 sq ft) to third-party logistics operator, Campeys of Selby, on a 10-year lease at £8.50 psf.
“While distribution firms remain active and comprise 27% of take-up over the past year, manufacturers now comprise 53% (1.1 million sq ft) of the floorspace signed. This marks a significant shift compared to last year, when distribution firms comprised 75% of annual take-up and manufacturers, only 11%.”
Despite the delivery of much-needed new stock to the market, supply levels are once again trending downwards. Availability of existing stock fell by 8.4% in Q3 to 4.1 million sq ft (units 50,000 sq ft+). Both new and second-hand supply levels fell in the quarter, bringing the vacancy rate down by 50 bps to 6.1%. Excluding space under offer, there are only seven new units available, all of which are under 200,000 sq ft.
The development pipeline of units over 50,000 sq ft remained unchanged during Q3 with Baytree Leeds, Baytree Developments’ flagship two-unit scheme (76,000 and 145,000 sq ft) located in South Leeds, remaining the only speculative development scheme underway, with practical completion expected in November 2024.
Iain McPhail continued: “This is a significant reduction from one year ago when 12 speculative buildings totalling 1.4 million sq ft were under construction. Based on the region’s five-year average annual take up and discounting space under offer, just 15 months’ worth of existing supply is available, reducing to seven months for new or grade-A space.
“Given the limited development pipeline, headline rents are expected to continue trending upward into 2025 as supply levels tighten further. Average rental growth forecasts for Leeds have been revised upwards in the latest forecasts, with 5.3% now predicted for 2024, and 3.3% for 2025.
“There is a general sentiment that occupier confidence is starting to return, on the back of the recent change in government and, more importantly, the Bank of England’s decision to reduce the base rate by 25 basis points. This has resulted in more positive conversations and some ‘on hold’ requirements being re-activated.”
