03/13/2019 | Press release | Distributed by Public on 03/13/2019 03:32
Savills research shows that overall annual take-up has also grown significantly during the last 10 years, rising from just 12.8 million sq ft in 2009 to 35.1 million sq ft (1.189 million to 3.260 million sq m) by the end of 2018 (for units of 100,000 sq ft +), signifying a 174% increase as businesses continue to expand their UK footprint, the most notable example being Amazon. The online retailer has seen its warehouse space grow by as much as 1700% over the past decade, occupying up to 23.4 million sq ft by the end of last year.
Consequently the sector has seen a 66% drop in supply since 2008, with vacancy rates at just 6.2% today, with this dropping to as low as 2.4% in prime locations such as London and the South East.
Richard Sullivan, national head of industrial & logistics at Savills, comments: 'For those of us who have been involved in the sector for the past decade, the shift is unprecedented. 10 years ago a number of landlords had higher vacancy rates in their portfolios than the entire market today, which proves just how much has changed. It is hard to imagine how the landscape might look in 2029, but I would not be surprised if we look back with similar amazement.'
The popularity of the sector has also been reflected in investment volumes, which have witnessed a 193% jump in this timeframe. In fact, in 2017 Savills figures showed that industrial property accounted for 17% of all commercial property investment, the highest ever recorded. What's more, yields are now at 4%, having dropped lower than retail assets for the first time in history.
The structural changes to the sector have also had an impact on the actual warehouse buildings themselves. The average size of a transaction has increased by 41% in the past 10 years and there are now over 15 units totalling more than a million sq ft in the UK. Whilst this growth can be seen across all sectors, online retailers in particular, such as Amazon, Wayfair and ASOS have upped their floor space considerably.
Savills has also seen buildings get taller during this time, with the average height of a unit increasing from 11 to 12.7 metres since 2008. Many developers are putting in planning applications to achieve consented heights of up to 18 metres, which has now become the norm to allow for incorporating additional racking and mezzanines to maximise efficiencies.
Will Cooper, director in the industrial project management team, adds: 'The warehouse itself has undergone a serious evolution in the last decade, changing from a simple 'shed' to a highly automated and sophisticated building. At present there is limited rental premium on height, so we will continue to see warehouses move upwards, especially as multi-storey units become increasingly normalised and occupiers seek the benefits of utilising mezzanine floors and increased racking heights.'