Speculative development surges but “risk of oversupply unlikely for now”

Midlands | North West | Property & Construction | Retail | South East | Transport & Distribution

The current speculative development boom in the UK logistics and industrial market will meet pent-up industry demands, according to research from Cushman & Wakefield.

8m sq ft of speculative development was in progress at the end of 2018. This followed the highest level of post-financial crisis speculative development earlier in Autumn of 2018, with 9.7m sq ft underway.

The drive for speculative development is being partly explained by the prospects of letting space out quickly. In fact, the average void period for speculatively built space fell to nine months at the end of 2018 – the lowest level since Cushman & Wakefield began tracking this data in 2009.

Cushman & Wakefield are not concerned about the risk of oversupply, citing low vacancies (around 5%), scarcity of land in prime locations, and a restrictive planning regime as mitigating factors.

The research suggests that e-commerce is driving demand and impacting the types of development.

Cushman & Wakefield estimates that if current letting rates persist, vacant newly-built space will reach 14m sq ft by the end of 2019 – though this is still 30% below the peak of over 20m sq ft registered in 2009.

35% of speculative construction is concentrated in the Midlands, with 31% in the South East/East and 13% in the North West.

Bruno Berretta of Cushman & Wakefield, said: “The supply and demand indicators we have reviewed suggest that despite the surge in speculative development, the risk of oversupply is unlikely for now. In absence of a major economic shock, positive demand fundamentals, which include e-commerce combined with remaining supply constraints, will continue to fuel rental growth which is likely to be localised in prime locations.”

Did you enjoy reading this content?  To get more great content like this subscribe to our magazine

Reader's Comments

Comments related to the current article

Leave a comment

Your email address will not be published. Required fields are marked *