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Logistics supply crisis sparks development boom

Chronic undersupply in the logistics market sparked a 16m sq ft “Big Shed” development boom in the first half of 2015, including 7.6m sq ft of speculative development – the highest total since 2007, according to research published by BNP Paribas Real Estate.

BNP Paribas Real Estate national head of industrial and logistics Nick Waddington said: “Over the past 18 months the dire lack of supply in the UK’s industrial and logistics markets has seen occupiers increasingly looking at design and build as the best route of acquiring the space they need.

“The willingness of developers to make a start on many speculative developments is also helping to alleviate a chronic supply shortage.”

Activity by retailers accounted for 60% of the total take-up figure with the likes of discounters such as Lidl, Aldi and TJ Morris taking 1.7m sq ft, including new hubs in Scotland (Lidl) and Wales (Aldi).

Mr Waddington added: “To enable them to keep pace with the growth of online sales, more and more retailers are reconfiguring and adapting their supply chain networks, which has a knock-on effect on the demand and supply levels of distribution property.”

In contrast to the levels of activity from occupiers and developers, the Big Shed report revealed that activity in the investment market has been more subdued during the first half of the year compared with the volumes transacted during 2014 (£1.8bn transacted – 16% down year-on-year).

BNP Paribas Real Estate head of national investment Hugh White said: “Although down on an exceptional 2014, this figure must be seen in context and it should be remembered that the first six months of this year saw the second largest volume of transactions on record, up 61% on H1 2013.”

The Big Shed report revealed that Standard Life’s forward funding deal of a new 638,000 sq ft John Lewis distribution centre remains the market benchmark.

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