Glenny’s Research team has been tracking industrial activity in the Eastern M25 market for 20 years this year, and our latest findings illustrate how the demand for industrial floor space has changed over this period.
Since the start of our analysis, the demand for industrial floor space in the region has risen from an annual average of 7.3m sq ft in the period covering the Great Financial Crisis (2007-12) to the current post-pandemic era (2020-23), where it averages at 23.6m sq ft.
“The Eastern M25 industrial market has undergone a significant transformation over the past 20 years and particular in the past four years as both the pandemic and the impacts of leaving the Eurozone have changed the dynamics of occupier demand. Whilst overall demand has tripled over this period, rising from 7m sq ft on average in the early years to 23m sq ft per annum in the post pandemic period, the most significant change has been in the Big Box market, where requirements have virtually quadrupled. The most significant thing, of course, has not just been in the volume of demand but the increase in the size of buildings required which has grown from circa 200,000 sq ft on average in the early years to just under 300,000 sq ft on average today.”
Leasing Activity Pays the Penalty
Whilst the demand for space has remained strong, leasing activity has paid the penalty for increased uncertainty and economic concerns over the past couple of years. Take up in 2023 has slowed to just under 3.5m sq ft in the first three quarters of the year, with full year activity expected to be 4.5-5.0m sq ft, broadly in line with last year’s figure, but someway down on the 10 year long run average which stands at circa £7m sq ft.
“The most significant slowing in activity has been in the Big Box market, as corporates have deferred making significant occupational decisions. Big Box deals have been boosted by the 650,000 sq ft pre-let of a distribution facility at Panattoni Park, Aylesford, whilst two lettings were secured at DP World’s London Gateway, both to global logistics groups.”
New Big Box Schemes Boost Supply
Supply has also increased over the past 12 months, rising from just under 9m sq ft at the end of Q3 2022 to 12.2 m sq ft in the latest quarter. The majority of the increase has been in grade A space, which now stands at 4.9m sq ft, up from 2.6m sq ft in the previous year. Most of the increase has been in Big Box units, where 10 of the 16 available units are in new buildings.
“A number of Big Box schemes have completed just as that market has slowed and this is going to be beneficial for occupiers wishing to improve their real estate ESG credentials going forward as most new schemes are being delivered with excellent Energy Performance ratings.”
