Q4 MARKETBEAT LI 2022

MAR K E T B E AT

Industrial Q4 2022 UNITED KINGDOM

Take-up still above long-term average The market closed 2022 having seen two successive quarters of contractions in take-up volumes. Take-up fell to 10.2 million sq ft during Q4, down from 11.5 million sq ft during Q3. Despite this, 2022 take-up volumes remain the second strongest on record, and the sector has continued to demonstrate its resilience amidst a backdrop of challenges facing landlords, occupiers, and developers alike. The most notable change throughout 2022 was the shift in demand dynamics, which saw a significant fall in demand from e-commerce and post and parcel occupiers, whilst simultaneously seeing significant growth in demand from manufacturers, seeking to re-shore and safeguard their supply chains within the UK. Take-up remained focussed on good quality stock, with 72% of space being taken in Grade A units throughout the year. Furthermore, occupiers looked to secure space early, with Build to suit schemes and pre-lets accounting for 43% of total take-up, its highest level over the last three years. Availability rises slightly Although supply remains at relative lows, constraints have begun to ease following two consecutive quarters of increases. Availability now stands at 55.8 million sq. ft, rising from 44.3 million sq ft during Q4 2021. The majority (62%) of this new availability is in Grade A space, which has risen by 56% YoY. Grade B shortages remain prevalent, with just 12.1 million sq ft available, due several occupiers renewing existing leases in order to avoid re-location costs, or higher rents in more recently completed units. Throughout 2022, developers have delivered new industrial space in key locations amidst a backdrop of ongoing constrained availability. Developers delivered an additional 17.5 million sq ft of speculatively developed space in 2022, the highest volume on record. However, as a result of shortages of key construction materials and labour, a number of schemes scheduled for delivery during 2022 have been delayed and are now expected to complete early 2023. Uncertainty shades H2 investment performance Investment volumes fell markedly during Q4, with trading conditions shaded by economic uncertainty and instability within financial markets. Q4 2022 posted a total volume of £1.3bn, the second lowest value since 2012. Bolstered by a strong start to the year 2022, Q1 seeing £6.7 bn transacted, total investment volumes reached £14.3 billion the second strongest year on record, behind 2021, and well ahead of the £7.9bn transacted during 2020. The Industrial and Logistics sector has seen a fairly rapid response to macroeconomic conditions, seeing significant decompression in yields during H2 2022. It is expected that this rapid outward movement and re-pricing will closer align buyer and seller aspirations and encourage the return of investor activity. Having seen the first outward movement in yields since 2012 during Q2, yields continued to decompress throughout the year now standing 150BPS higher than the same period last year.

12-Mo. Forecast

YoY Chg

55.8 M Availability, SQFT Q4 10.2 M Take-Up,SQFT Q4

18.4% Prime Rent Growth YoY

Average UK Big Box

LATEST INDICATORS

12-Mo. Outlookt

YoY Chg

45.3 Manufacturing PMI (December 2022)* -42 GfK Consumer Confidence Index (December)

TAKE-UP AND AVAILABILITY

C&W PRIME RENT INDEX, Dec 2008=100

26.6% Online Share of retail. (By value SA, December 2022)

80

75%

240

70

55%

60

200

50

Source: GfK,S&PGlobal (IHSMarkit), ONS * A score below 50 indicates contraction ** Compared with same month the previous year

35%

40

160

30

Million sqft

15%

120

20

10

80

-5%

0

2015

2016

2017

2018

2019

2020

2021

2022

Availability

Take-up

Q4 2008

Q4 2009

Q4 2010

Q4 2011

Q4 2012

Q4 2013

Q4 2014

Q4 2015

Q4 2016

Q4 2017

Q4 2018

Q4 2019

Q4 2020

Q4 2021

Q4 2022

Source: Cushman & Wakefield Research, Big Box = Units 100K sq ft +, Mid box = 50k-100k

YoY Growth (100K +)

50-100K

100K +

MAR K E T B E AT

Industrial Q4 2022 UNITED KINGDOM

MARKET STATISTICS

Availability (sq ft)

Grade A (sq ft)

Spec Grade A U/C (sq ft) Current Quarter Take-up (sq ft)

YTD Take-up (sq ft)

Prime Rent (£ / sq ft)

Prime Equivalent Yield

2,467,640

1,640,519

589,115

166,173

717,794

27.5

4.45%

London

9,094,592

6,514,698

1,905,187

2,473,802

9,493,821

22.5

4.80%

South East & East

8,393,605

5,054,046

2,063,574

1,361,508

8,147,147

8.25

4.80%

North West

7,436,724

4,916,739

1,810,078

903,449

8,847,801

10

4.95%

West Midlands

8,613,384

7,540,066

4,519,548

1,962,581

9,157,300

9

4.95%

East Midlands

4,774,794

3,686,665

2,073,587

1,396,783

7,092,581

8.25

5.10%

Yorks & Humberside

5,351,508

3,331,976

2,549,081

341,465

5,523,063

8.5

5.10%

South West

3,168,260

1,074,251

816,411

571,563

1,966,001

7.25

6.30%

North East

4,268,364

212,582

212,582

785,047

2,125,588

6.75

6.55%

Wales

2,274,682

398,161

-

258,143

1,456,190

7

6.55%

Scotland

55,843,553

34,369,703

16,539,163

10,220,514

54,527,286

10.65**

4.45%

Total

* Unweighted average for the 71 submarkets tracked by C&W

KEY LEASING/OWNER-OCCUPIER TRANSACTIONS Q4 2022

Property/Business Park

Sub Market

Tenant

SQFT

TYPE

Gateway 14, Stowmarket, Suffolk

East

The Range

1,200,000

BTS

Panattoni 630, Rotherham

Yorks & Humber

Alliance Automotive

630,000

BTS

Former Bison Concrete Premises, Mulberry BP

East Midlands

The Pallet Network

610,000

Pre-Let

Connect 6, Farington Park, Preston

North West

Victorian Plumbing

544,000

BTS

Ark, Trafford Park

North West

Supreme Imports

245,000

Existing

KEY INVESTMENT TRANSACTIONS Q4 2022

Property Name

Region

Seller/Buyer

Size (sq ft)

Price

Edward Bavister Associate +44 (0) 7721 671 121 / edward.bavister@cushwake.com

Thames Gateway Park, Dagenham

South East

Abrdn/ICG

£99,000,000

395,288

Redditch Gateway South, Redditch

East Midlands

Stoford/Blackbrook Capital

£62,551,160

446,794

South

Abrdn/Aviva

£46,500,000

Unit 24, Sutton Business Park

210,000

A CUSHMAN & WAKEFIELD RESEARCH PUBLICATION

©2022 Cushman & Wakefield. All rights reserved. The information contained within this report is gathered from multiple sources believed to be reliable. The information may contain errors or omissions and is presented without any warranty or representations as to its accuracy.

Super W, J20A, Warrington

Yorks & Humber

BA Pension Fund/Leftfield Capital

246,136

£32,100,000

cushmanwakefield.com

Source: Cushman & Wakefield Research, RCA

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