Supply Edges Up at the End of First Quarter

Posted by Glenny on 11th June 2020 -

We recently published our Q1 Databook to provide a snapshot of the market as we entered the COVID-19 lockdown period. This data has since been published by Property Week, but did not comprise the full data and included an inaccurate reference to supply levels which has led to many of you contacting us with questions.

We want to use this opportunity to relay the facts:

The supply of industrial floor space in the Eastern M25 market saw the most significant increase in more than a decade in Q1 2020, as a number of new schemes completed and a number of occupiers placed ‘surplus’ space onto the market in anticipation of a slowdown in the economy due to the Covid-19 pandemic

Availability edged up to 10.5m sq. ft., a level last seen in 2015, with grade A space accounting for 2.9m sq. ft. – the highest level of grade A supply since the depths of the financial crisis in 2009

Encouragingly, however, our pre Covid measure of requirements for industrial floor space across our region showed close to record levels of demand, particularly at the larger end of the market, and this increase in availability could help some occupiers, especially retailers, satisfy their needs

2019 was also a strong year for the Eastern M25 industrial market, with take up bouncing back to 6.25m sq. ft. fuelled by the completion of new schemes

Recent market activity is looking equally promising. Since March, we have placed under offer 400,000 sq ft of built product and 5 acres of land in 10 separate deals. This is encouraging and the type of positive sentiment that should be shared as it’s not all bad news.

Lastly, in a break from tradition, we will be publishing revised figures at the end of Q2 to provide a market update for our clients before returning with a full edition of the Databook in Q3. The full  summary of our Q1 Databook is below.

The supply of industrial floor space in the Eastern M25 market saw the most significant increase in more than a decade in Q1 2020, as a number of new schemes completed and a number of occupiers placed ‘surplus’ space onto the market in anticipation of a slowdown in the economy due to the Covid-19 pandemic.

Availability edged up to 10.5m sq. ft., a level last seen in 2015, with grade A space accounting for 2.9m sq. ft. – the highest level of grade A supply since the depths of the financial crisis in 2009.

John Bell, Head of Business Space at the Eastern M25 specialist, Glenny said, “The increase in supply in the early part of 2020 would have been viewed as a welcome boost to a market which has been starved of stock over the past few years but ironically the uncertainty that the Covid lockdown has now created leaves us all second guessing as to how the remainder of this year is going to unfold. Encouragingly, our pre Covid measure of requirements for industrial floor space across our region showed close to record levels of demand, particularly at the larger end of the market, and this increase in availability could help some occupiers, especially retailers,  satisfy their needs.  Having said that, many businesses are for obvious reasons putting their requirements on hold at the moment as they wait to see how the next few months progress.”

The latest Glenny research shows that 2019 was a strong year for the Eastern M25 industrial market, with take up bouncing back to 6.25m sq. ft., after a disappointing outturn in the previous 12 months, when activity slumped to 4.7m sq. ft., its lowest level in more than a decade.

Bell adds, “The Eastern M25 industrial market was very active last year fuelled by the completion of a number of new schemes which delivered the quality of space that occupiers were looking for. Whilst the first three months of 2020 were slower than expected, we saw three ‘Big Box deals complete in Q1, which is broadly in line the number of large lettings seen over the past five years.”

Offices

The Eastern M25 office market also registered a good year in 2019, with total lettings surpassing 2.5m sq. ft., although more than 50% of activity was focused on Docklands.  Take up during the year was held back by a below average performance in each of the Glenny submarkets, with only the East London market seeing take up exceed its long run trend level.

Two larger lettings in the final quarter of the year helped to push take up in the East London market above trend levels of activity, with the Home Office taking 33,870 sq. ft. Western Gateway E16 and the Robbie Williams backed creative academy, LMA, taking 30,220 sq. ft. at the Broadcast Centre, Here East, E15.

Supply remains constrained in the Eastern M25 office market, with only the East London and Docklands markets offering a selection of grade A space for occupiers.