Knight Frank: North West industrial and logistics rent grows 11%

The consultant’s quarterly report on occupier and investment trends in the region’s logistics and industrial sector indicates that take-up is improving in the region.

Occupier market

In the first three quarters of 2024, occupiers took up 3.3m sq ft of space, recording a 43% rise compared to the same period last year.

An 11% rise in annual rental growth across the region was recorded.

Average rental growth forecasts have been revised upwards, with a 5.5% growth rate predicted for the North West.

In Q3 2024, a 72% jump in transactions from Q2 demonstrated the increased occupier demand.

Sam Royle, a partner within the Manchester logistics and industrial agency team, said that the Greater Manchester area has made up the “bulk of transactions” this year, with “take-up levels down across Merseyside and Cheshire”.

Unit 1, Cobalt 2 –  developed by Marshall CDP and acquired by Indurent at the beginning of the year – a 61,500 sq ft build in Chadderton, was let to ADI Global Distribution for a headline rent of £10.50/sq ft, the region’s highest.

The letting was agreed by Davies Harrison and CBRE on Indurent’s behalf, and Paul Nichols & Co acted for ADI.

Royle continued: “We expect an uptick in rental tones for second-hand accommodation and the rental gap between Grade A and second-hand will start to close.”

The report notes that take-up has been split relatively equally over four major occupier groups.

Manufacturer’s share of take-up rose from 15% in 2023 to 31% this year.

Distribution made up 22%, while retail amounted to 23%.

The remaining 24% has been attributed to other industries.

The Q3 vacancy rate of 7.1%, a rise from 6.6% in Q2, has been driven by the widening availability of second-hand space.

Royle said that this had “boosted supply levels” by 7.2% in Q3, to just below 11m sq ft in the North West, although the supply of new-build specific units fell by 3.7%.

The report indicates that speculative space was 19% lower this quarter, with 3.1m sq ft under construction.

Investment market

Craig Barton, partner at Manchester logistics and industrial capital markets, said transactional volumes for Q3 were “muted”, but insists “strong investor appetite still remains”.

Across the quarter, prime net initial yield – an indicator of a property’s income potential – was 5.50%.

The report details that Q3 investment volumes in the region were below the long-term average for the North West, but the market was considered stable.

The region’s most notable transaction was that of Cabot – it acquired Honeywell International’s Cheshire distribution hub in Ellesmere Port for £18.5m.

As for the market, Barton highlights Premier Park in Trafford, which has been subject to bidding from investors, and driven the quoting price for the site up to £37.5m.