Robust take-up fails to dent national supply picture
Panattoni Park Avonmouth, where Panattoni, advised by Savills, has leased 885,000 sq ft to GXO
As the old adage goes, “there are decades where nothing happens; and there are weeks where decades happen”. Given the pace of geopolitical events on the world stage at the moment, it certainly feels like this quote is a good place to start. Since our last Big Shed Briefing in January 2025 we have had the inauguration of President Trump for a second term, a subsequent focus on increased spending on defence by NATO countries, the implementation and subsequent moratorium of trade tariffs by the US Government, the UK Government signing limited trade deals with the US, India and EU, and the outbreak of open conflict between Israel and Iran. In the midst of all of this, traditional economic indicators such as consumer confidence, retail sales, unemployment and GDP remain highly volatile, with little sign of emerging trends to guide how the market will perform moving forward.
Starting with recent events in the Middle East, it is pleasing to see that the ceasefire agreed after twelve days of hostilities continues to hold. Whilst still volatile, this has sent the oil price largely back to where it was before the conflict broke out. A cause of great concern, however, will be tensions escalating and Iran carrying out its threat to close the Strait of Hormuz, disrupting global flows of both oil and liquified gas, therefore sending energy prices soaring, which would impact consumer confidence negatively and send inflation back on an upward trajectory.
We are tracking more units under offer now than before ‘liberation day’, inbound port traffic to the UK has increased, and requirement levels have risen for the last two quarters
Kevin Mofid, Head of EMEA Logistics Research, Commercial Research
Moving to tariffs, our current view is that the direct impact on the market will be fairly negligible, mainly due to the fact that very little of our tangible goods are exported to the US. Indeed, at a European level, just 3% of exports make their way to the US. More concerning, however, is the wider ripple effect on consumer and business confidence. Indeed, based on long-term averages, nearly two-thirds of deals relate to the retail sector in some way, so if retailers are feeling the pinch, that will have an impact on the market.
Returning to the theme of volatile data points, we see this in some of the most recent releases from the ONS regarding retail sales where in April retail sales rose by 1.2% but fell by 2.7% in May adding fuel to the suspicion that the burst of economic growth witnessed in Q1 2025 has all but petered out. In terms of making meaningful comparisons with the past, the only event we can really compare the current trade situation to is Brexit, where we witnessed a V-shaped impact on the market with a strong year in 2016, followed by a comparatively weaker year in 2017 before rebounding sharply in 2018.
There is, however, early evidence that we may actually see an accelerated impact because, as things stand, we are tracking more units under offer now than before ‘liberation day’, inbound port traffic to the UK has increased, and requirement levels have risen for the last two quarters. Indeed, take-up in the second quarter of 2025 has rebounded by 11% when compared with Q1, suggesting occupiers remain committed to improving their supply chains.
Take-up
After a slower-than-anticipated first quarter of 2025, an improved Q2 has seen total take-up for the first half of 2025 reach 14.71 million sq ft across 66 individual deals. This is a welcome rise of 13% when compared with the area of space transacted in the second half of 2024, when take-up reached 13 million sq ft.
Deep diving into the data shows a market of two halves at the moment: the market for existing units and the market for built-to-suit (BTS) units. H1 2025 has seen just 2.77 million sq ft of BTS deals, making it the lowest level of BTS in any half-year since 2013. The market for existing units, however, remains strong. Indeed, the first half of 2025 has seen 7.31 million sq ft of deals for existing units, which is a 49% increase on the second half of 2024, and the strongest half since H1 2022. Indeed, if we examine the level of existing unit take-up further, we can see that the post-Covid average (2023 onwards) for existing unit half-year take-up has settled 17% ahead of its pre-pandemic level (6.28 million sq ft). Savills is monitoring extensive BTS requirements, which should progress towards signing as the year progresses, which therefore have the potential to see take-up rise in the second half of the year.
Looking at the H1 data also provides an interesting insight into the size of units being taken. In one day during May, the market witnessed close to 2 million sq ft of deals, all for e-commerce companies. Delving a bit deeper and looking at the market for units over 300,000 sq ft shows that 27% of the deals so far in 2025 have been for units over 300,000 sq ft, up from just 20% in the second half of 2024.
Supply and Pipeline
Even with robust take-up of existing units in the first half of 2025, supply and vacancy continue to rise at a national level. The first half of 2025 has seen 10.30 million sq ft of speculative completions and an additional 5.95 million sq ft of second-hand space come to the market since year-end 2024.
This means that supply now stands at 63.93 million sq ft across 306 units and reflects a vacancy rate of 7.90%.
No region or size band has been immune to this rise in supply, and 61% of the total supply is considered Grade A. Moreover, the overall level of new supply (Grade A Spec) increased by 16% in H1 compared to year-end and now stands at 24.81 million sq ft.
We are, however, tracking 23 existing units that are under offer to occupiers, and should these deals complete, this will result in supply falling to 58.65 million sq ft.
Moving forward, there is 9.14 million sq ft of space under construction speculatively, which will be added to total supply throughout 2025 and into 2026.