A lack of supply in key locations remains a feature. In some cases, space is becoming available as firms rationalise, and this is enabling market churn. However, the level of disposals has been relatively modest so far this year given the turbulent economic conditions. Older units can still let well if the specification is right, the unit is adaptable, or it is well-located.
However, we think that the secondary market could well see a rise in vacancy rates as more insolvencies are announced, particularly in areas such as store-based fashion. In addition, some of the short-term COVID-19 space will be released back to the market from organisations such as the NHS.
Developers are understandably cautious about speculative schemes, although there is still activity. An example is the Oxfordshire market, with speculative development at Axis Point in Bicester, Didcot Quarter and Tungsten Park, Witney. High street lenders are undoubtedly more cautious on commercial property lending generally, although the institutions as well as private investors and well-financed property companies remain keen.
There has been much conjecture around a greater requirement for storage and distribution space, as corporates increase the resilience of their supply chains in the wake of COVID-19 through reshoring some of their production, and also in preparation for Brexit. In a recent IAS survey, 70% of respondents cited that the logistics / supply chain sector will change to a different model to allow greater flexibility as a result of the pandemic.
Re-shoring will be a relatively long-term trend, as it will take many years to accomplish, and the extent will vary significantly by business sector. However, some Brexit-related demand may be needed quickly, for example to accommodate additional space for customs procedures.