Coronavirus and the impact on the South Yorkshire industrial market – Knight Frank perspective

Rebecca Schofield

Coronavirus has caused major disruption for businesses, tenants and landlords.

As the pandemic continues to dominate the headlines, Rebecca Schofield, head of the Yorkshire industrial team at Knight Frank in Sheffield, looks at its effects on the South Yorkshire market

Rebecca said: “These are unprecedented times for all businesses. Some have locked the doors for the foreseeable future, some may have changed to operate from home, while others continue as key worker hubs providing essentials such as food and other necessary goods, medical supplies and other key public services.

“Events have moved very quickly and, as a result, the impact on our clients – existing occupiers, landlords and developers – has been mixed and the full effect of this remains unknown currently.

“In South Yorkshire, the market has been robust and prior to entering into this period had a relatively limited supply of properties, especially at the smaller end of the market.

“The B8 distribution market has witnessed a raft of short term requirements. Requirements from supermarkets, home delivery companies and 3PLs with the focus being on immediately available, fitted facilities, as well as requirements to support the NHS and local Government.

“The growing dependency on online ordering and home delivery has potential longer term benefit for the sector of speeding up growth of online as a percentage of all retail sales, particularly grocery items and food, which we believe will result in longer term demand.

“Prior to the lockdown, 18 per cent of all retail sales were online, with only five per cent of online sales in the food sector. The lockdown has forced people to try online, so we are anticipating accelerated further growth on online sales.

“Retailers with a good online offer, will be best placed to survive. “3PLs are reporting they are busy with short term requests from customers, whilst their biggest challenge is getting enough people in the right place to service key contracts.

UK Warehousing Association surveyed members and found that they are running at 90% capacity , which will potentially lead to more short term requirements

For Q1 2020, Knight Franks Industrial dashboard shows take up figures of units 50,000 sq ft plus in South Yorkshire were down at 161,000 sq ft. There is currently 3.75m sq ft of supply (4.8 per cent vacancy rate) with just over 950,000 sq ft under construction. Given the interest in a number of the larger units, Knight Frank anticipates a bounce in Q2 take-up figures.

Rebecca added: “From a regional perspective, turning to the smaller end of the market, enquiry levels have been down, but occupiers looking prior to COVID-19 are still reporting requirements, however are pausing decisions until they can assess the impact of the lockdown on their business and also the wider economy. Over the last two weeks, we have started to see enquiry levels to creep back up which is encouraging.

“There was a real shortage of small to medium sized units across the region prior to lockdown and while we anticipate there will be some casualties which will result in some units coming back to the market, we are hopeful of a resurgence in requirements post lockdown.

“Another point to consider is that people’s habits will have changed, whilst many have been pushed to shopping online, we have also seen a shift to supporting local occupiers who have stepped up to provide delivery services that we have all relied on, whether it be the milkman, the local butcher or greengrocer.

“These businesses, offering delivery services to our doorsteps, have quickly adapted to how we are living currently. Will this warrant our loyalty the other side of the pandemic restrictions and generate requirements for small distribution units? The new norm will undoubtedly be different to the normal life as we have known.

“Whilst the impact on the market is unknown and we continue to watch this closely as we head towards a phased release of lockdown and June quarter date this should give us a clearer understanding. In the meantime we are still working with a number of developer and occupiers who remain interested in the region given its strong fundamentals with excellent connectivity to the road network, ports and nearby available workforce.”

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