The Return of Speculative Development in the UK Logistics Property Market: JLL's Logistics & Industrial Research Director Writes For Logistics Hub UK

In 2010 there were none, in 2011 just one and in 2012 there were none, again.  Last year, there were two.  What am I referring to?  The answer is the number of distribution buildings of 100,000 sq ft and over speculatively developed and completed each year across the UK.


The speculative development of large distribution facilities reached a peak in the heady days of the previous property boom, when 44 units were completed in 2008 totalling around 10.5 million sq ft.  Unfortunately, these buildings hit the market just as the UK economy slid into recession, along with virtually every other major economy.  The development tap was quickly turned off, as developers focused their attention instead on finding occupiers for their vacant buildings.

The overhang of speculative space has now been mostly taken-up (although even today there remain some buildings available that were completed in the last property cycle) and many parts of the country have moved from a glut to a shortage of good quality distribution space.  With the UK economy on a stronger growth path and with occupier demand more robust, speculative development is once more returning – although at a modest level compared with previously.

Five new buildings have been completed so far this year totalling some 924,000 sq ft and two of these have already been let, both in the Midlands.  A further eight buildings are currently under construction totalling 1.3 million sq ft, two of which have been let prior to practical completion.  Recent announcements include Henry Boot Developments’ decision to speculatively build 100,000 sq ft at Markham Vale, Chesterfield – within the Sheffield City Region Enterprise Zone.

JLL data show that distribution demand ‘compacted’ over the past few years, with most of the take-up of new facilities - whether speculative or built to suit - being focused on the key motorway corridors, particularly running from the South East, through the Midlands to the North West.  This South East-Midlands-North West axis is where recent speculative development has been focused and since the recession no new speculative buildings (of 100,000 sq ft and over) have been developed in Yorkshire and Humberside, the North East, the South West or Wales.

However, the picture is starting to change. The Yorkshire and Humberside region had been one of the speculative development hotspots prior to the recession and at mid-2009 23 new vacant buildings were available across the region. Now there are just five.  It’s only a matter of time before speculative development returns to the region, reflecting this upturn in demand.

Looking ahead, JLL is currently monitoring around another 30 potential speculative developments nationwide, a few of which are planned to start shortly whilst others are much longer-term and may not proceed in the current cycle. Speculative development is back but at a much lower level than in the previous property cycle and occupier demand is trending stronger.  But, as always, location and building specification are key.



Jon Sleeman, JLL October 2014