Contact Us

The Sensational Rise Of Sheds In H1 2020


The routine scorning of industrial agents (shed shifters) and their stock in trade (crinkly tin boxes) was standard in the property industry until just a few years ago. 

Today that feels very misplaced. Sheds, the bigger and crinklier the better, are the new hot property, and the brokers and developers who deal in them stride the world like colossi, as the logistics sector becomes practically the only entirely viable part of the real estate industry left standing.

According to Savills' latest Big Shed Briefing, take-up of industrial and logistics space (units of 100K SF or larger) hit record levels in H1 2020, reaching 22.4M SF, a cool 66% above the long-term average. This comes despite economic uncertainties, pandemics and the difficulty of signing a lease during lockdown.

A hefty 43% of take-up can be attributed to online retailers, with Amazon alone accounting for up to 84% of that subsector. Third-party logistics providers accounted for just 15%, many undertaking contracts for the NHS. A further 11% were short-term lease agreements as a result of the coronavirus pandemic, including space to hold excess stock by retailers unable to shift it to their high street stores.

Savills noted that the average deal size this year has risen substantially, increasing from 197K SF at its lowest in 2009 to 362K SF today, an 84% increase. 

Not only are logistics operators signing up for more floorspace, they are paying their rents on time, too. Unlike other property market sectors, the damage to rental flows caused by the pandemic appears to be slight. On Tuesday Segro became the latest to reveal June quarter day payment figures 14 days after rents came due. By 7 July Segro had received 93% of the £37M rent due. Segro said a further £9M rent has been pushed back to the second half of the year to help tenants with cashflow. 

The surge in demand comes as new supply holds steady, rising by a barely perceptible 340K SF to 36.2M SF, a vacancy rate of 6.58%. Grade-A space is now 52% of supply. Savills anticipates that the availability of grade-A space will continue to decline, with just 900K SF of speculative announcements being made available in Q2, the lowest level since the first quarter of 2017. 

“The industrial & logistics sector has proven incredibly resilient, even in the face of unprecedented uncertainty,” Savills National Head of Logistics Richard Sullivan said. 

"Online retail has undoubtedly played a crucial role during the lockdown period, as well as occupiers who have reconfigured their supply chains to provide personal protective equipment and essential items to both the NHS and vulnerable members of our communities, all of which has translated into additional take-up. These unique set of circumstances have provided a significant boost to the sector and with supply levels falling across most of the UK, these positive market fundamentals are set to continue.”