The industrial and logistics market is set to be hit by a slowdown in investment and a pause in much-needed speculative development as a result of uncertainty in the market following the UK’s vote to leave the EU.

According to JLL’s latest Big Box market report, take-up of industrial and logistics space in the first half of the year did not appear to have been affected by the uncertainty in the build-up to the EU referendum – total occupier demand in H1 2016 was 18% up on the second half of 2015 and 19% up on the same period the previous year.

Take-up of new floorspace – speculative vs built-to-suit

In all, take-up of grade-A industrial and logistics space totalled 10.2m sq ft in the first half of the year, with retailers accounting for the greatest share (58%), followed by manufacturers (18%) and logistics firms (7%). 

Regionally, the West Midlands accounted for the largest share of take-up, with 26% of total grade-A space transacted.

Strong demand in the first half of the year meant that despite an overall increase in speculative development over the last few years, the level of new supply was still 67% below the pre-recession peak.

Stalling investment

“We expect a slowdown in occupier demand due to political and economic uncertainties, declining business sentiment and weaker economic growth,” said JLL research director Jon Sleeman.

Investment, which slowed in the first half of the year, is also expected to stall, as investors become increasingly cautious due to the economic and political uncertainty.

While prime yields in London, the South East and the major regional markets remained unchanged in the first half of the year, these are expected to soften in the second six months.

Sleeman said the softening would also lead to a slowdown in speculative activity. 

“We expect to see a decline in speculative development over the short to medium term as developers and investors postpone decision making amid political and economic uncertainty and a likely drop in occupational demand,” he said.