On 29 June, ShedMasters, the annual event held exclusively for the European Logistics and Industrial sector, brought together a record number of over 400 leading developers, investors, occupiers, agents and facilitators, offering those lucky enough to attend a fascinating insight into the industry and market, as well as a chance to connect whilst bathed in glorious Barcelona sunshine.

Not only will many have returned from the Catalan capital with a healthy sun-kissed glow, but they will have also come away with cautious optimism for the year ahead. As always, Stevens & Bolton co-sponsored the event, and it was a pleasure to facilitate the ShedMasters conversation, which continues to offer thought leadership in the sector.

For those who missed out, Kevin Mofid of Savills offered us a valuable insight into the current state of the logistics market. In summary, whilst the economic situation across Europe is volatile, the strong structural drivers that have previously helped to sustain growth in the sector remain. In particular, online retail, whilst no longer as prolific as it was during the pandemic, is here to stay. Also, as supply chain pressures continue to be felt across Europe, nearshoring has crept to the top of companies’ agendas. Alongside high construction costs and low availability of materials and labour, it is, therefore, easy to see why these drivers are both leading to an increased demand for available warehousing and keeping an upward pressure on rents in the UK. Broadly speaking, despite the economic headwinds, growth in the sector is expected to continue.

But the devil remains in the detail. Savills’ Big Shed briefing, which was published last week, offers a more in depth look at the UK’s performance at the end of H1. As discussed in Barcelona, there has been a fall in take-up and rise in vacancy rates to match pre-Covid averages. With build to suit levels dropping off and less speculative development (although we are in touch with a number of developers who are still doing so), second hand space is back in demand, despite their generally poorer environmental credentials. But, the picture remains nuanced across the regions. Whilst London struggles with a high proportion of grade C space and the North East suffers from a high percentage of units which do not meet future EPC standards, the Midlands boasts the greatest supply of grade A units. The variation in ability to let sheds that meet occupier requirements will continue to impact on regional vacancy rates and take up. It is quite easy to see, therefore, why some shed owners are thinking about the redevelopment potential of their existing stock as well as re-purposing other assets to meet customer letting standards and demand for better quality stock.

Amongst other conversations at ShedMasters, delegates reflected on the mood for Environmental Social and Governance (ESG)-friendly warehouses. Sheds that meet all the environmental criteria are still very much at the top of clients’ wish lists. However, the ‘social’ in ESG is now finding a greater voice in those discussions. Occupiers not only want their properties to have positive impacts on the environment, but offer positive social impact, greater community engagement and a place where people actually want to work. All said and done, clients want action, not just words, and time will tell if those goals are actually met.

As trusted advisors to investors, developers and occupiers of industrial and logistics space, if you have any queries or would like to discuss your sustainability requirements, or acquisition, disposal or development needs, please do get in touch.