North East industrial market: Demand to remain robust
February 2025
Overall, the take-up of industrial space in the North East in 2024 was slightly higher than 2023 by approximately 200,000 sq ft. The number of transactions was up, although the size of the space taken was often smaller.
Keith Stewart, partner and head of industrial agency at Naylors Gavin Black noted: “Take up in 2024 was slightly higher than 2023, with approximately 1.4m sq ft transacted of units above 50,000 sq ft, compared to around 1.2m sq ft in 2023.
“There were more transactions in 2024, albeit the average size was down on 2023.
“The largest transaction last year was the sale on Nelson Way, Cramlington which was 204,000 sq ft. In addition, there were a number of other freehold transactions – mainly from occupiers – which took a number of units out of the market last year.”
Mark Proudlock, partner at Knight Frank in Newcastle who heads-up the industrial agency team, echoed those figures and added “Take up in Q4 2024 amounted to 303,500 square foot across 4 units.
“Over the year, 14 transactions completed above 50,000 sq ft – 10 leasehold and four freehold – notably better than the eight units that traded in 2023.”
In terms of popular areas, those close to the A1 and A19 come out on top for the region. Particularly, Stewart noted, “Industrial estates in Washington, Gateshead, North Tyneside, Durham, Peterlee, and Teesside are seeing good demand and take-up and this is evident from the results over the last couple of years.”
The size of stock
Most industrial lettings in the North East are below the 400,000 sq ft region, with the smaller and mid-size market dominating the region.
Proudlock noted: “In spite of a relatively static economy, lettings of smaller and mid-sized units have held up as evidenced by take-up in 2024.
“Availability of modern stock across a range of sizes is proving to be one of the biggest barriers with specific sizes currently not catered for, while in other size bands there is more choice for occupiers.”
This was echoed by Stewart, who said: “Smaller units are still popular, however, some have been on the market for longer than in recent times.
“Rents have increased due to high demand over the last few years – particularly those that are below the rates threshold. Mid-size units are letting well, albeit there is limited availability of stock between 20,000-50,000 sq. ft.”
According to Savills latest Big Shed Briefing, occupiers across Yorkshire and the North East regions have paused on larger transactions over 400,000 sq ft, primarily due to political and economic uncertainties, which has impacted take-up levels.
However, Savills says, deal churn in smaller size bands has remained robust: In 2024, there were 16 deals within the 100,000–200,000 sq ft size band and four within the 200,000–300,000 sq ft size band.
What next?
And perhaps most importantly, what is the general outlook for the year ahead? It’s a mixed bag, with Stewart highlighting how the challenges posed to businesses by the recent Budget may affect the market:
“Unfortunately, we anticipate some business failures this year and with that more stock will come back to the market, of varying sizes.
“We expect it to be challenging, with some businesses pausing on whether they move and readjusting their forecasts given the recent budget and the effects that may have.”
As for demand, everyone seems to agree that it will remain high. Proudlock noted “Demand continues to hold up, with occupiers closing in on some of the remaining new stock and units under construction.
“Q1 2025 will see just under 0.5m sq ft of new speculative stock hit the market across four units, and developers with sites in our area will be closely monitoring the speed of take up.
“Prime industrial rents in Newcastle grew by 6.7% during 2024 to £8/sq ft, albeit remaining stable in the fourth quarter (units 50,000 sq ft+).
“According to RealFor, average rental growth of 2.8% is forecast for the North East region for 2025. Stronger growth of 3.6% is predicted for Newcastle.”
Stewart also pointed to the trend for high quality space affecting the market: “There will be limited construction coming forward in 2025 so we anticipate there will still be good demand, with supply of high-quality units in short supply.
“Landlords will continue to refurbish and repurpose older units up to higher standards to increase rental levels and protect their investment, but also to provide a standard of unit that most tenants now require and demand.”
Tom Asher, director in the industrial & logistics occupier advisory team at Savills, commented: “Despite current headwinds, we are seeing encouraging signs in the market.
“Vacancy rates are reducing, deal churn remains robust, and there are clear indications of increased activity.
“These factors collectively highlight a resilient industrial and logistics sector poised for growth, and we anticipate that strategic investments in modernising and redeveloping existing spaces will further enhance market dynamics.”