A heady cocktail of structural change, tight levels of supply and increased confidence vis-a-vis other sectors is fuelling insatiable investor demand for industrial and logistics, according to the 2018 Industrial and Logistics Market Report, published by consultancy Lambert Smith Hampton (LSH).
Investment market at full throttle
The firm reports: ‘In the space of a few years, industrial and logistics has gone from being the ‘Steady Eddy’ of UK property to the asset class of choice, capped in 2017 by record annual investment volumes of £7.5bn, a renewed bout of yield compression and sector-leading annual returns of 19.6%. 2018 has picked up where 2017 left off, with stock of varying size and quality changing hands across all parts of the market.’
Volume-wise, no individual sub-sector really stood out in 2017, says LSH. Distribution warehouses (£3.8bn) and South East industrial estates (£1.4bn) both saw record volume, while the rest of UK accounted for £2.4bn, which was far ahead of anything seen over the past ten years. 2017 was also remarkable for the sheer depth of investment demand; the year saw 540 separate deals, up 51% on 2016 and 39% above the previous record year for volume in 2014.
Occupier markets unfazed by Brexit uncertainty
Judging by market activity in 2017, occupiers appear to have been indifferent to the uncertainty posed by Brexit. The report, which examines activity across the whole market, reveals that UK-wide take-up was relatively respectable in 2017, standing at 96.2m sq ft and falling only 2% short of the five year annual average.