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Can Industrial/Logistics Continue to Outperform in The Commercial Sector?

Peter Hemple looks at the rising star within commercial property

The large majority (74%) of the major players in the real estate sector say that distribution and logistics is now the most appealing property asset class, according to research from international law firm CMS. This is in stark contrast to a sharp decline in sentiment towards the retail sector, which has fallen from being favoured by 35% in 2016 to just 7% in 2018.

Research compiled by FTI Consulting on behalf of CMS surveyed 353 real estate investors, developers and advisers, controlling combined assets worth £400bn to examine their views on the key factors driving the market.

Ciaran Carvalho, head of real estate at CMS UK, says: “UK logistics has benefitted from a tide of international capital. Global players have been captivated by the transformative impact of e-commerce on the sector. Its appeal is clear with online fulfilment requiring about three times the warehousing space of traditional store-bound models.

“While some high street retailers have had very public troubles this year, it’s fascinating to see how other major retailers are turning place and the creation of experience to their advantage in the battle for customers with their large online competitors.”

There are also positive views expressed about ongoing warehouse requirements, with 91% of real estate professionals responding that demand will continue to increase in the UK. However, both real estate professionals (85%) and retailers (83%) feel strongly that the future health of the logistics industry depends on securing a balanced trading agreement between the UK and EU.

Both real estate and retail specialists foresee continued high demand for both large out-of-town warehouses (76% and 72% respectively), however there is a discrepancy of views in relation to small, centrally located warehouses facilitating last mile delivery (86% and 55% respectively). This is an interesting divergence of view, since speed of delivery is a key battleground between online and traditional retailers.

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