[online income without investment]UK Industrial & Logistics sector sees record H1 take up and investment

Tag: 2021-08-06 17:19

  Take up of warehouse space in units larger than 50,000 sq ft reached a record 30.8 million sq ft in H1 2021, double that recorded in H1 2020, according to Knight Frank.

  Retailers and distribution companies collectively accounted for 76 per cent of take up so far this year, as they seek to expand their online and home delivery capacity in response to growing levels of ecommerce penetration. Online sales accounted for 28 per cent of retail spend in 2020, up from 19 per cent in 2019, and in the first five months of 2021 this rose to 32 per cent. Even as lockdown measures ease further in the second half of the year, online platforms will continue to play a much bigger role in the retail market than they did pre pandemic and this will necessitate more structural changes in retail supply chains.

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  Due to the high level of take up, availability, particularly of high-quality space, has diminished over the past 18 months with just 43 million sq ft of space currently available. This represents just 8 months of supply based on current rates of take up, although most of this space is either under offer or does not meet current occupier requirements in terms of locations or specification. Lack of availability is particularly acute in the big box market, with operators looking for units in excess of 350,000 sq ft faced with very limited options.

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  Charles Binks, Partner and Head of Industrial & Logistics at Knight Frank said: “Many occupiers are struggling to find available units that match their requirements, and often have to compromise either in terms of location or specification. Companies that are unwilling to compromise may need to put their expansion or relocation plans on hold as they await development completion.

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  Online retail spend forecasts have been revised up over the past 18-months and operators have brought forward their ecommerce growth strategies. Yet, despite robust levels of demand from online retailers, distribution companies and 3PLs, the lack of available space and constraints on development are likely to impact on operator’s ability to acquire space in the coming months.”

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  Investment into UK industrial and logistics totalled a record GBP6 billion in H1 2021, more than double the GBP2.7 billion recorded in H1 last year. This was also 54 per cent higher than the previous record H1 in 2018. Overseas investors have accounted for over half of the total spend so far this year, compared to 44 per cent in 2020 and 38 per cent in 2019. The average lot size transacted in the first half of 2021 was GBP20.2 million, compared to GBP17.9 m in 2020 and GBP11.9m in 2019, largely due to increased activity from overseas investors as well as UK Institutional investors seeking to diversify their holdings and tilt their portfolio towards logistics. Overall, UK Industrial and logistics yields have compressed 25-100 bps over the past year.

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  Johnny Hawkins, Partner, UK Capital Markets at Knight Frank, says: “Despite yield compression, core logistics assets offer an income and risk profile that is difficult to match in other real estate sectors. Structural trends such as the unprecedented level of ecommerce penetration, a limited supply of high-quality assets and robust occupier demand for space have created the “perfect storm” and the investor base targeting industrial and logistics assets is continuously broadening, demonstrating the wide appeal of the sector.

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  ”High-quality distribution facilities can offer secure and often inflation linked income through strong covenants on long leases. Long-income options underpinned by strong structural trends are difficult to find across other asset classes and this has notably created increased competition for assets.”

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