The UK logistics market has seen demand surge from April-June 2020, to hit a new quarterly high.
There were more than 30 deals in Quarter 2, 2020, involving 12.8million square feet booked, including two deals over 2million square feet, one of which was for the largest logistics UK unit ever.
That contributed to an H1 2020 total of 19.1million square feet, according to CBRE’s latest United Kingdom Logistics Market Update.
UK logistics a winner
“The industrial and logistics sector has emerged as a winner in real estate, and attracted lots of investment demand, even from non-habitual logistics investors. Incumbents are cashing-in on the increasing investor appetite but with the idea to redeploy developing new logistics schemes.”
The rise of online shopping to one-third of all retail sales due to the pandemic has fuelled the demand for logistics property – and CBRE says the trend looks to continue during the rest of 2020 with logistics and industrial units outperforming other UK commercial property sectors.
“The contrasting changing fortunes of retail and logistics will lead to repurposing of retail assets, including retail warehouse parks to urban warehousing.”
Although building supply is growing, around 82% of the development pipeline is already pre-let. This trend is seen throughout Europe. As a result, the investment market is thriving and is “more than resilient”, with investors cashing in to redeploy on new logistics schemes.
The current record high London rent of £16.00 per square foot is likely to be beaten during the third quarter of the year
September saw the launch of big portfolios from established logistics investors looking to cash-in on private equity and sovereign funds interest.
CBRE concludes, “The forecast for the next five years shows a continuation of the outperformance of the industrial sector and the highest capital value growth across the whole UK property industry. Nevertheless, general softening of total returns is also expected for industrial and logistics.”
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