The industrial and logistics property sector has performed strongly over 2023 so far. The Covid-19 pandemic is in the past and rates of new construction and leasing of existing properties should give confidence to investors, developers and occupiers.
The data suggests that the backlog in the market which built up during the pandemic has now eased and the sector has returned to business as normal.
The latest UK Logistics and Industrial Outlook from Cushman and Wakefield shows that demand receded over the most recent quarter measured in the report, the number of enquiries and requirements has continued to grow.
Furthermore, more than 7.5m sqft of immediately available stock is under offer. Pent up demand finally being satisfied is a good sign for the market and should ease concerns about properties lying empty for the long term.
Overall availability is at just over 63.5m sqft across the UK and investment volumes have recovered according to the report. Total investment volume of £1.6bn over the quarter represents a recovery over Q4 2022 and Q1 2023 values. Most importantly, it is also accompanied by the return of price stability.
Rents as a whole continue to grow in the industrial and logistics sector. Cluttons’ industrial market update for the Autumn shows that while the rate of growth has slowed slightly, rents have still gone up by an average of 7.1% year-on-year.
Buildings with a high specification and those which meet BREEAM Very Good or Excellent environmental standards are proving to be especially popular as businesses look to future-proof their operations by prioritising sustainable real estate.
To break the overall figures down further, data from Colliers splits rental figures into two sections. Prime headline rents for large distributions warehouses of 100,000 sqft or more rose by 6.6% over the last six months and 10.1% over the last year, to an average of £10.90 p/sqft.
Rents for smaller units and multi-let sites grew by 4.1% in the last six months and 9.3% over the last year to a total of £14.20 p/sqft.
It is reasonable to expect this level of rental growth to ease slightly over the rest of 2023 and into 2024 as higher costs and inflation continue to bite. However, for now it is easy to see why investment in the sector is increasing as these rates of growth are notably higher than other property sectors.
What does the future look like for occupiers and businesses looking to find industrial property to rent?
With rents rising, it might be a good time to find your next industrial and logistics property and secure it at a lower price than it will be in 12 months’ time. Most importantly, there is an ongoing flight to quality – as demonstrated by the preference for higher spec, sustainable buildings discussed previously – which will impact what is available in the future.
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