OUR VIEW ON                              

industrial

AUTUMN 2017

 

We will continue to see a convergence of the digital and physical world. Those who conquer that trend will be market leaders.

John Phillips

Supply Chain & Logistics, Pepsico Inc.

 

Boost in demand highlights shortages of stock across the Bidwells region

The past six months has seen a significant upturn in demand for industrial floor space across the Bidwells region.

Total requirements at the end of h1 2017 were at their highest level since 2010/11, with aggregate demand across our locations approaching 12m sq ft.

At the centre of our region lies the M1 south market, which accounts for almost two thirds of total requirements, but more recently both Cambridge (1.9m sq ft) and Oxford (2.1m sq ft) have also seen a strong surge in requirements as the growth in the ‘knowledge’ economy spills over into demand for flexible industrial space.

The graph below illustrates the path of demand since 2007 and whilst the supply of standing stock has been sufficient to meet demand in the early part of the analysis, the shortages of stock have become acute over the past few years.

 

Industrial rents respond to market imbalance

Following a period of stability between 2010/13 industrial rents have responded to the widening imbalance between supply and demand over the past few years.

The growth in prime rents peaked at 9.9% in 2016 and the past six months has seen a further increase of 4.8% suggesting that the momentum in rents will continue this year.

Secondary values have also reflected the shortages in supply, rising by 17.9% over the past 18 months.

Whilst there has been some response in new development, there is only 2m sq ft of space under construction at the end of h1 2017, with the majority of this space already committed.

 

Industrial property remains at the forefront of investors requirements

Over the first six months of the year investors have continued to commit funds to the industrial and distribution market, with a total of £3.7bn of property purchased, only 10% below the peak level of investment in the sector in h2 2014.

Several larger portfolio transactions were at the forefront of activity, with SEGRO paying £365m for the remaining 50% of its Airport Property Partnership JV with Aviva Investors whilst CBRE Global Investment Partners invested £310m into their UK logistics venture with Prologis by acquiring an 85% stake in 16 ProLogis parks.

Industrial property retains a broad interest amongst investors, with both UK institutions and property companies vying with overseas investors for stock.

 

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