Publications

U.K.-wide demand for big-box logistics units remains strong over Q3
Research - NOVEMBER 12, 2018

U.K.-wide demand for big-box logistics units remains strong over Q3

by Andrea Zander

Demand for “big box” logistics assets remained buoyant in the third quarter, with large occupier take-up and investment deals taking place across the country, according to BNP Paribas Real Estate.

In terms of leasing, the Midlands saw the largest share of demand nationally of warehouses of more than 100,000 square feet, accounting for 35.4 percent of the total take-up, followed by the South East at 19.4 percent and the North West at 16.6 percent. Yorkshire also saw a significant uplift from a 3.3 percent share for the period first quarter 2017 to third quarter 2017, to 13.2 percent for the same period this year.

BNPPRE research has shown that between 2013–2017, Birmingham saw take-up of warehouses, more than 5,000 square meters (54,000 square feet), reach 1.17 million square meters (12.59 million square feet), making it Europe’s leading logistics market, ahead of the Greater Paris region.

Furthermore, increased demand on larger units has been a dominant theme so far this year, particularly for units between 300,000 square feet and 400,000 square feet, with 13 units taken compared with five over the same period in 2017.

These national trends were widely mirrored in the investment market. Among some of the key investment deals, NFU Mutual Insurance acquired the currently under construction KitchenCraft unit at The Hub, Birmingham, for £33.7 million ($43.36 million), representing a yield of 4.41 percent. In Merseyside, Tritax Big Box REIT is forward-funding a low-density building of 361,000 square feet for £68.7 million ($88.4 million), as well as forward-funding a logistics unit at Link 66, Darlington, for £120.7 million ($155.31 million).

However, the South East is still achieving the strongest pricing, and continues to outperform national averages, due to the expectation of further rental growth in areas of constrained supply. Key examples include DTZ Investors purchase of a multi-let estate in Deacon Way, Reading for £11.4 million ($14.67 million) at a NIY of 4.48 percent and BMO’s acquisition of a 76,000-square-foot logistics property at Flex Meadow, Harlow for £11.3 million ($14.54 million), representing a NIY of 4.33 percent.

This investment in the logistics sector has been driven, in part, by high demand for good-quality, well-located stock across the country. Data from BNPPRE shows that more than 3 million square feet of speculatively developed logistics units were let to September-end 2018.

James Fairweather, head of industrial and logistics investment at BNP Paribas Real Estate, commented: “It is reassuring to see that investment levels have remained buoyant throughout third quarter. Overseas appetite continued unabated, accounting for around 21 percent of total industrial and logistics investment, demonstrating international commitment to the U.K. market.

“The final quarter of the year is already demonstrating a continued trajectory of demand outstripping supply and is expected to deliver another strong period of investment in both industrial estate and logistics properties.”

 

 

 

 

 

 

Forgot your username or password?