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Abstract
Where next for industrial and logistics?
- With 2017 being a record year for investment into the overall industrial and logistics sector, yields falling to the lowest levels seen since 2006, most markets continuing to see vacancy rates fall and land values increase it would be tempting to suggest the market has reached a turning point.
- Medium term rental growth is expected to continue, as whilst the rate of growth for online retail is slowing, it is crucially, still growing and in November 2017 accounted for 19.8% of all retail sales, setting yet another record.
- The UK also remains, on a per capita basis an "underwarehoused country" with just 7.61 sq ft of warehousing per head compared to almost 39 sq ft per head in the US.
- So, whilst the levels of speculative development have reached levels not seen in the current cycle, there is good reason to suggest that net absorption levels will remain strong, providing of course that larger build to suit requirements can be diverted to speculatively developed units.
- This would in turn drive rental growth in many other markets mirroring what we have seen in the South East where speculative units have achieved rents 9.2% higher than build to suit units.
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FIGURE 30 | Southern M1 rents by grade
Source: Savills Research