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UK Logistics & Industrial Regional Outlook

The UK Logistics & Industrial National Outlook report analyses quarterly UK industrial and logistics property activity across the UK including demand, market supply and pricing trends with an outlook to future trends in this property sector. 

UK Logistics & Industrial Regional Outlook

Bruno Berretta • 18/02/2020

Q4 2019 Logistics & Industrial Market in Brief

  • Take-up reached 6.8 million sq ft in Q4, taking the annual total to 32.5 million sq ft.
  • This represents a 18% decline on the record levels of 2018 (39.7 million sq ft), but it is a 5% increase on the 10-year average (31 million sq ft)
  • The deal flow was healthy by historic norms (225) but the average deal size smaller (144,000 sq ft) as uncertainty impacted larger requirements
  • A notable exception was the 2.9 million sq ft pre-let taken by JLR in the East Midlands in Q3, which skewed the share of the manufacturing sector in take-up (33%)
  • Otherwise the year was dominated by 3PLs (26%), while e-commerce was less prominent (9%) despite Amazon taking big chunks of space in the first half of the year
  • The East Midlands and London/South East had a particularly strong year while the West Midlands suffered from a quieter than usual manufacturing sector
  • Availability continued to rise (+21% y-o-y) to 71.8 million sq ft, driven primarily by new development
  • The surge in new supply has curtailed prime rental growth. C&W prime rent index for 100,000 sq ft+ and 50-100,000 sq ft units rose by 1.9% and 2.1% respectively compared to 3% during 2018
  • Cushman & Wakefield prime average logistics yield remained virtually unchanged during 2019, at 5.1%

UK Logistics & Industrial Property Outlook

  • While Brexit is far from being a “done deal”, market sentiment has improved since the general election. This will benefit both the occupier and the investor markets
  • Rental growth will be slower and more localised going forward as the market absorbs the quantum of new spec space delivered during this development cycle
  • Nonetheless, supply growth is expected to slow going forward as developers are slower to commit to new development. For 2020, there is so far 5 million sq ft of spec space under construction
  • Wellbeing and sustainability in logistics are themes likely to gather further momentum, with developers already introducing new features to their latest developments including social spaces and running tracks
  • Competition for “last mile” assets is likely to heat up in 2020, with some investors starting to eye retail to logistics conversion around London
  • Cushman & Wakefield forecasts a weighted average total return of 6.7% for the sector in 2020

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