Steady and Rising: UK Industrial Sector

“Industrial capital values are now rising at an annual rate of 15% and the sector’s annual rental value growth is 4.9%.”

The UK industrial property sector is continuing to prove itself adaptable and willing to facilitate modern demands. Investment and development in the domestic industrial property sector has already out-paced 2017 and 2016 and projections are set to increase.

Investment and Development

Both central and regional locations attracted considerable investment and development was extensive nationwide. At the end of last year total investment was up to £11bn an increase of 80% from 2016. The UK’s Golden Triangle of Logistics connecting the UK’s major industrial and logistical sites expanded its total sq ft of an existing 150million by 7.86million to facilitate increasing demand.

Overseas investment volume continued on its upward trajectory with the overall share of investment increasing to 44% of total investment volume. The majority of inward investment was accredited to Chinese investors more specifically China Investment Corp who expanded their UK property shares to a portfolio worth £2bn.

Whilst domestic investment has been supported by mainly large retailers optimising their operations for the recent rise in eCommerce and consumer preferences for online shopping.

“The year [2017] saw 540 separate deals, up 51% on 2016 and 39% above the previous record year for volume in 2014.”

Demand Outstripping Supply

With the sudden increase in demand for warehouse and logistical space, the speed of development and supply is limiting the overall take-up volume. The total take-up at the end of last year equated to 27.3million sq ft which is a 28% decrease compared to 2016. This is largely due to a lack of supply and increasing demand for 100,000 sq ft or less units.

There is a significant amount of proposed development plans in the pipeline for the next three years which hopefully will come into fruition to anchor interest and investment.

Innovation

Globally the industrial property sector isn’t typically associated with creative designs and innovative competition. However, in the UK there are already plans to start implementing forward thinking methods and concepts to facilitate modern companies and drive interest.

Developers in London and the South East have already proposed plans for the first subterranean and multi-storey warehouse units which are being considered as a viable option to facilitate innovations in the logistical industry, such as high powered hybrid/electrical vehicles and fully automated depots.

UK Projections

LSH research suggests “at least 7.3m sq ft worth of units above 50,000 sq ft will come forward speculatively across the UK.”  Whilst Knight Frank predict “occupier requirements will be driven by the increasing shift to automation and the need for sites/buildings that can accommodate higher power requirements, autonomous vehicles and hybrid/electric delivery fleets.”