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Boom predicted in logistics sector in 2019

Boom predicted in logistics sector in 2019

The autumn may have just begun, but we already have the first predictions for 2019. For the logistics sector they look stellar.

The boom in logistics property development and investment won’t be ending any time soon, according to one of the world’s largest asset managers.

Analysis of the outlook for warehousing and logistics property from UBS Asset Management’s Real Estate & Private Markets team suggests the industrial sector looks set for another super-strong year. UBS REPM is also seeing the first indications that the pace of growth on both the occupier and investment side is starting to ease back slightly as we move into the second half of the year.

Industrial and logistics property continues to top a list of rental growth among fifteen property sectors, easily out-pacing former favourites like central London offices and retail, which is now seeing rents move backwards.

Strong estimated rental values (ERVs) are driving foot-loose international capital into the logistics sector, helping to fuel the supply of new warehouse development.

“Overall we expect industrial to remain the outperformer over the next five years as the factors that have driven recent performance have by no means abated; however, we are expecting these returns to not be much more muted than those to which we have become accustomed,” USB said.

They expect industrial property to outperform other asset classes over both the next three years and the next five years – a prediction which will give investors further medium-term confidence in the sector.

“£A big driver of demand for industrial space has been the growth of ecommerce, which has driven leasing in the distribution warehouse sector. However, the majority of industrial operators are not the likes of Amazon, rather smaller occupiers occupying units on industrial estates. These are companies operating in the light industrial, food and beverage and catering arenas, to name a few and they are really feeling the pinch of a combination of ecommerce and competition from residential. As such, rents for standard small-format units on industrial estates have risen much faster than distribution warehouses, whose relatively bespoke nature and often reliance on a single tenant reduced the landlord's ability for bargaining,” the report concludes.

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