Savills estimates that up to £2.5 billion of industrial portfolios could change hands in the final quarter of the year, boosting UK industrial investment volumes to almost £9 billion if they are all transacted. This would result in 2018 volumes reaching approximately £8.7 billion - higher than the record £8.5 billion invested in 2017 - when the exceptional £2.4 billion sale of the Logicor portfolio by Blackstone is excluded from the figures, says Savills.
In its latest Market in Minutes report (avaiable for download here), the international real estate advisor says that industrial investment volumes stood at £6.2 billion as of the end of Q3 – a 34% decline year-on-year – but, according to Savills, this is due to a stock supply issue. Given the high returns forecast for industrial property over the next five years, the majority of investors are choosing to hold assets rather than trade, leading to a lack of supply available for purchase, despite the weight of money looking to invest in the market.
Tom Scott, director in the investment team at Savills, comments: “In previous market cycles, industrial developers generally traded stock once complete, typically to UK or overseas institutions. However, many historical developer traders are now developer holders and are keeping stock in their own funds and maximising income returns, leading to a fall in transactions thus far this year. But the final quarter will see volumes rise given the number of portfolios in the market and the current amount, and depth, of investor interest.”
Kevin Mofid, head of industrial research at Savills, adds: “In the longer term, new entrants to the UK logistics market may stimulate investment volumes into 2019 and beyond. If the model these developers have deployed successfully in the USA and Europe is replicated in the UK, we expect to see this new stock traded once let, increasing stock availability in the investment market.”