Industrial Market Booms

The industrial market has experienced a truly buoyant and active year with forecasts suggesting the activity will continue throughout 2019.

Online spending has seen the highest growth in H1 YoY in 8 years, enjoying a +16.8% increase from 2017! The increase in online shopping has played a key role in delivering a significant increase in demand for industrial property, with retailers accounting for 44% of total take-up volume this year.

As the online shopping world grows, the need for warehouse and distribution centres is increasing rapidly. Amazon is a prime example, the retailer brought its total warehouse space to 12.2million sq. ft in 2017, rising from just 1.47million sq. ft in 2008. In addition, this year Amazon has been rumoured to be acquiring Homebase stores to grow their portfolio further. This increase is a fantastic demonstration of the growth of online shopping and how this is driving demand for industrial space.

Cushman & Wakefield reported that both leasing and investment volumes are in-line or above the 5-year average for the sector. The first 9 months of the year saw a transaction volume of £4.3 billion with assets becoming increasingly sought after, driving numerous bids when coming to market.

Some large acquisitions this year include:

• Ascendas REIT acquired 26 logistics properties from Griffin UK Logistics Fund Limited for £257.46 million.
• Tritax Big Box exchanged contracts on a new logistics fulfilment centre at Link 66, Darlington, for £120.7 million pre-let to a leading retailer.
• Legal & General’s acquisition of Woodside Industrial Estate in Dunstable for £182.3m.

According to Savills, there has been 10.1 million sq. ft of industrial speculative developments announced in 2018 – a 134% increase on the 5-year average! The current market is seeing stock take-up increasing which is, in turn, pushing rental value higher. The market’s current buoyancy and growth predictions suggest these developments will be quickly acquired upon completion.

Furthermore, in addition to current market demands, online shopping is expected to continue to rise and is forecast to account for 19% of the total retail sector by 2022. This increase in activity suggests the appetite for industrial assets will continue to rise as according to research undertaken by Prologis, an extra €1 billion spent online leads to an additional 770,000 sq. ft requirement for warehouse space. Looking at these statistics, it is not surprising the industrial real estate market is outperforming many other asset classes and it will be interesting to see how this develops through 2019.