The industrial property sector can look forward to a more positive market outlook from 2013, according to the latest Real Estate Investment Forecast from Colliers International.

Rental decreases are expected to cease this year, with an uplift of 1.5% expected in 2014 rising to 1.9% in 2015. The report reveals that yields are also expected to harden steadily, if modestly, through to 2016 with capital growth registering 2.6% by 2014.  Industrial distribution warehousing is forecast to offer a return of 10.8% in 2014, second only to London’s City and Mid-town offices, which will offer a higher annual return of 11.1% also in 2014.

At 9.2%, Colliers International expects total returns to lead the main commercial segments over the forecast horizon, driven by a combination of strong income return and modest rental and capital growth. 

Dr Walter Boettcher, Director of Research and Forecasting at Colliers International comments on the findings for the industrial occupier and investment markets:

“Investor interest in the industrial sector is linked to lack of supply of large (100,000 plus sq ft) Grade A distribution warehouses, UK wide, and to steady demand for multi-let industrial parks in London and the South East.

“The impact of e-commerce and internet supply logistics cannot be underestimated, nor that of on-going consolidation of supermarket supply chains. Lack of finance is holding the sector back, although alternate funding sources (e.g. insurance companies/ pension funds) are looking increasingly at  ‘forward funding’ and ‘design and build’ opportunities.”

Colliers International’s latest Property Snapshot for March 2013 also showed that availability of new and refurbished space represents just over two years of supply for the UK. London, the South East, Eastern, North East and Wales are all facing a lack of supply in the next 18 months.