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Strong market fundamentals expected to drive the industrial sector to achieve another record year in 2020

28 01 20 industrial and logistics

According to Colliers’ latest annual Industrial and Logistics Report.


The industrial sector out-performed all other property asset classes in 2019, partly driven by very strong rental growth in London and key South East locations, according to Colliers International’s annual Industrial and Logistics report which was launched at a private client event today. As a result, strong market fundamentals are expected to push the sector forward in 2020 as occupiers focus on streamlining supply chains.

The report reveals that the sector has witnessed strong rental growth for several years now and, consequently, this is expected to moderate in 2020, although logistics units located in densely populated areas will reach above average returns. 

Andrea Ferranti, Head of Industrial and Logistics Research at Colliers International commented: “Supply has increased and now stands at around 36 million sq ft. However, looking at 2019, in which 9 million sq ft of new-build space was completed, the market remains well-balanced in terms of supply and demand, with developers seemingly unfazed by the current economic jitters.  In this respect, Colliers’ records show that around 5.6 million sq ft of new supply is currently under construction in January 2020.”

Demand for Industrial & Logistics space in 2019 remained strong with take-up reaching 30 million sq ft for the year, exceeding the 10 year annual average by 17 per cent, but 14 per cent below the record breaking 2018. 

In terms of take-up by type of unit, design and build accounted for a 53 per cent share of total, followed by second-hand units at 27 per cent, the lowest share on record, with take-up for speculative distribution warehouses at 20 per cent.

When analysing take-up by deal count and size band, most deals occurred within the 100,000-199,000 sq ft size band. However, over the past three years, we’ve seen the return of the mega box as active retailers and 3PLs seek to capitalise on the growth of ecommerce while reaching greater economies of scale. There has been eight large distribution warehouses in excess of 500,000 sq ft speculatively delivered, or under construction since 2017 and this trend is set to persist.

Based on current market dynamics, total space under offer, and the wider consumer and technological landscape, Colliers predicts that 2020 will witness the release of pent up demand which could translate into a total take-up close to the record-breaking activity of 34.6m sq ft witnessed in 2018.

Len Rosso, Head of Industrial and Logistics at Colliers International said: “2019 was a very challenging year for business planning. Political uncertainty and exchange rate volatility made it extremely difficult for businesses to commit to large capital expenditures. Nevertheless, the sector has been supported by strong occupational demand driven by retail occupier’s requirements to future-proof supply chain operations.  In this regard, provisional take-up figures for large distribution warehouses greater than 100,000 sq ft topped 30m sq ft, in line with the five-year average.”

Andrea Ferranti, Head of Industrial and Logistics Research at Colliers International added: “Looking forward, investors will continue to search for yields in a low-rate environment, driving further capital growth for the sector in 2020.  We expect London assets to capture most of this upside and the market will see more UK wide portfolio transactions as international buyers look for ways to enter the UK industrial sector.”

 

Related Experts

Andrea Ferranti

Director for Industrial Client Engagement

Research and Forecasting

London - West End

Head of Industrial & Logistics Research working closely with the Research & Forecasting team whilst supporting the Industrial and Logistics teams nationally in providing research and advises to clients. Andrea leads on the division’s key research papers which include, but not limited to, the Industrial & Logistics Barometer and the UK Speculative Development Map – both of which have become key benchmark publications highly valued by UK investors and developers alike.

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Len Rosso

Head of Industrial and Logistics

Industrial and Logistics

London - West End

Len has more than 30 years' experience in the commercial property sector. Having started out as a trainee surveyor in 1983 he moved on to set up Jansons in 1990, a niche agency specialising in industrial in North and West London. In 2004/5 the business was voted Industrial Agency of the Year, this being the first ever non West End national practice to have won this prestigious award. In that same year the business transacted in excess of 3.5 million sq ft which accounted for in excess of 50% of the total transactions for the North and West London market.


Since joining Colliers International, as the Head of the UK Logistics and Industrial Department, the objectives are the same as always, to outperform all competitors whilst providing the highest level of service to all our clients. In 2018, the Colliers International UK Industrial & Logistics team completed over 250 deals totalling over 15 million sq ft. 

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Hannah Zitren

Associate Director

Marketing & Communications

Manchester

I am responsible for media relations and generating coverage in top tier broadcast and print media. I work across a range of Colliers’ UK & Pan-EMEA business lines advising on their strategic and tactical PR needs.

My role includes:

·         Developing and executing PR plans for the various business lines to help promote their key messages across all aspects of the media - print, broadcast and social.

·          Media evaluation and reporting objectives, targets and successes across the business.

·         Reputation management and crisis management.

·         Media training.

·         Media engagement: setting up meetings with top tier media and various internal spokespeople to continuously expand and build a presence with property and vertical media network.

·         Consistently delivering service excellence, meeting with business heads of a regular basis and trying to influence the research as much as possible to ensure our content has a strong enough news hook.

·         Key campaigns that I work on include MIPIM; MAPIC; REVO; Midsummer Retail Report; IHIF; Cities of Influence in addition to a host of all alternative property sector research reports.

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