Industrial investment in Q1 driven by overseas capital and flight to prime – Colliers International

Investment into industrial assets in Q1 2020 was characterised by a dominance of overseas capital and a flight to prime according to global real estate advisor Colliers International.

Investment levels in the industrial and logistics sector reached in excess of £1.5 billion in Q1 2020, which despite being 23 per cent down year-on-year, was well ahead of the decline seen across many other sectors. Overseas capital was the most active group according to Property Data accounting for 50 per cent of investment acquisitions, a doubling from the Q1 2019 period.

Michael Kershaw, industrial investment director at Colliers International, commented: “We can’t look at the Q1 volume figures without noting the impact of the coronavirus outbreak. Across the board investment volumes have fallen but they have dropped less so in the industrial sector, which has been buoyed by the occupational story with its resilience on online shopping and the associated supply chain demand.”

The firm notes that there was a flight to quality in the first quarter of the year with investors being attracted by the long-term upside potentials as increased demand for online goods will continue. Larger well-let distribution warehouses have recently traded throughout the UK with significant deals in Wembley, High Wycombe, Wakefield and Doncaster all exchanging post the UK lockdown.

According to MSCI, total returns on industrial assets, although slowed from Q4, remained in positive territory with an increase of 0.6 per cent in Q1, out-performing all other commercial sector. All property total returns showed a 1.4 per cent decline compared to Q4.

John Hanson, industrial investment director at Colliers International, added: “While there has been a sharp decline in activity, there were still significant deals happening in the industrial sector in Q1 and into the second quarter. The whole industry is in a state of flux while the majority take a ‘wait and see’ approach to the ongoing effect from coronavirus on the market. A flight to prime isn’t a surprise, and we remain cautiously optimistic that there is still appetite from investors for the right stock, in quality locations, that is priced correctly.”