Industrial investment reaches record Q1 high

Len Rosso, head of industrial & logistics at Colliers International

The industrial & logistics sector is continuing its record-breaking trend with the highest ever Q1 investment figures being recorded this year, reaching £3.4billion.

Data gathered by the research team at Colliers showed that investment levels have continued to break records, following the sector’s previous all-time three month high in Q4 2020 with £5.6bn invested. Overall it means that £9bn has been transacted in the sector over the last six months, just ahead of the five-year annual average of £8.7bn.

“After a phenomenal year, some might have expected that investment would begin to slow down, however it currently shows no sign of abating,” notes Len Rosso, head of industrial & logistics at Colliers. “There is a wide range of buyers interested in this sector right now spurred on by its resilience shown last year, and the acceleration of e-commerce during the pandemic. Investors can see that logistics is going to be key for the future as consumers are likely to maintain many of the habits they have begun over the last year, and expectations around speedy next-day delivery will remain.”

Take-up of space was also strong for the first three months of the year with 8.6 million sq ft being taken by new occupiers, in line with the quarterly five-year annual average of 8.7 million sq ft. There is significant pressure on the supply chain with less than 30 million sq ft of space available (including speculative units completing this quarter) meaning that the vacancy rate sits at just 5.3 per cent. This is expected to continue to push growth in rental values by between 2.3% or 3% depending on location and stock type. Prime units located in London and in key South East markets will witness rental growth above 4% in 2021.

Andrea Ferranti, head of industrial & logistics research at Colliers said: “The strong occupier demand for grade A space continues, fuelled by a lack of availability and the growth of e-commerce. It is also being pushed by businesses renewing their focus on sustainability and energy efficiency as the impact of the pandemic and the recent acceptance that we’re on the edge of a climate crisis has focused minds and consumer expectations in this area as well.”

Len added: “The industrial sector presents a perfect storm for investors to take advantage of. Significant occupier demand for quality assets alongside a chronic lack of supply and low financing rates means further compression of yields on industrial and warehousing space is likely as investors compete on limited opportunities with future expected rental and capital growth in mind,”

This Q1 data was presented to over 500 industry professionals at Colliers’ quarterly industrial & logistics webinar earlier this week.