Increasing returns and falling yields mean industrial property is no longer the “ugly duckling”

Tim Matthews, CEO, Blue Marble Asset Management

The industrial property sector is the lowest yielding property asset class for the first time in many years, prospering while the retail sector struggles, according to a leading commercial property investment manager.

Tim Matthews, Chief Executive of Birmingham-based specialist real estate asset management company, Blue Marble Asset Management (Blue Marble), says that for the first time in his 30 year career industrial property is no longer the ugly duckling of property investment.

Mr Matthews says: “As returns in the industrial sector once again led the way in CBRE’s November Monthly Index, with total returns of 1.4% over the month, reflecting 1% capital growth and 0.6% rental value growth, the equivalent yield for industrial has fallen again reflecting the appetite from investors to acquire product in this sector.

“This is in stark contrast to the continuing gloomy picture for retail which saw a fall in capital values of 1.9% over the month, while rental value moved into negative territory at -0.9%, with yields moving out for high street, out-of-town and shopping centres.

“High street retailers’ struggles have been well documented with a number of business failures and CVAs, most notably HMV, House of Fraser going into administration and Debenhams calling in KPMG to advise.

“By contrast the industrial sector is taking up the slack. While it is regrettable that jobs are being lost on the high street over the past few months, new jobs have been created in the distribution sector to help meet our changing demands of retail purchasing: namely online shopping.

“Last mile delivery is now driving the industrial market, with internet retailers and their logistics providers competing for units close to city centres, as they seek to win the customer service battle for same day fulfilment, offering one hour delivery time slots, rather than simply morning, afternoon or evening delivery.

“When we started Blue Marble eight years ago we earmarked the industrial sector as the main focus for our clients’ investment strategies and now the market has caught up.

“Industrial property has blossomed into a beautiful swan, so we find ourselves having to work even harder to acquire properties which still offer value and potential to meet our investment strategies, but I’m confident that our great market knowledge and contacts will allow us to continue to deliver for our clients in this changing market.”

Blue Marble Asset Management presently has more than £100 million of property assets under management. It works for a select range of clients including family offices, trusts, high net worth individuals and investment businesses. Its business is based on understanding its clients’ investment requirements, their attitude to risk, their aspirations on returns and their long term goals and providing them with the optimum commercial property investment strategy.