UK Industrial property investment market at highest level in 7 years13th March 2014

As economic conditions in the UK continues to improve, demand for industrial property in the UK is predicted to exceed 2013 levels, with a return to rental growth over the next four years and strong investor activity, according to property consultants JLL.

At the end of 2013 availability involving units from 1,000 to 99,999 sq ft was 17 per cent lower than the year before. With only 7 per cent of available space in units from 1,000 to 99,999 sq ft in new or refurbished units.

JLL expects to see an increase in speculative development, with a number of ‘big box’ units and smaller multi-let schemes underway. There is currently some 2.1 million sq ft of floor space speculatively under construction, including ‘big box’ units and smaller multi-let units, which will help to boost dwindling levels of Grade A stock.

Investment in the UK industrial property market totalled £4.4 billion in 2013, 70 per cent up on 2012 (£2.6 billion) with regional multi-let yields moving in by around 75-100 bps over the year. The report highlights that while investor demand will remain focused on prime stock, as availability continues to fall investors will look at good quality secondary assets and the arbitrage between prime and secondary assets will narrow.

Jon Sleeman, Head of UK Industrial research at JLL said: “The UK economy is gathering momentum, which is translating into stronger occupier demand . We expect supply to continue on a downward trend. We are seeing a good level of enquiries in the market and speculative development, while picking up, remains modest overall.”

Andy Harding, Director in JLL’s Industrial & Logistics team said: ““With improving demand and shortages of good quality available buildings, the market is seeing a return to speculative development. The South East and Greater London regions currently have the highest level of speculative development underway, but with the marked take-up within all the regions there is the anticipation of an increasing number of much-needed development starts during 2014 throughout the UK.”