2013 saw the largest net investment in the logistics sector in IPD history, with well over net GBP1bn being invested, according to the inaugural IPD/BNP Paribas Real Estate Logistics Property Index Report.
At a national level logistics has outperformed industrials in 2013 producing a total return of 15.1 per cent compared with 12.4 per cent, with all regions in the index producing positive total returns.
Logistics experienced stronger rental growth performance across all sectors suggesting an increase in occupier demand when compared to industrials.
The Eastern region and the Midlands were the strongest performing parts of the UK market over three years. Logistics in the East had a total return of 9.5 per cent, just being pipped by logistics in the West Midlands at 9.6 per cent. The Midlands also experienced the strongest levels of rental growth within logistics; however the top rental growth segment was the North East which saw the widest differential in performance as logistics outperformed other industrials by 8.4 per cent. The smallest differential between logistics and all other industrial was in the East Midlands where there was just a 1.5 per cent difference over three years.
Wales delivered the most muted regional performance with only mild positive yield impact of 0.6 per cent, otherwise both rents and yields softened over the course of the year. This continued a trend that Wales has followed for some years, although the region has experienced the largest increase in investment in 2013 with a 63 per cent increase in investment in Wales.
Hugh White, head of national investment at BNP Paribas Real Estate, says: “Long term annualised total returns confirm logistics has proven to be a stronger performer, when compared to both other industrial sub sectors and the wider property Index. This is in part driven by the weight of money seeking to capitalise on the changing shopping habits of the general public, with the continued increase in internet retailing. Due to this structural change in the market, the IPD/BNP Paribas Real Estate Logistics Property Index provides an essential benchmark.”
Peter Hobbs, executive director and head of research, IPD says: “This research is particularly timely at this stage of the cycle, capturing the broadening of the recovery away from the prime end of the market. By Q4 2013, strongest returns were starting to be seen in good quality short leased assets, compared with the long leased assets that had performed best earlier in the cycle.”