Industrial & logistics sector continues to break records as investment volumes reach GBP10.8bn in 2021
According to research from Savills, investment volumes for industrial & logistics space reached GBP3.0 billion in Q3 2021, the second highest Q3 on record.
To date, transactions in 2021 now total GBP10.8 billion, this means that capital invested has already surpassed 2020’s total of GBP10.2 billion and as a result, the firm anticipates figures could exceed GBP12 billion by the end of this year.
Primarily driven by the strength of the occupational market, take-up hit 13.2 million sq ft in Q3. A critical lack of supply, with a vacancy rate of just 3.62 per cent, has seen quoting rents grow by as much as 20 per cent in key locations. Consequently, values have continued to rise with Savills prime yields contracting further to 3.25 per cent.
Whilst 2020 was dominated by portfolio deals, the first three quarters of 2021 have seen some significant single asset transactions. This includes Savills Investment Management’s GBP130 million sale of Mowlem Trading Estate in Tottenham, London Metric’s GBP100 million sale of Primark in Thrapston and Savills Investment Management’s GBP160m purchase of Amazon, Bardon.
Driven largely by private equity backers, Savills notes that overseas investors remain the most active, accounting for 52 per cent of all transactions. In turn, UK institutions accounted for just 14 per cent, down from a record high of 48 per cent just over a decade ago in 2010.
Kevin Mofid, head of industrial & logistics research at Savills, says: “Despite an increase in volumes we have seen less deals take place so far this year, which points towards the significant value still to be had within the sector. Given the ongoing issue with supply, this has strengthened the case for speculative development. Yet, although there are requirements for funding, we are seeing this impacted by construction costs and power availability, so competition for existing assets will remain fierce.”
Tom Scott, director in the industrial investment team at Savills, adds: “The long-term structural shift we have seen play out over the past few years shows no signs of slowing and this means that the industrial & logistics sector will remain a key asset class. With pricing continuing to increase, some investors and developers will take the opportunity of realising a profit and we will continue to see sales come to market. There is no reason that we will not see these volumes continue in to Q1 2022.”