The industrial & logistics sector has broken the record for the best performing UK real estate sector with 11 consecutive months with the highest monthly total investment returns of any real estate sector.
Analysis from Cushman & Wakefield into the UK real estate market also reveals the sector’s ‘winning streak’ is set to continue in 2021 and beyond.
The MSCI data, tracked every month since January 1987, shows the previous 10-month ‘winning streak’ achieved by the London West End & Midtown Offices subsector stood as a record for nearly 14 years since being set between Oct 2006 and July 2007.
Meanwhile, the retail sector, which previously held the record for the lowest investment returns in the UK for two years, has started to post positive returns. Cushman & Wakefield forecasts returns will further stabilise in 2021, with most markets seeing low positive returns.
Greg Mansell, Head of UK Research at Cushman & Wakefield, commented: “Winning streaks have never lasted a year, but the industrial sector could change that having achieved 11 consecutive months as the best performing sector. The sector should benefit from strong occupier demand beyond the pandemic, but when will investors finally price in this growth? Meanwhile, retail assets with rebased rents and high yields surely won’t be the worst performers in the future.”
Paul Durkin, Head of Retail, Logistics & Industrial at Cushman & Wakefield, commented: “The long-term fundamentals driving structural shifts in demand for real estate within supply chains are well documented, however, the pandemic has brought into stark relief the strength and stability of this demand within the modern economy and hence the increasing attractiveness and returns created within logistics and industrial sectors. Whilst the pandemic has accelerated and supercharged the returns in the short-term, we expect the sector to continue to do well in the medium and longer term.
He continued: “The retail sector’s structural challenges are equally well-documented, and with the exception of grocery, the sector has been significantly affected by the pandemic in the short-term. However, the reopening of non-essential retail, food and beverage and leisure activities is an opportunity for the sector to regain momentum. Whilst we believe that the bounce-back will not be equally distributed, with the strongest locations which offer distinctive and differentiated reasons for consumer visits being the sector winners, we see the opportunity for occupiers and landlords to innovate and collaborate as being a potentially seminal moment and encouraging for the long-term health of the sector.”
The winning streak analysis comes from Cushman & Wakefield’s Real Estate Chartbook which provides a monthly overview of economic, financial and real estate data and identifies trends and analysis in the UK real estate market.
Cushman & Wakefield’s Research & Insight team forecasts 27 sector and geographical market combinations across the UK. It forecasts logistics will remain the top performer throughout 2021, with the UK’s top 10 performers all in the logistics sector. Prime logistics in Bristol tops the list with returns over 29%.
As the economy picks up, so too will UK office market activity. Cushman & Wakefield identifies prime offices in London and Bristol among the top performers in 2022, thanks to the extremely low availability of prime space.
Greg Mansell added: “The accelerated pace of shopping online and working from home has proven that milestones, once slated for the distant future, can pass in a matter of weeks. The pandemic and the ongoing recession have occupiers of all property types reconsidering where they want to be and how much space they need. Real estate investors must review each asset and answer honestly the question: will people want to be in this building in the future?”