CBRE has released a benchmark index tracking investment performance of modern logistics stock across the UK, the ‘CBRE UK Logistics Index’. This is the only index that focuses exclusively on the modern warehousing property industry in the UK.
According to the ‘CBRE UK Logistics Index’, the total return for UK logistics for H1 2016 was 4.4%. Despite being down from 8.9% in the second half of 2015, logistics outperformed the wider industrials sector and all UK property collectively, which saw returns of 3.6% and 3.0% respectively. The logistics performance comprised 1.7% of capital growth and 2.7% of income return. Capital growth in particular has been hit, having grown by 5.9% in H2 2015. This is, in part, due to the impact of the changes to Stamp Duty Land Tax in the 2016 Budget. Over the 12 months to the end of June, total returns in the logistics sector stood at 13.6%, with capital growth at 7.7%.
In contrast, rental growth rates have remained stable. At the UK level, rental value growth in the six months to June 2016 was 2.2%, unchanged from H2 2015. It is the second fastest rate of rental growth recorded on the Index, which has been backdated to the start of 2010. At a regional level, the highest returns in H1 2016 were seen in the North of England, where the total return was 6.9%. Returns were also robust in the Midlands at 5.5%, with the lowest returns in the South East, at 3.2%. Superior rental growth in the North and Midlands contributed to this outperformance over the past six months.
The ‘CBRE UK Logistics Index’ is comprised of repeat valuations of large, modern warehouse stock built since 2000, valued by CBRE, and owned by some of the leading investors in the UK logistics sector. The data for H1 2016 is based on the collective performance of 280 individual assets, with a combined capital value of £8.22 billion at the end of June 2016. The index will be updated every six months,
Andrew Marston, Director in CBRE’s UK Research team comments: “With the launch of the ‘CBRE UK Logistics Index’ we can, for the first time, focus a spotlight on the performance of what is now a mature real estate asset class. The first Index confirms why the logistics sector has been such a popular choice amongst investors in recent years. Regardless of whether we look at a holding period of one, three or five years, logistics real estate has consistently outperformed both all property and all industrials in terms of total returns, capital growth and rental value growth. For example, the annualised total return for the three years to the end of June 2016 for logistics is 19.9%, compared to 11.3% for all industrials and just 8.8% for all property on the CBRE UK Logistics Index.”
Due to the timings of valuations that comprise this Index, it is too early to measure any impact of the result of the UK’s referendum on EU membership. The next update of the CBRE Logistics Index will be released in January/February of 2017 and will report in full performance over the second half of 2016.
Turning attention to the Yorkshire market, Mike Baugh, Senior Director of Industrial Agency at CBRE’s Leeds office said; “Although take up in H1 for Yorkshire was slightly disappointing, take up for the full year is likely to be ahead of the 2015 figure, in fact take up in H2 is already at over 1.5M sq ft following the deals at iPort, Doncaster which CBRE has concluded. This is very positive news for the region and with other deals currently under offer, take up for the full year is likely to be well over 3 million sq ft.”
