Investment into UK logistics assets reached £2.6 billion in 2016, 53% above the long term average of £1.7 billion, according to international real estate advisor Savills.
Despite the political uncertainty and resulting market volatility, investment levels remained fairly consistent throughout 2016, with the year ending on a high. In the fourth quarter alone £871 million was transacted across 43 separate deals. The total deal count for 2016 was 202.
The liquidity of the sector was buoyed by continued demand from online retailers and structural change in the sector caused by more people purchasing on the internet. This demand ensured the market remained strong, despite the decision to leave the EU, with investment levels in Q3 and Q4 totalling £1.4 billion.
Savills notes that Tritax was the most active investor, deploying £326m in the last quarter alone, accounting for 37% of the market in Q4. Overseas investors increased their presence as logistics increasingly becomes a global asset class, accounting for a fifth of transactional volumes (just over £500 million) in 2016.
Looking ahead to 2017 the firm expects the industrial sector to remain robust, underpinned by the strong occupier market. Investor demand is expected to keep yields strong and stable with total returns predicted to be between 6% and 8%, assisted by rental growth across more established markets.
James Williams, investment director at Savills, comments: “This year will be an interesting one for the sector as rapidly advancing technology and more demanding consumers push retailers review their supply chains. Investment into the logistics sector has been at an above average level for the last four years, with overseas investors becoming increasingly active. We expect this trend to continue in the next year given the ongoing strength of the occupational market and the cheaper pound.”
