UK Industrial Sector Sees Sharp Increase In European Investment Market Share

UK takes 46% share of European industrial investment market in first half of 2009.

London, 27 October 2009 – A shift in investor interest in favour of the UK industrial and logistics market bucks the trend of the past two years, according to CB Richard Ellis’ latest EMEA Industrial & Logistics Market View report.

The UK’s share of European industrial investment activity, which had progressively diminished over the previous two years, increased to 46% of the 2009 first half European total, up from around 25% in 2008. This positive jump demonstrates that the UK is further advanced than its European counterparts in the current value-adjustment cycle and hence viewed as less likely to suffer further reductions.

Richard Holberton, Director, EMEA Research, CBRE said: “The UK’s uplift in industrial activity as compared to the rest of Europe demonstrates the market’s lead in the correction cycle and the resulting investor confidence in the UK industrial and logistics sector. The high income returns which the industrial sector can deliver, together with increased stability provided by the longer leases in the UK market generally, is proving an enticing combination.”

UK Industrial yields rose by over 300 basis points from the peak of the market in 2007 to the highest point in Q1 2009. After a period of stabilization in Q2 2009, prime yields have experienced rapid hardening in Q3, largely due to the return to the market of the UK institutions combined with an acute lack of stock to satisfy these requirements, which has led to a number of competitive bidding situations. Prime rents in the UK’s regional industrial markets have generally seen a modest decline over the past year, although this has eased in some locations in the past quarter. Prime rents for the UK’s main regional markets lie in the range of £5.75 – 6.50 / sq ft / annum.

John Adcock, Head of UK Industrial Investment, CBRE, said: “Headline rents, particularly in the UK’s South-East region, have in the main been maintained for well-located modern industrial and logistics properties, although incentives such as rent-free periods have increased considerably. Whilst investors are factoring in lower rental values and additional void costs, this has not dampened investor appetite. Investor sentiment has improved significantly in recent months for prime multi-let industrial estates and the single-let industrial market. Many investors perceive there to be good value within this sector and favour the exposure to this particularly defensive asset class.”

CBRE advised on a number of deals in the first half of 2009 which are testament to the increased investor confidence in the UK’s industrial sector. This included two acquisitions on behalf of Harbert Asset Management Corporation, one of which was a portfolio of five single let distribution units purchased from ProLogis for £64.405 million, and the other a portfolio of four multi-let industrial estates from SEGRO for £103.75 million. More recently, CBRE advised on the acquisition of a prime freehold multi-let industrial estate, Waltham Park Way, Walthamstow for £14.925 million.

EMEA Industrial & Logistics MarketView October 2009
EMEA Industrial & Logistics MarketView October 2009