The industrial and logistics sector has seen robust demand post-pandemic. Rental growth in the sector has outperformed the majority of other mainstream asset classes and inflation due to the continuing imbalance due to demand consistently outstripping supply aided by the higher interest rate environment. The resilience and adaptability of the sector continues to make it a key driver of economic growth and development in the UK.
The sector is going through a period of immense change and pressure centred on various issues such as electrification, automation of last-mile deliveries, a growth in ultra urban logistic centres to meet the growing Q-commerce demand, alongside more traditional factors such as planning constraints and availability of suitable development land. As the global economy evolves the sector will need to continue to adapt to changing consumer behaviours, technological advancements and supply chain disruptions. Investors are also anticipating a potential shift in the market given the change in investment values.
Top of the agenda for the majority of investors and occupiers is the delivery of a sustainable industrial and logistics pipeline from the manner of construction and refurbishment of buildings, to developing technologies and systems to make operations more efficient and sustainable. The drive towards net-zero and the key role that ESG plays in the decision making process for both investors and occupiers has been topic of discussion for our clients, and one in which we have been consistently involved.
At the same time, manufacturers and industrial occupiers have had to re-evaluate their business models, and their need for and use of space as part of their operation (including those businesses operating on a ‘just in time’ basis, or with international shipping requirements).
At the same time ESG and sustainability are featuring more prominently in the minds of occupiers (and therefore investors) when it comes to new developments – with environmental performance ratings, provision for electrical vehicles, and other future proofing of properties being at the forefront of people’s minds.
These trends are likely to continue to drive the industrial market over the next few years as we continue to adapt to the new international trade position, and in a post-pandemic world:
- Investors will be looking for ways that they can keep up with (and anticipate) the needs of their occupiers.
- Modular construction may be considered as a way to develop new space sustainability and efficiently.
- Occupiers will be looking at efficient use of space within their property portfolios, which may see re-purposing of assets within their businesses.
- Last-mile logistics will take on greater prominence as our reliance on home deliveries looks unlikely to reduce substantially.
- As shop brands disappear from the high street, having been purchased by online retailers, logistics demand will only increase.
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