Regulated by RICS

The industrial and logistics market remains the most active commercial property market in Europe.

There is a lack of supply and an increased demand across the board, and though the rental incomes have not increased in line with sale prices, the market is still a developer’s dream.

Investors are affected by the rise in online shopping. Businesses now need far more space to store inventory than to sell it, and the demand for housing e-commerce increased by a staggering 68% in 2018. The amount of technology in our lives is only set to increase, making industrial and logistics assets a strong choice, both now and in the long term.

Over £12 million worth of investments were transacted in the industrial and logistics market in Europe in 2018, but this is not the market of years past. Where previous investors would purchase second hand sheds and refurbish them, a growing number are purchasing new sheds, or building them themselves. Building new sheds can be achieved at a decent cost, and investors can then let them out on a 10-year lease without a break clause. Investors have been quick to capitalise on what some consider relatively low-risk opportunity.

The innovations do not stop there. As with shopping centres, some investors are mixing asset types and combining industrial developments with residential developments. SEGRO and the like are pioneering this effort in an attempt to diversify the product and encourage wider use, making the most of the asset and providing an answer to the oft-asked question about residential housing.

Local Authorities are supporting this growth, and some are even relaxing planning permissions to encourage investors and developers to build. In addition to providing additional storage, industrial and logistics assets boost the economy, as local residents can take up employment at all levels. Industrial and logistics buildings require both power and a workforce, and working with local authorities benefits both the business and the local community.

However, this mixed-use opportunity is not a catch-all solution. We anticipate that the opportunities lie in combining leisure and storage, rather than residential and storage solutions.

The future of the market? At Hollis, we urge potential investors to look to sustainability for the next steps. Energy consumption and building operations usually represent 20-30% of building costs, making energy a significant value changer and bad for the environment. Much of the energy waste can be reduced or even eliminated with affordable technology. Businesses should look to reduce energy output to increase capital gains.