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Abstract
The key investment fundamentals of the logistics market continue to remain strong. This, combined with intense competition amongst investors, is expected to lead to further yield compression during H2 2018
Capacity Dartford
- The industrial and logistics market continues to attract significant interest from UK institutions and overseas investors. Access to stock remains a key issue which is reflected in the investment volumes achieved in the first half of the year.
- £1.58bn was transacted in the first half of 2018, a 31% decrease on the same period in 2017. However volumes are still 70% higher than the half year average of £0.93bn.
.png "Figure 27")
FIGURE 27 | National logistics investment volumes
Source: Savills Research, Property Data
- Assisting the investment volumes were a number of portfolios, including the Magnus Portfolio which traded for £150m reflecting a net initial yield of 6.41% and the Mountpark portfolio purchased by M&G for £93.7m.
- The largest single-let transaction of the year to date has been Tritax forward funding a £120.7m build to suit development in Darlington where Amazon will construct a 1.5m sq ft facility. Upon completion Amazon will take a 20 year lease which will reflect a net initial yield of 5%.
- Savills prime yields have fallen by 50bps in the last 12 months and now stand at 4.25% for prime single let logistics units and 4.00% for multi-let industrial estates, the lowest level ever seen.
.png "Figure 28")
FIGURE 28 | Prime Investment yields
Source: Savills Research, Property Data
- We expect further yield compression particularly for prime logistics units and South East industrial given the weight of capital targeting the sector combined with the scarcity of stock.