A new spot in the real estate market of the U.K. is attracting the investment intent of money managers – and they are flocking there.
There is rising appetite for industrials and logistics spaces even as the attractiveness of the traditional office spaces are losing their lust for the investors.
James Carswell, analyst at the stock broker Peel Hunt said that higher rates of interest are being offered by industrials and logistics “due to the shift from physical stores to online shopping, as retailers are looking for more space”. “There are more people buying online and there’s a growing need for quicker delivery times.”
There is also increasing needs for more and larger sized warehouses and storage units in the U.K., driven by the growth of e-retailers like Amazon and eBay and a number of other online shopping platforms such as Ocado. There is an enhancement in the demand for the number of storage spaces which includes the demand for big boxes in the countryside as well as the smaller units that are situated closer to the biggest cities, primarily London, due to the demand trends by customers for getting their purchased items delivered ot them as quickly as possible and a race among retailers to comply.
Industrials and logistics are performing “very strongly… and investors are seeing double-digit returns”, Miles Gibson, head of U.K. research at commercial real estate services and investment firm CBRE, told the media.
There is an obvious lack of interest among investors about the other side of commercial property – offices.
“Offices, for example, are affected by the fact the we have full employment, nearly full employment, in the U.K. so employment growth is slowing, which means demand for offices is slowing, so we are expecting rent growth in office sector for example to slow as well,” Gibson said.
The uncertainty that has been created by Brexit and the uncertainty that surround the potential future of trading conditions between the U.K. and the other companies European Union following march 2019 after the setting of Brexit, and this is another issue for lowering of interest in office spaces.
“Most of the office space is concentrated in London. Because of Brexit and the uncertainty surrounding it, we expect companies to delay big decisions and thus are generally less likely to sign a new 20-year lease,” Carswell said.
In the office space sector, there is little space for gaining returns from investments because of the fact that the rents are relatively high at the moment and there are low yields at the same time, heh added. Including regional offices, which “offer more upside with higher yields and rents which still look affordable”, some expectations were also noted by him.
(Adapted from CNBC)