Second-Hand Assets ''Dominate UK Logistics Market''

The vast majority of logistics properties available in the UK are second-hand units, despite the growing trend of design-and-build projects...

The vast majority of logistics properties available in the UK are second-hand units, despite the growing trend of design-and-build projects. UK head of logistics at BNP Paribas Real Estate Paul Rixon explained the market started 2012 well, with nationwide take-up in the first quarter of the year "on a par with Q1 2011" and up on the final three months of last year. He added that 74 per cent of deals were for second-hand units, while 84 per cent of the UK's total supply of logistics and industrial real estate assets also fall into this group.

Mr Rixon predicted the availability of prime units will continue to be restricted as the year progresses, due to retailers that are currently "particularly active in reorganising their supply chains". In June, Savills published its Spotlight on the UK Retail Warehouse Market report, which noted there was a significant drop in the volume of investment ploughed into the sector at the start of 2012, although the firm is confident this is "more reflective of an unwillingness to trade rather than a loss of interest in the sector".

However, Mr Rixon believes investment in logistics real estate assets will pick up as the year progresses, noting there will "potentially be a raft of good-quality units returning to the market as five-year breaks or lease expiries are exercised following on from the record take-up levels of 2007". In addition, companies are expected to rework their supply chains over the coming months, which may well result in a higher number of second-hand units entering the market, while retailers are leading the way in terms of designing and building their own premises. One of the major issues affecting the logistics sector at present is the low level of new developments in the pipeline, Savills stated, as this has broken "the traditional flow from developer to investor" and, coupled with the low volume of second-hand assets coming on to the market, has contributed to the slowdown in investment in the industry.

- Friday 10 August 2012

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