Northampton, Manchester ahead in logistics cycle – DTZ
The UK market for logistics property is recovering, says DTZ, with a 19% increase in take-up during 2010. DTZ’s recent European report on the sector says most logistics markets in the region will deliver rental growth in 2012 at the earliest, but notes some early signs of a rental recovery, with Northampton and Manchester ahead in the cycle. The firm expects prime rents in general to stabilise in 2011 and forecasts that they will rise on average 1% per year between 2011 and 2015.
Occupational demand in logistics markets is rising as the economic recovery becomes more firmly established and several successful companies seek to consolidate their market position, DTZ says. Key transactions within the UK market for logistics property last year included 800,000 sq ft taken by Debenhams at Sherburn Distribution Park, Leeds; 240,000 sq ft by Urban Outfitters at Rushden Link; and 318,000 sq ft by Waitrose in Milton Keynes.
DTZ says the sharp rise in traffic at ports and airports across Europe last year was evidence of increasing economic activity. In the UK, expansion prospects include ports such as Bristol, Liverpool and Thames Gateway, it notes. The firm also notes that London Heathrow was among the five main European airports to report growth in cargo volume of between 15% and 25% in 2010 – this follows an average decline of 13.5% in 2009.
The investment market for logistics property in the UK remained the largest across the EMEA region, with an investment volume of close to £2.8bn in 2010 representing 43% of all European deals that year. The strong performance of the UK market is linked to portfolio deals such as the Dunhill portfolio of five warehouses sold by AEW for £123m; the Lojix portfolio bought by London and Stamford for £82m; and the Westcore portfolio, sold to Hermes REIM for £80m, DTZ notes.
The firm’s most recent Fair Value Index ranks the logistics sector as offering the most attractive investment opportunities, compared with the retail and office sectors. It also featured a jump up the rankings for the Manchester market, which moved from 18th place to 8th position. This leap reflects “a low level of the risk free yield and an expected annualised capital growth of around 4% per year between 2011 and 2015”, explained Magali Marton, head of DTZ CEMEA research.
