Mid-box warehouses hit the sweet spot for investors – Lambert Smith Hampton
With a gradual improvement in conditions in some parts of the UK market for industrial property, and structural issues adversely affecting growth prospects elsewhere, Lambert Smith Hampton says investors are seeking to increase their exposure to the industrial sector.
Investors in industrial property have been very selective over the past 12-18 months, tending to keep away from secondary stock and secondary locations, although demand for long-let distribution units and multi-let estates in prime locations has been good. Now, the rate of reduction in capital values for industrial property is slowing; the level of income return – superior to the other main asset classes – is another reason why investors are giving greater consideration to the industrial market, Lambert Smith Hampton says.
However, take-up in the industrial market fell 25% in 2012, indicating that the decision to invest in this market is not straightforward. LSH says only 10% of available stock is Grade A, leaving occupiers with little option but to delay expansion decisions until the quality of the stock available improves. Demand for Grade A warehousing is meanwhile set to grow as the logistics and distribution market expands in line with growth in online sales channels.
LSH says the growth of e-commerce is particularly positive for the 50,000 sq ft to 100,000 sq ft size range, with demand for this mid-box warehouse type set for particularly strong growth thanks to demand from parcel delivery specialists. “Given the lack of quality warehousing stock in this segment of the market, and the pent-up demand, this ‘mid-box’ warehouse segment appears to hit the sweet spot for industrial property investment opportunities,” the firm says.
