Friday 21st Oct 2016 - Logistics Manager

Warehouse rental growth falling

Rental performance between the traditional sector and distribution warehouses has diverged, according to GVA Grimley’s latest Industrial Intelligence report. The bi-annual report reveals that while year-on-year rental growth for traditional industrials has held steady at about 1% per annum, distribution warehouses have seen a reduction from 1% in December 2004 to 0.1% in June 2005.

And GVA Grimley says that a number of institutional investors have been particularly active in the distribution sector with the larger property allocations. However, it says that there is evidence that specific purchasers have “fulfilled their short-term allocations”.

Despite this, the company is confident that property companies and private investors will still invest in the distribution sector because of falling debt rates and a weight of institutional money available. Transactions for prime stock are generating yields of about 6% to 6.25% for ten-year income, and sub 6% for 15-year plus income.

GVA Grimley questions whether a further hardening of yields will be seen this year. However, it believes that the active purchasers from the early part of 2005 will be replaced by “new” ones, particularly institutional investors, who remain under pressure to allocate funds.

Notable transactions this year include:

Europe Logistics taking a 7,900sq m distribution unit at Grange Park, Northampton.

Tesco now has a 70,000sq m newly build and pre-let distribution facility on DIRFT, Daventry.

John Lewis is leasing a 8,700sq m warehouse on Weybridge’s Brooklands Industrial Estate.