What can possibly go wrong? The UK is the healthiest market for logistics space in Europe according to research by developer ProLogis in conjunction with consultant King Sturge. Their report, UK Logistics Property Markets – Hale and Hardy, shows just how good conditions are for developers of industrial distribution space across the country.
The report estimates the average industrial vacancy rate at 7.4 per cent which indicates a healthy, well leased market. Meanwhile, construction of industrial facilities is moving along at a brisk pace. When they are totted up, deliveries of new space in the country’s top 15 industrial markets during 2006 are expected to exceed totals the year before, when almost 11 million sq ft of inventory came onto the market.
More than 5.3 million sq ft went up in the UK in the first half of 2006, with another 7.2 million sq ft under construction at mid-year. More than 25 per cent of all new construction is occurring in just two areas – the East and West Midlands. The total inventory of warehouse space in the top 15 distribution markets exceeds 650m sq ft with a third of that in units larger than 100,000 sq ft and with clear heights of at least 30 ft.
‘For global real estate investors the UK offers the most transparent, the most liquid and the most resilient property market in Europe, if not the world,’ says ProLogis’ first vp of research Leonard Sahling. ‘It stands out by virtue of its sturdy, high-performance economy, the bond-like quality of its income streams, the stability of its customer base and the scarcity of developable land.’
The future is bright for logistics space, too. ‘The outlook for this vibrant commercial property market remains highly favourable,’ says Sahling. ‘ Longterm trends on the occupier side of the market will continue to bolster demand for modern distribution facilities in accessible locations.’
To reinforce this message, a survey carried out for ProLogis by the Paris office of Capgemini found that the UK is the largest employer in Europe’s distribution network. But it named the Netherlands as Europe’s most sought-after location for distribution centres, with Belgium and Germany close behind. Two-thirds of the European land devoted to distribution facilities is located in the Netherlands, the UK, France and Germany. ProLogis and Capgemini report that this map of European logistics may change as enhanced markets for consumer goods emerge in Eastern Europe.
Slough Estates starts 2007 on a high note. It has announced a raft of logistics property lettings across Europe. It has signed its first pre-let in the Czech Republic, a warehouse which will act as a new hub for Kuehne & Nagel on Slough’s Tulipán Park scheme, outside Prague. K&N is paying a headline rent of €269,000 per year for the next 52 months. And in the UK, Slough’s joint venture with Helios Properties, HelioSlough, has secured a forward funding deal of approximately €150m with CBRE Investors for six speculative distribution properties across the UK totalling 1.6m sq ft.