Return on logistics property rises

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The Logistics property sector recorded a five per cent total return for the first half of 2017, according to the CBRE UK Logistics Index.

On an annualised basis, for the 12 months ending June 2017, the total return on UK Logistics was 9.3 per cent, up from 8.6 per cent for the year ending December 2016.

There was a mixed performance for logistics at the regional level, with assets in the London, South East and Eastern region being the main driver of the national improvement in returns. Over the six months to the end of June, the total return for the region was 6.0 per cent, up from 5.1 per cent in H2 2016.

The Midlands saw a total return of 4.1 per cent for the first half, up from 3.4 per cent in H2 2016. The region also saw an improvement in rental growth, with rents rising by 1.1 per cent over the first half, from 0.7 per cent over the previous six-month period.

“The superior returns that have come from South Eastern logistics assets, combined with data that suggests stronger performance from assets of less than 300,000 sq ft, is indicative of investors’ growing appetite for exposure to the so-called ‘last-mile’ section of the market,” said Andrew Marston, director within the UK research team at CBRE.

“These are the smaller warehouse units, close to large centres of population, such as London, that have become a critical node within the delivery network for online retail purchases.”

* Competition for space in Scotland means that prime industrial rents for 10-50,000 sq ft units in Scotland have jumped three times faster year on year than the UK average, according to Colliers International.

The commercial property firm found that prices for prime industrial space rose on average 7.7 per cent in the 12 months to July 2017, compared to a rise of 2.3 per cent in the UK as a whole, to the current Scotland average of £7.59 per square foot (psf). Current UK average is £8.68 psf.

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