Savills: Global logistics markets set to return to normality before year end
Savills have commented in their Capital Markets Quarterly report that Q2 2023 saw global investment volumes rise 10% above the Q2 2019 levels.
Given the prospect of greater stability in interest rates over the coming 12 months and “continued upwards pressure on rents”, the UK, US and Australia average yields of circa 5% are reportedly beginning to attract investors again. That will be welcome news for investors and the sector as a whole, which has faced a turbulent 12 months with market uncertainty, sustained high build costs and geopolitical events continuing to put pressure on supply chains.
The future looks bright with signs that we are nearing the end of interest rate rises. There has already (to a certain extent) been a rebase in terms of pricing to account for increased debt costs with both sellers and buyers acknowledging that higher debt costs are here to stay, at least in the short term. As such there is likely to be a noticeable uptick in investor activity in Q4 2023 through to 2024.
UK logistics property remains an attractive proposition with rents forecast to continue to rise. As occupiers look to add resilience to their supply chain through consolidation and ever-increasing focus on ‘ESG’ requirements for both landlord and tenant, high tech energy efficient buildings in particular are likely to attract a premium.
Moving forward, both landlord and tenant will need to be aligned in terms of a commitment to sustaining or improving energy performance of the unit with ‘green clauses’ in leases now being a permanent fixture in the market. As landlords and tenants grapple with new assessments and acronyms such as NABERS UK and CRREM there are bound to be some difficult conversations around who bears the cost and what is proportionate given the nature and age of any given unit but with an ever-increasing focus on the journey to net zero there is likely to be a middle ground which will allow all parties to fulfil their objectives.
Lets see what the future brings…
“Although activity is a far cry from the frenzy of the last few years, several major industrial portfolios, involving some of the world’s largest asset managers, have transacted this year. Across many metrics we are getting back to pre-Covid levels, which implies a robust market. At the present moment our expectation is a return to steady rental growth with accelerating investor activity before the year is out, given many remain as enthusiastic as ever regarding the medium and long-term growth prospects for the sector.”
