Logistics property key as UK retail culture shifts

Overall take-up for the year is expected to surpass the 10-year average of 33 million sq ft, according to new research from Cushman & Wakefield.

New data shows that after activity ground to a near-halt in early April, market sentiment returned quickly as the importance of the logistics sector to the UK’s economy during the peak of the pandemic became evident, and the cultural shift towards online retailing was boosted by the lockdown.

Amazon

Three major deals by Amazon brought second quarter take-up volumes to 13.3 million sq ft, the strongest on record. If a further 3.6 million sq ft of short-term deals (mostly generated by food retailers and the public sector) are accounted for, the first half take-up was also the strongest ever recorded at 22.6 million sq ft.

A sharp increase in the average deal size made up for the lower number of total transactions during the second quarter (46 compared to 59 on average). Boosted by the Amazon deals, eCommerce accounted for 64% and 48% of take-up during the second quarter and the first half respectively, both of which were record highs.

eComm property under offer

Looking ahead, with 16 million sq ft of long-term deals under offer at the end of the second quarter, take-up is likely to surpass the 10-year average of 33 million sq ft this year. A significant amount of space under offer is to eCommerce occupiers, in what could be a record year for the sector in terms of net absorption.

Richard Evans, head of UK Logistics and Industrial at Cushman & Wakefield, said: “The latest data supports the theory that the logistics sector has emerged from the crisis of the pandemic in positive shape.”

After successfully raising new equity capital, UK REITs were also active on the buy-side. In April, Urban Logistics REITs acquired the Paloma and Crown Portfolios from Paloma Capital and Legal & General for £31.9 million and £47.2 million. Backed by its largest equity raise on record (£650 million), SEGRO purchased the 34 acres Perivale Industrial Estate (593,096 sq ft) in West London from Federated Hermes for £202.5 million.