Investment in industrial property soared last year to almost £11bn, making up 17% of the total number of commercial property transactions in the year.
Compared to 2016, industrial property investment grew by a record 80%, with the second half of the year seeing transactions total more than £7bn, according to research from Knight Frank. The increase in industrial capital values reached around 15% year-on-year, while annual rental value growth was 4.9%, making it a popular investment choice for many.
Investors from overseas made up most of the transaction numbers, taking a 44% share of the market last year compared to 18% in 2016. By contrast, UK institutional investors made up 21% of the total last year, which was down from 30% in the previous year. However, one particularly large transaction from overseas of £2bn by China Investment Corp made up a significant share of the total in 2017. London and the south-east largely dominated the figures, according to Knight Frank’s analysis.
Limited occupier levels
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Despite the heightened investment seen in the industrial property sector, the level of occupier take-up has declined from the previous year by around 28%, down to 27.3 million square feet, with 10.8 million of this being taken up in the second half of the year.
Head of logistics and industrial at Knight Frank, Charles Binks, said: “Lack of supply is limiting take-up. In the Big Shed market new-build supply of units above 100,000 square feet stood at 10.5 million square feet at the end of December 2017 compared with a peak of 28 million in Q1 2008. Developers are responding to the shortfall with a new wave of speculative development. However, there is a shortage of sub-100,000 square-foot space in the Midlands and in London conurbations, as the pressure on land suitable for industrial development continues to increase as the need to build more homes grows.”
