Page 6 - FOGlet 4

There is more to

industrial than just

warehouses

By Hugh Elrington

he sector continues to attract interest from investors to a sector offering
investors and occupiers alike, and a diversified income stream with the ability
the move towards multi-channel to perform through cycles.
Tretailing and last mile delivery has With supply expected to remain
increased demand for small urban constrained and tenants increasingly
industrial units. This trend is expected to requesting longer lease terms, the sector is
continue for many years, making industrial seeing higher retention rates as vacancy
a highly attractive sector. The changing of rates decrease at close to one per cent a
the way we live, and shop and how year since 2010.
retailers are adapting to consumer demand, The sector has become more
together with the current low supply and institutional in nature and has moved away
high demand for industrial provides a from noise and waste-creating physical
compelling investment case. activity to lighter/cleaner storage,
distribution and administration, with the
The opportunity
emergence of trade counters/wholesalers as
To gain exposure to the UK industrial
the dominant occupier.
sector which offers a diversified and robust
income proven to be resilient during Sustained contraction of supply
economic downturns. Targeting Supply remains constrained due to the
undermanaged estates with relatively low dual effect of limited new development and
obsolescence where the opportunity for loss of space to higher value uses such as
both income and capital growth exists residential. For example, industrial land in
through pro-active asset management. London is being lost at 260 acres per year
The sector is underpinned by an (1,300 hectares since 2001). Occupier
increasingly attractive and diverse occupier take-up of small and medium sized units
base which is being fuelled by structural (less than 50,000 sq ft) was up again in
shifts in online retail, technology and higher 2018, leading to fund interest in
value engineering and manufacturing. speculative development and limited
Coupled with this is a continued delivery of sorely needed new stock. The
contraction in supply due to both a lack of ability still exists to buy estates at a
development and replacement of stock by significant discount to the cost of build or
alternative higher value uses fulling further replacement
the upward pressure on rents. This has Strong rental growth prospects
already led to significant rental growth (off The imbalance in supply versus demand
historically low rental levels) and strong in the sector and the continued loss of

4 www.gpfo.co.uk Foglet 4th Edition