As the year progresses, anecdotal evidence does suggest that institutional investors are still targeting the UK industrial and logistics sector and actively seeking to deploy capital in this sector.

However, despite a strong end to 2014 for the industrial and logistics sector, UK investment volumes for the first quarter were down 27 per cent, reaching £602 million. Given that the availability and quality of stock on the market is limited, it comes as no surprise that investment volumes for the first quarter are a little subdued.

The current market cycle has thrown up some interesting factors for the investment market. We are seeing many of the large-scale developers choosing to hold their prime development stock where traditionally they would have been traded on practical completion, or sooner if a prelet has been secured thereby creating a further lack of stock in the investment market. The same is true of investors who are funding speculative development in the current cycle – we expect this stock to be held in the short to medium term.

While some investors are looking towards secondary locations, we are still seeing many investors focus on only the most prime, liquid of assets which could be brought back to the market with ease in the next stage of the cycle. Hence we are seeing the spread between short and long-term income decrease to just 100bps.

All of the above is conspiring to ensure that, not for want of trying, the logistics and industrial market isn’t matching the outperformance of 2014. However, we are tracking over £250m of stock currently on the market and off market deals, such as Logicor’s recent purchase of a portfolio worth £388m from Oaktree Capital Management and Anglesea Capital, will ensure that total investment volumes remain robust.

Further information

Contact Savills investment sales and acquisitions team.