With an uncertain political outlook throughout much of 2019, retail funds have been quietly bolstering cash holdings through strategic sales and while overall volumes are down, this has not had any discernible impact on the pricing of industrial and logistics assets in recent months. Savills Industrial and Logistics investment team have bought or sold a total of over £1.4 billion of industrial property so far in 2019, with a weighted average yield on investment stock just above 5 per cent.

Volumes across all sectors continue to be muted in the run up to the General Election, however industrial and logistics continues to receive support from a range of purchasers and at all points along the risk curve.

This is a relevant point as at most times of uncertainty, capital tends to focus on prime assets only. We have continued to see multiple parties coming forward with competitive offers, even on more secondary or higher risk, more asset management intensive investment opportunities.

This is undoubtedly down to the sustained strength of national industrial occupational markets and a low overall vacancy rate of just 6.8 per cent, as reported at our recent Savills Big Shed Breakfast market summary.

The buoyancy of pricing levels might in part be attributed to the reduced quantum of stock in the market, however a more important driver has been the depth and diversity of purchasers. Savills data recorded funds or institutions as being the most active purchaser type in 2018, comprising over a third of the market. However, in 2019 they are not anticipated to constitute even 25 per cent of the purchaser pool.

While some funds and institutions have stepped away over the past 12 months, overseas capital has increased their acquisition volumes by approximately 60 per cent. Buyers backed by overseas equity have taken advantage of the weakened pound and considered the prevailing market provides a good opportunity to access a quality of stock that, until recently, they have found challenging to secure in the face of stiff competition from institutional buyers.

Savills is forecasting all industrial investment volumes for 2019 will be down by around 40 per cent year on year. While logistics volumes have held up very well (just 15 per cent down), transactions in the multi-let sector are down by over 50 per cent. This is predominantly due to a lack of willing sellers of multi-let stock. With the outlook for returns remaining favourable for the sector, it is difficult for most owners to justify selling multi-let industrial as opposed to disposing of another sector where rental and capital growth prospects are perceived to be more limited.

While the General Election and ongoing challenges for retail funds continue to provide turbulent conditions across the property investment market, buyers in the industrial and logistics sector continue to have faith in the prospects for long term performance. Rental growth and pricing are expected to hold up as we move into 2020.

Further information

Read: Take-up by diverse range of industrial occupiers means another strong year, says Savills