Capital markets all but ceased during the height of lockdown as investors struggled to undertake due diligence and underwrite rental growth assumptions. As it became clear that inspections and surveys could be undertaken whilst maintaining social distance, and that occupiers were taking space at pre-Covid rental levels, confidence returned, and the rate of transactions continued to increase.

Given the market turbulence across all sectors, it is encouraging to report that Logistics investment volumes have reached £1.12bn for H1, a fall of just 26% when compared with H1 2019. With investors looking to deploy capital into more defensive assets, it is noteworthy that volumes for logistics investment fell by 24% from Q1 to Q2, a statistic all the more remarkable given the entire commercial market volume fell by 82% during the same time period.

Savills recorded an up-tick in transaction numbers in Q2 when compared with Q1, demonstrating the desire to transact in the sector with the most positive occupational outlook. Indeed, of the 50 transactions Savills have recorded information on in 2020, 72% have been for lot sizes under £20m. Key transactions over £20m this year include sale and leasebacks to B&M at Bedford which transacted for £153.8m pre-lockdown and a package of Next warehouses in Doncaster for £120m post-lockdown.

Moving forward, we expect more sale and leaseback transactions to come forward as occupiers look to leverage their covenants to raise capital in uncertain times. We are also tracking a number of portfolios that, providing they transact, would see up to £1 billion added to our investment volumes. Less clear is if and when the UK institutions will return to the market as active sellers.

During lockdown, Savills prime yields have moved out 25bps and now stand at 4.50% for prime single let logistics units and 4.25% for multi-let industrial estates. However, as lockdown has been eased and market activity has returned, positive sentiment and competitive tension is again putting negative pressure on these yields.

_{Read the articles within Big Shed Briefing below.}