INTERNET RETAILERS AND 3PLS DRIVE 20% INCREASE IN QUARTERLY TAKE-UP
Occupier demand improved significantly in Q2, with 13.7m sq ft transacted, up 20% on Q1 and 17% on a year earlier. Activity was driven by Chinese internet retailers and third-party logistics providers (3PLs), with Amazon also reaffirming its commitment to large-scale investment in the UK. This mix of new overseas investment and domestic occupier expansion and supply chain reorganisation lifted quarterly demand back to the 10-year average.
As occupiers released space to upgrade their facilities, a growing volume of secondhand space returned to the market in Q2, pushing the overall availability rate to 8.6%, the highest in over a decade. However, relatively moderate development activity means that new-build availability remains more constrained, at a relatively low 4.8%.
The volume of investment remained subdued in Q2. There is breadth of demand for UK logistics property, but yields moved out by approximately 10bps. The impact of ‘Liberation Day’ on the gilt market caused some to reevaluate deals and, on balance, sentiment was slightly weaker in Q2 than in Q1. The portfolio segment continued to account for the bulk of transactional activity and debt was materially more accretive, with LTV ratios increasing from around 50% to 70% in Q2, so the stage is set for a stronger performance in the second half of the year.
