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01/10/2018

Logistics finally goes to the ball after years as ‘the Cinderella of property’

Words: Huw Morris
Distribution and logistics / Shutterstock_648604981

Nearly three-quarters of real estate professionals now regard distribution and logistics as the most appealing property asset class for investment.

A survey by FI Consulting for law firm CMS underlines the changing fortunes of the UK property market, the underlying future demand for planning applications and the continuing decline in retail.

Just 7 per cent of professionals are seeing retail as the most appealing sector – a dramatic fall on the 35 per cent who favoured it in 2016.

CMS UK said that even in 2013 warehouses were seen as “the Cinderella of property, with the greater appeal and perceived glamour of mainstream office and retail assets often leaving logistics and industrial properties neglected among investors”.

But its head of real estate, Ciaran Carvalho, said logistics and distribution are now attracting significant international capital investment.

“Global players have been captivated by the transformative impact of e-commerce on the sector,” he said. “Its appeal is clear, with online fulfilment requiring about three times the warehousing space of traditional, store-bound models.

“While some high street retailers have had very public troubles this year, it’s fascinating to see how other major retailers are turning place and the creation of experience to their advantage in the battle for customers with their large online competitors.”

The vast majority of real estate professionals and retailers – 85 per cent and 83 per cent respectively – felt strongly that the future health of the logistics industry depended on securing a balanced trading agreement between the UK and the EU, the poll shows.

They also predict continued high demand for large out-of-town warehouses and believe such property would have to become “vertical” or be built taller to accommodate demand. But space and planning constraints are seen by 96 per cent of real estate professionals as the most challenging issues facing the sector, particularly for urban logistics.

“The UK logistics sector is facing varied challenges as it evolves in the face of rapid technological change and intensifying consumer demands,” added Carvalho.

The poll surveyed 353 real estate advisers, developers and investors controlling combined assets worth £400 billion.

Image credit | Shutterstock

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