According to JLL’s latest Industrial Tracker reprot, the UK industrial market continues to be the shining star of the property sector with strong rental growth boosting overall total returns for the sector.
2018 was yet another positive year in the occupational market with JLL’s agents reporting that, generally, demand for industrial space remained steady, giving rise to another year of stable take-up. With this sustained demand, supply has continued to fall across many regions or remained stable from its already low base.
The Industrial Tracker report monitors and comments on the state of the standard industrial market, involving small and mid-sized boxes. With generally modest levels of supply and robust occupier confidence, developers demonstrated a wider focus on speculative development last year.
At the start of 2019, JLL recorded over 12 million sq ft of industrial and logistics floorspace speculatively under construction nationally. However, much of this space was ‘big box’ (100,000 sq ft +) logistics space. The report suggests that continued low levels of speculative development of smaller industrial units could dampen supply levels and drive further rental growth. As 2018 was a positive year for occupiers, with steady demand and stable take-up, supply continued to fall across many regions or maintained stability from its low base level.
High level findings include:
- During 2018, the level of demand was reported as stable compared with 2017 in 8 out of 11 regions, with agents highlighting an increase in demand in the North West, East Midlands and West Midlands.
- Nationally, JLL rental growth data show an unweighted average growth rate across the country of 8% in 2018.
- The overall total return delivered by the UK industrial market was strong in 2018 at 15.5% (according to the MSCI Quarterly Index), significantly outperforming offices (6.2%) and retail (-0.3%) sectors. Standard industrial recorded a total of return of 16.7% and distribution warehouses recorded a return of 12.9%.
Andy Harding, lead director industrial and logistics commented: “With strong occupier demand and modest supply, the industrial market had another solid year in 2018. From an investment perspective, the industrial sector has proven again to be the standout performer amongst the main commercial property types, outperforming both retail and offices, and we expect this to continue due to its strong occupational fundamentals.
Despite a backdrop of political and economic uncertainty from Brexit, cities continue to grow as does the need to service them. Our predictions suggest that strong demand and supply fundamentals will drive another robust year.”
Jon Sleeman, director industrial and logistics research also said: “Our research highlights robust performance across 2018, with demand comparable to 2017 and even increases across the North West, East Midlands and West Midlands. Nationally, our prime rental growth data show an unweighted average growth rate across the country of 8.0% in 2018 which was driven by limited supply in the market. Looking to the rest of 2019, both JLL and independent data suggest that sentiment for the industrial and logistics market will remain strong, positioning the sector as a favoured option amongst investors and developers.”