Industrial property sector ‘robust’ despite economic turbulence
The industrial and logistics property sector in the UK has remained resilient in the face of economic turbulence, according to a report published by property intelligence platform provider Nimbus.
“The dance of inflation and e-commerce revolution”, published by Nimbus in December 2023, is a white paper combining data from Nimbus with insights from property organisations such as Prologis and Barberry Developments.
It identifies three key factors that can impact the industrial and logistics property market: inflation, interest rates and political shifts. In what the report describes as ‘the dance of inflation’, these factors can have a profound impact on the sector, be it as a result of a ripple effect from the cost-of-living crisis or governmental policy changes surrounding UK property.
In higher inflation environments, the white paper outlines a ‘complex pattern’ that property pricing trends often follow. This pattern begins with an initial surge in property prices as a result of inflationary pressure, followed by a correction period wherein interest hikes prompt property investors to be more cautious and prices decrease over time.
Nimbus’ report acknowledges recent events that have had a significant economic impact, including rising inflation, interest rate hikes, Liz Truss’ mini-budget and the war in Ukraine, that ‘have set the backdrop against which the sector has demonstrated its resilience’.
Paul Davis, co-founder of Nimbus, explained: “Often seen as humming away in the background, the industrial and logistics property sector powers the all-important supply chains that ensure the manufacture and distribution of goods reach our shelves, doorsteps, and businesses seamlessly and without delay.
“It’s not just where products are stored and sold, it’s where they are made, sorted, packaged and dispatched. It forms the backbone of modern commerce, acting as both engine and compass.
“However, consumer demand continues to grow, and we’re now in a world where ‘next-day delivery’ is an expectation, forcing supply chains to pivot quickly to meet demand.
“This ability to respond depends on the sector’s overall resilience, a topic that we examine in our white paper, set against the background of both an uncertain economic market, changes to inflation levels and a shifting retail landscape.”
Looking to the future, Nimbus’ report addresses what trends are anticipated to be seen within the industrial and logistics property sector in the coming years. The use of robotics and automation within the warehouse has become ‘a driving force behind the adaptation of warehouse spaces to meet online consumer demands’, a trend that is expected to continue.
Another trend that is set to continue in the near future is the increasing importance of sustainable warehousing. As deadlines for environmental targets (such as reaching net zero by 2030) draw closer, making meaningful strides towards these goals will likely become more and more imperative.
Speaking to Logistics Manager about anticipated trends in the year ahead, Phil Shepley, Vice President & Head of Commercial UK & Ireland at Iron Mountain, said: “The tightening energy performance standards on new and leased buildings will see occupiers modernising their estates, at the risk of being served huge fines.
“While retrofit activity will drive a significant number of efficiencies, the demand for new spaces built to modern standards will rise. The sustainable nature of the warehouse of the future will be another important consideration. Providers will need to support customers to achieve their net zero goals.
“EPC changes will drive customers to demand higher standards from their suppliers to ensure requirements are met ahead of deadlines.”