UK industrial rent values rising, research finds

Research from Colliers has found that UK industrial land values have, on average, risen from £1.5 million per acre in the first quarter of the year to £1.8 million per acre in Q3 3023.

According to Colliers’ Industrial Rents Map, “UK average prime headline rent for large distribution warehouses (100,000ft²+) rose by 6.6% (six-monthly growth) and 10.1% (year-on-year) to £10.90 per ft² in Q3 2023″.

Meanwhile, it found that rents for smaller and multi-let units rose by 9.3% year-on-year, reaching £14.20 per week.

Len Rosso, Head of Industrial & Logistics at Colliers, said: “At the beginning of the year market sentiment was very negative – there were predictions of one of the longest recessions on record, and that higher borrowing costs would result in a significant number of forced sales – but ultimately that’s not materialised and we’re seeing resilience with some investors, particularly those that are cash-rich, focused on the medium to long term.

“At the same time landowners are holding out for a price that they think reflects their asset’s medium-term value, rather than having knee-jerk reaction to current market dynamics.

“While occupier demand has come down from the pandemic peak, it is still there, particularly for those who have a need to move due to lease events or contract-led requirements.”

Rosso predicted in August that rents would continue to rise throughout the year in spite of lower take-up levels.

Andrea Ferranti, Head of Industrial Research at Colliers, added: “Despite the difficult economic conditions, uncertainty over exit yields and elevated debt cost environment, land values in core markets have increased due to the resilient occupier demand, robust rental growth, strong investor appetite for value-add investments and an acute lack of development land, particularly in London.

“We remain cautiously optimistic there will be sustained rental growth and investors will look to position themselves on the right side of the real estate cycle as soon as there is confidence in the normalisation of monetary policy.”

From an occupier perspective, another report from Savills and Tritax EuroBox this week revealed that rising costs and rents are a primary concern for occupiers of logistics property in Europe.

Source: logisticsmanager.com