Unsurprisingly, the industrial sector has proven a robust performer during the turbulent weeks since the EU referendum - the defensive nature of industrial assets has ensured a relative calm navigation of choppier waters.
In fact, we have more than enough reasons to be cheerful.
Firstly, occupational demand remains strong, which has kept income levels up. During the 10 weeks from 23 June 2016, the industrial team at M&G Real Estate has completed 10 new lettings and renewals amounting to 500,000 sq ft across our portfolios.
Enquiry levels are healthy and the fundamental demand/supply imbalance across our sector has not altered - admittedly helped somewhat by the continued growth of ecommerce.
The way consumers behave has not changed overnight. Regardless of Brexit, they are increasingly demanding quicker and more bespoke delivery methods - for example, dedicated time slots or more convenient product return options.
Quick access to the marketplace
All of this adds pressure on a retailer’s supply chain network and to successfully meet the requirements of a more sophisticated consumer retailers require their logistics assets to have quick access to their marketplace and the transport network.
Moreover, industrial tenant make-up is now more diverse - another of its defensive qualities. The lettings mentioned above include a range of traditional multi-let occupiers in Harlow and Southampton, together with a big shed letting in Milton Keynes.
This pent-up demand, combined with a shortage of high-quality accommodation, ensures the investment case for industrial remains compelling as vacancy levels continue to sit at historic lows.
Pricing of prime logistics has held up. We have successfully sold assets at yield levels similar to those pre-EU referendum and continue to acquire new opportunities to recycle proceeds accordingly. Interestingly, we are now competing with new entrants such as overseas buyers and local authority pension funds, which are clearly attracted by the factors outlined above together with the long leases and strong rental growth prospects.
There will be further headwinds for the UK economy as it decouples itself from the EU, a process that will no doubt take a long time. A key indicator of consumer confidence will be Q3 GDP data. Whatever the outcome, given the prospect of a lower-for-longer economic and return outlook and with a long-term investment horizon, property looks well placed to offer a relatively attractive return compared with other asset classes. The industrial sector is set to continue performing strongly.
Paul Crosbie, head of logistics and industrial, M&G Real Estate