New occupier requirements continue industrial and logistics reign

GVA research shows headline rents for UK sheds rose 3.3% in 2017 alone and, it predicts, they could rise a further 4% this year. Strong rental growth is driving speculative development, which will sate demand to a degree. But with new and old types of occupier crying out for space, there will be a shortfall for some time to come.

Two occupier groups with big requirements are food retailers and manufacturers, and TV and film production companies. The former group is planning for a no-deal Brexit and the likelihood of border chaos.

Tesco, Co-op and consumer goods giant Mondelez have either confirmed they will increase their storage capacity to stockpile goods or are considering doing so. As for the latter, Lambert Smith Hampton’s Christopher Berry estimates land the size of 100 football pitches will be required to host the 1.9m sq ft of studio space required by 2023.

Insatiable demand and high rents are attracting overseas developers, including US industrial developer Scannell Properties, which has launched in Europe and aims to build €250m of assets a year from 2019.

The attractiveness of the sector means investors are also clamouring to pile in. The portfolio market is booming as a result. In the first three quarters of the year, £1.63bn worth of industrial portfolios sold, about 40% more than in the same period last year, according to Gerald Eve. And with more than £400m of industrial portfolios on the market, a blockbuster Q4 is on the cards. There will be questions over whether the market is overheating, but for now it reigns supreme over other property sectors.

Mia Hunt is Property Week’s market reports editor