Speculative development has long been the barometer by which developer confidence is measured.
Given the ongoing political turmoil and uncertainty over Brexit, it is no surprise that there was a 55% drop-off in spec build last year – or that the market is forecast to contract again this year.
It is not expected to fall by anywhere near as much, though, because the fundamentals remain so strong. In almost every region, demand for space is still high, especially from the ecommerce retailers, and supply is still extremely low.
While developers are ‘umming and ahhing’ about their spec allocations, investors and landlords are reconfiguring their portfolios in search of the best returns.
The multi-let market is flavour of the moment, with numerous REITs being set up and institutional money piling in. They are all looking to cash in on the exponential rental growth in the subsector. One investor, Stenprop, is going as far as repositioning its entire European portfolio to focus on multi-let.
Another investor rethinking its strategy is Aviva Investors. As its head of UK logistics Mike Green explains, it is selling off its smaller industrial units because it believes there are better returns and less asset management work to be had in bigger, well-located clusters. Whatever the size of the unit, every occupier needs flexibility in its supply chain.
That is where proptech firm Stowga comes in. The platform is enabling occupiers to shift from a ‘peak warehousing’ to a ‘base’ model in a move that could have huge ramifications for the market, which is probably why CBRE and Gazeley are partnering with it.
They know it pays to stay ahead of the curve in this rapidly changing sector and we can help you on that score. These issues and more will be debated at Property Week’s Industrial & Logistics Conference in London on 17-18 May. See you there!
Richard Williams is Property Week’s news content editor