Investment in industrial and logistics (I&L) properties fell sharply in Q4 2022, with spending totalling just £890m – 73.1% lower than the Q4 three-year average.

I&L data feb 23 1

Source: Savills

Figures from Savills show that 2022 got off to the strongest-ever start to a year, with £5bn worth of deals struck in Q1. However, investment slowed steadily over the next two quarters, with asset values declining as the economy struggled and debt costs increased.

Overseas investment and property companies were mostly inactive in the I&L market in Q4, with total investment falling by 96% year on year and spending totalling just £170m compared with £4.4bn in 2021.

Domestic investors and private investors recorded declines of 89% and 47% respectively, according to Savills. Occupiers and financial institutions were the most active in the quarter, accounting for 48% of total investment, compared with a five-year average of 10%.

I&L data feb 23 2

Source: Savills

Investment remained concentrated in London and the South East last year, with deals in these regions accounting for 26% and 18% of investment volumes respectively. The east of England and Yorkshire were the third and fourth most active markets, accounting for 14% and 10% of investment turnover.

The Midlands saw the sharpest declines in overall investment, with spending falling by 54% in the West Midlands and 73% in the East Midlands.

Kevin Mofid, head of industrial and logistics research at Savills, says: “Investment across all asset classes fell by almost 80% in Q4, so the fall in the industrial sector is in line with the rest of the market. There remains a weight of capital targeting the sector as the fundamental backstory remains intact. Indeed, 2022 occupational take-up reached 48m sq ft and the vacancy rate remains well below the long-term average at 3.9%, and we are also seeing a rise in demand from the manufacturing sector.

“All of these factors should give confidence to investors in the medium-term outlook.”