Returns for industrial property will fall by 50% next year but the sector will still outperform the market as a whole.
Research released by Lambert Smith Hampton predicts that returns in the distribution sub-sector will drop to 7.5% next year, before recovering to 10.6% in 2006. The industrial sector overall will experience a similar fate and fall to 7.7%.
This is a far cry from the returns achieved this year, which were above 15% for both sectors.
The report envisages only modest rental growth of around 1.5% for the whole sector next year, meaning that yield shifts will still be the main driver of returns. For distribution, rents will increase by 2.5%.
Michael Alderton, head of industrial at LSH, said: “We are going to see a lot of activity on major sites in fringe locations.”
References: EGi News 04/01/05
