COMMENT: The challenge of meeting demand for land with consent is driving the industrial agenda, writes Rob Cosslett, investment manager, Schroder UK Real Estate Fund.
Althouigh there have been numerous requirements for larger logistics hubs of 100,000+ sq ft from the likes of online retailers and manufacturers, these have now largely been fulfilled.
We are now witnessing greater demand for space on multi-let estates, often from local businesses, meaning that we are changing the way that we run and develop sites to meet these evolving requirements.
By operating multi-let estates with regular tenant leasing activity, we have been able to capture the rental growth within the sector simply resulting from a lack of supply and consistent demand for smaller, more affordable space.
However, with rents set to continue to rise, local businesses may struggle to afford the space they require.
It is difficult to see local authorities giving further planning permission to expand urban industrial sites, owing in part to surging residential demands for land. As a result, developers could be forced to build up rather than out.
Advances in technology and automation will assist but will local planners support the idea?
Councils need to be more imaginative about how industrial and distribution space can fit with other uses. They must work with developers to ensure that both small and large businesses have the space they need to flourish, which means an increased level of flexibility on land uses and more mixed-use schemes.
And developers must think more creatively about how to satisfy demand from users that are in competition.
