Continued appetite for industrial assets from investors and developers is being met with stronger covenants from occupiers, as the sector goes from strength to strength, according to new analysis from EG’s Radius Data Exchange.
In a divergence from other real estate sectors, figures show that average lease lengths have increased, moving upwards by 10% over the past five years. This has had a knock-on effect on rental values, with the average £ per sq ft rent on new leases increasing by 15% over the same period.
The logistics market has been the real winner in a period of market malaise in the second half of the past decade. Changes in consumer behaviour, most pertinently the move from physical to online retail spend, has meant that many retailers have made the move to increase their logistics offering.
With more and more seeking to secure new logistics space, take-up across the industrial sector has remained strong, although it did start to slow in 2018-19, with activity falling by 25%. The decline in take-up may, of course, be driven by a lack of available space. Radius data shows a 20% increase in applications for new space over the five years since 2015 and a 20% hike in spend on industrial assets over the same period.
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