Industrial Investment Property Market England Update

As 2023 is now firmly underway, we take a quick peek back at the market last year and what the year ahead may look like for the industrial sector moving forward.

H1 2022 was another stellar period for industrial investment in the UK with confidence in the sector never higher. A strong occupational market with seemingly unstoppable rental growth as the long term trend of retail moving online continued at a pace, historic low interest rates and a whole host of buyers desperate to get a slice of the action helped to push capital values and yields to all-time highs. Our sale of a unit in Trafford Park, Manchester, let to Evri (formerly Hermes) for what some may argue was a cycle record 3.8% for a 13,000 sq ft refurbished shed with 6 yrs income, perfectly demonstrated the strength of the market.

Things peaked of course around summer time and there were more cautionary winds in the air as life returned to the office following holidays in the sun. At first slowly with the cost of living crisis starting to bite, utility costs rising as the war in Ukraine intensified and interest rates shooting up, but it was the mini budget that really intensified this turnaround of fortunes and drained confidence in the market.

So what for 2023? Certainly the landscape looks a lot different to even just 6 months ago and some feel that the market had heated too much in any case, with a correction in pricing being just what the market needed. But with caution comes opportunity and here at Ryden we are optimistically looking forward to working with our clients in the year to come to unearth these opportunities and find value where others may not. Certainly anyone relying on finance in the coming months will continue to find things challenging, but we do see a continued opening in the market for long term investors that can invest through the current volatility and pick up stronger assets at discounted prices whilst a lot of buyers remain on pause. Similarly, for prop co’s, 2023 in our view is likely to see more distress hit the market with perhaps lenders and HMRC being more decisive in taking action on defaulting loans. Together with tenants and manufacturers going bust and other occupiers downsizing, this will lead to an increase of value add assets hitting the market with some downward pressure on the secondary market making some investments look better value.

So whilst things are likely to remain challenging for a while, we still remain excited for the year ahead. Things are certainly different from the last downturn over a decade ago as the market is still liquid and there has seemingly never been as much money still waiting to invest when the time is right.  As testimony to this, Ryden launched a prime London multi-let trade park in December at £28,000,000 reflecting 3.75% demonstrating our client’s confidence in the sector for fundamentally strong assets that will comfortably navigate any short term volatility.

If you wish to discuss any of our thoughts above or require any help with your industrial investment needs in 2023, then please just pick up the phone with one of our team who would love the opportunity to discuss this with you.