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Retail-logistics property investment boom

by Nikki Dale -

Physical high street retail was struggling anyway with the yearly rise of its e-commerce opponents.  Thanks to the global pandemic the woes of retail have deepened and e-commerce soared in 2020 as millions were pushed online to shop and supermarkets were forced to refocus on logistics.

According to CBRE for every extra £1billion spent online requires as much as 900,000 sqft of retail logistics space.

Retailers scramble for warehouse logistics space

With a high and rising demand for warehouse properties for storage and distribution centres to facilitate online orders.  Many traditional retailers are scrambling for new warehouse space and funds managers have seen investors come in their droves, with one stating “virtually every investor” has been keen to onboard in the sector.

Savills stated investment into distribution warehouses in 2020 was 25% up on 2019 – reaching £4.7bn.

Sergo PLC UK’s largest listed property company has played a vital part in the e-commerce boom that is upending business models globally. The FTSE 100 company, worth £10.8bn, saw its shares rise around 7% since the start of 2020.

LondonMetric Property (LMP) continues to boost its exposure to this sector of the property market with its January reported acquisition of two sites, one in London and one in Redditch for a combined £13.2 million.

However, the biggest single deal was private equity firm Blackstone’s £473m acquisition of a logistics platform from the world’s largest warehouse company, Prologis, last October.

Amazon, e-commerce giant and golden tenant, whose vast marketplace has allowed it to ride the 2020 ecommerce wave, signed leases on a series of multimillion-square foot facilities around England last year.

E-commerce obligation to serve customer demands

Online retailers are obligated to serve customer demands for click and collect and door-step delivery and ideal offer an efficient returns system. This creates a need for different types of warehousing space and plenty of it.  These assets are mostly leased on long-term rental agreements which are linked to inflation and the markets have switched on to the appeal of these industrial assets.

UK logistics market goes from strength to strength

Numis analyst Robert Duncan continues to see strong prospects for this part of the real estate market, commenting: “Catalysed by Covid and Brexit, the UK logistics market continues to go from strength to strength: take-up in 2020 set new records and availability has hit a new low, with a particular acceleration seen over the last six months.”

READ ARTICLE: Warehouse Landlord Winners. Will investment remain high in 2021?

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