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Warehouse Landlord Winners. Will investment remain high in 2021?

by Nikki Dale -

We are aware there has been a few sector-shifts in the real estate market in 2020.  Trends which were steadily rising year-on-year that have been undoubtedly fast-tracked by the pandemic.

The shift from physical to online retail

2020 saw online shopping start to account for a critical proportion of sales. The internet has gone from accounting for less than 3% of total retail sales in 2006 to nearly 18.6% in 2019.

The rise had already started to challenge the retail landlord and put pressure on rental income and occupancy rates – not to mention high-street retailers argument for the inequitable and out of date rates system –  rents need to be set at levels that allow tenants to profit.  In turn, it also put a strain on physical retail asset valuations.

More recently, the ONS (Office for National Statistics) compared retail sales made online in February 2020 and November 2020, 36% and 19% respectively – a 17% rise – of course the effect of the pandemic.

READ ARTICLE: The UK Retail Logistics property investment drive

Warehouse landlords are winners during the pandemic

Since the beginning of 2020 shares in Sergo, the UK’s largest logistics and warehousing company, have risen around 7% and it was stated by the company this month it had collected 98% of its rent it was owed by occupiers for 2020.

On the other hand, well-known retail landlords, such as Hammerson, Land Securities and British Land have rents owed to them since the beginning of the pandemic, but have only collected around half or three quarters of what is due.

Will investment remain high in 2021?

According to CBRE, every extra £1billion spent online needs as much as 900,000 sqft of retail logistics space.  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 for a bite of the action.

Tom Scott, director in the industrial investment team at Savills said investment levels were likely to remain high into 2021. “The supply and demand dynamics of the occupier market will continue to drive competition for the best assets, which in turn will generate strong investment volumes.”

Numis analyst Robert Duncan was said to see strong prospects for this part of the real estate market, commenting: ‘With occupational demand expected to remain deep and broad-based in 2021 given the sustained rise in ecommerce penetration and the ongoing importance of supply-chain efficiency, further rental growth and, in turn, yield compression, look likely.’

 

Source: FT

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