Opinion: industrial investment market

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It’s been a difficult couple of years for the industrial investment market – but latest figures are looking promising, says Chris Sinclair. In fact, the industrial sector across Notts and the East Midlands in 2013 seems to be holding up quite well…

At the beginning of the year I reported that during all of 2012 the total amount of cash invested in industrial investment property throughout the UK was £2,587m.  Looking back, at the end of July 2012 the running total then stood at £1,465m.

I also reflected on the fact that the forecast for 2013 was for a slight reduction in capital/rental levels in the industrial sector, although there would be some “hot spots” and that well located industrial estates in the Midlands region would continue to attract investor interest.

Perhaps we can see what has happened so far this year

Up to the end of July  some £1,944m has been spent on industrial investment stock, an increase of a staggering £479,000,000 over the same period for 2012.  These figures however do not tell the whole story.  Up to the end of June 2013 the industrial investment sector accounted for £1,407m worth of activity,  pointing to a very busy July

So how are things going to pan out in the latter part of 2013?

According to the most recent consensus forecast produced by the IPF, general sentiment for capital growth across the majority of property types from the survey conducted in May to the survey conducted in August of this year has moved to a positive of 1% for the rest of the year compared to -0.2% in May and -0.8% in February. This is the first positive growth forecast since November 2011.

It is further anticipated that the growth rate will continue to 2015 when there will be a fall back over the remaining years of the forecast resulting in a five year average of almost 1.7% per annum.

Within these figures the industrial sector is holding up quite well.

Of particular note, the forecast five year average capital value growth in industrial property has increased from 1.1% in May to 1.5% in August.  In the immediate future the 1% forecast in 2013 is followed by 2.1% growth in 2014.  Only the “office” sector is forecast to perform better.

The issues affecting the sector outlined at the beginning of the year still pertain.  Investors like the attraction of multi-let locations to give them the opportunity of asset management possibilities and with tenants’ desire for short term leases this neatly falls into place. 

Coupled with the continued lack of new additions to stock and what appears to be a reasonably steady demand profile, the future for the sector appears to be one of on-going attraction to investors leading me to think that my prediction that investment in the sector in 2013 should perform at least as well as it did in 2012 to be a little understated.