Industrial & Logistics

Viewpoint Summary - Feb 2021

Activity reached a new record and we continue to witness strong occupier demand across the UK.
Availability remains patchy across the UK with some regions witnessing less than one years’ worth of supply and historically low vacancy rates.
Industrial investments topped £10.2 bn in 2020, 33% y/y. Total returns reached 9.0% (standard industrial) and 9.7% (distribution warehouse).

Despite a challenging economic backdrop, 2021 will continue to witness inflationary pressures on rents.

Len Rosso

Head of Industrial & Logistics Colliers

Supply & Demand

  • The UK avoided a double-dip recession as official data showed the economy growing by 1.0% q/q during the final quarter of 2020. The Q1 2021 GDP print will undoubtedly be negative, given the current national lockdown. However, the extent of the short downturn will be significantly milder than during the first lockdown which started almost a year ago.
  • 2020’s take-up for large distribution warehouses (100,000 sq ft+) reached a record-breaking 48.5m sq ft, 56% ahead y/y. In terms of take-up by business type, online pure-play occupiers took the lion’s share and accounted for 31% of total take-up, followed by 3PLs at 30%, general retail at 18%, manufacturing at 12%, with the balance accounting for other business types.
  • The market continues to see strong demand for Grade A space. Take-up for design & build distribution warehouses accounted for 49% of overall take-up, with 21% of leasing activity witnessed for speculatively developed units and the balance transacted on second-hand space.
  • Availability remains patchy across the UK with some regions witnessing less than one years’ worth of supply and historically low vacancy rates. National supply of large distribution warehouses stands at 32.5m sq ft, 6.5% below y/y, which equates to a vacancy rate of 5.8%.
  • Developers have remained unfazed by the pandemic-induced economic slowdown as the growth of online commerce caused an acceleration of development land erosion. As a result, 2020 saw the delivery of 8.2m sq ft of new speculative space. If we look at the amount of new deliveries since January 2018, the sector saw an annual average of 7.9m sq ft, however this did little to bolster supply.

National take-up (m sq ft)

Source: Colliers - Note: Occupier deals 100,000+ sq ft

Speculative deliveries and planned completions (m sq ft)

Source: Colliers - Note: Units 100,000+ sq ft

There is strong buyer competition with portfolio opportunities being traded at a premium as they allow investors to scale up.

Andrea Ferranti
Associate Director, Research, Colliers

Pictured: Mountpark Bristol 360 | 359k sq ft cross-docked speculative warehouse (recent Colliers instruction)

Capital Markets

Despite lockdowns and localised restrictions, there remains a strong appetite for prime industrial assets, both multi-let and single-let distribution warehouses. According to Property Data, industrial investment volumes reached £10.2bn in 2020, 33% ahead of 2019. Interestingly, industrial investments accounted for a record 22% share of total investment volumes as Q4 topped £5.5bn, the largest quarterly activity on record. According to the quarterly MSCI digest, industrial total returns for the 12-month period to the end of Q4 2020 reached 9.0% (Standard Industrial) and 9.7%. (Distribution Warehouse).


Industrial investment volumes (£ ‘000)

Source: Property Data

Global multi-asset investors have continued to increase their allocation into the industrial sector as the pandemic resulted in decreasing occupier demand for office and retail assets. Overseas interest remains high and in 2020 foreign buyers accounted for a 44% share of total turnover, up from the 27% average share recorded over the period 2015-2019.


Prime investment opportunities in London are trading at around, if not sub-3% NIY, as investors are envisaging strong reversionary potentials and more rental growth to arise due to the lack of development land and the strong consumer economy. Prime South East assets are being traded at around 4% NIY, similarly in line with prime regional assets in core locations.


According to the quarterly MSCI Digest, industrial total returns for the 12-month period to the end of Q4 2020 reached 9% (Standard Industrial) and 9.7% (Distribution Warehouse). Pricing has remained largely stable with further yield compression occurring for strongly covenanted, RPI linked, long-let assets which have become highly attractive to annuity funds, property companies, core investors and international buyers alike.


Prime yields are under pressure as investors continue to increase their portfolio weighting towards industrial.

Andrea Ferranti
Associate Director, Research, Colliers

Due to the pandemic, 2020 saw annual online commerce share of total retail sales reach 27.9%. It is plausible to expect this share to decrease once the UK is able to get back to some sort of normality. However, consumer shopping habits have changed, resulting in more consumers discovering the benefits of shopping online. In this respect, Colliers is forecasting an annual e-commerce share of total retail sales of 29% by the end of 2024. According to our analysis, this would mean that the UK could need an extra 51 million sq ft of logistics space. That said, there are some headwinds as the Bank of England is forecasting the unemployment rate to reach 8% by the middle of the year.

In Colliers’ latest Industrial & Logistics Market Update webinar, which was attended by over 600 industry professionals, attendees took part in a poll where 66% (out of 280 respondents) said they thought it unlikely that a drop in consumer confidence, due to the pandemic, would affect industrial take-up activity in 2021. When asked how long the boom times for industrial can last, 81% said they expected this buoyancy to remain throughout 2021 and beyond. Furthermore, 58% of respondents stated that yields will remain unchanged, while 34% expected further yield compression in 2021.


Rental growth is expected to remain relatively strong in 2021, whilst fierce competition for investment assets indicates that there will be further mild prime yield compression. Colliers is forecasting an annual ‘all industrial’ rental growth of 2.6% this year, with London and the Rest of South East’s rental growth expected to outperform at 3% and 2.9%, respectively.


For regional insight and analysis please request the full Industrial Viewpoint 2021 Report here.

Len Rosso

Head of Industrial & Logistics

+44 78 3143 6096

Andrea Ferranti

Industrial Research

+44 75 2235 7441

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Len Rosso

Head of Industrial & Logistics

Colliers International