Thought of the Week
What is sustaining Industrial and Logistics investment and its interest as investors’ preferred sector?
February 20, 2025 4 Minute Read
The latest CBRE Investor Intentions Survey and investment volume data indicate that the UK’s Industrial and Logistics (I&L) market continues to be at the forefront of investors’ minds seeking to deploy capital in commercial real estate.
Throughout 2024, the I&L sector attracted £9.1bn of investment, representing an 8.4% increase compared to 2023. Over the last five years, the sector has attracted an average of 21.3% of total UK real estate investment, a significant rise from the previous five-year average of 13%. However, in 2024, the sector’s share decreased due to a surge in Hotel investment and increased M&A transactions throughout the year.
Figure 1: UK Industrial investment volumes and share of overall UK investment
Building on investment volumes, our European Investor Intentions Survey series reveals that I&L has been the preferred sector by investors targeting the UK for the past two years. In the 2025 survey, 36% of respondents identified this sector as their primary target for the upcoming year. This follows 39% of respondents who preferred it in 2024.
Figure 2: Preferred sector for investment in 2025
I&L’s income performance makes it attractive for core and core plus investors for 2025 and beyond. According to our UK Monthly Index, the average annual rental growth over the past five-years for the I&L sector has been 6.8%. This compares with 1.2% for Offices and -1.3% for the Retail sector, highlighting the I&L sector’s stronger income growth and revisionary potential.
Additionally, over the past five years, I&L rental growth has surged by 38%, well in excess of the 25% increase in UK CPI. This indicates that the sector has enabled investors to achieve real rental growth even in a high inflationary environment.
Our European Investor Intentions Survey reveals a growing preference for core plus strategies among investors targeting the UK, with 34% of respondents selecting this as their preferred strategy in 2025, up from 22% in 2024. These stable income fundamentals align well with such investment strategies.
Globally, investors are underweighted to real estate which will benefit Industrial investment moving forward. According to INREV’s 2025 Investor Intentions Survey, which provides insight into multi-asset investor and Limited Partners’ investor sentiment, across all respondents, average current allocations to real estate are 8.7%, which is below the average target allocation of 9.0%. North American investors saw the biggest gap, with current allocations at 10.4% and below an average target of 11.2%. The UK also remained the most preferred market in both INREV and the CBRE Investor Intentions Surveys for 2025.
Additionally, if investors look to increase real estate allocations through positive net inflows in 2025, both direct and indirect investment to real estate should increase. Current strategic allocation models will also allocate a significant portion of real estate investments into the I&L sector.
Despite volatility in global bond markets in January 2025, markets appear to have settled and optimism surrounding UK real estate markets for the year has returned. Greater certainty regarding interest rates will assist investment volumes, potentially surpassing the £53.6bn invested in UK real estate in 2024. The I&L sector remains particularly attractive to investors given consistent returns over the past 12-18 months.
Thought of the Week
Contacts
Jack Cox
Managing Director, Head of European Industrial & Logistics Capital Markets
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