10 March, 2021

Although the widening definition of Urban Logistics has, in part, been witnessed across occupational markets in the UK, the true extent is still unknown and evolving. A surge in demand for industrial accommodation in urban areas has already led to unprecedentedly high occupancy levels and significant rental growth over recent years. But are there any ‘knock on’ effects of this growth other than healthy returns for investors? Has tenant displacement already begun as rents become unsustainable for some businesses or are more and more real estate costs being passed onto the consumer?

Industrial developers continue their struggle in competing with higher and better uses, with industrial land values often trading at a discount in comparison to other uses, notably residential. However, the tide is beginning to turn with industrial land values on the move, directly correlated to the rental growth story touched upon above. The re-equilibrium in the hierarchy of land use values is upon us and set to continue.

Other likely trends could include; 

  • An increase in office content of new build stock, above historic levels as take up from SME’s increases as they strive to expand e-commerce penetration.
  • 3PLs will focus on developing out ‘build to suit’ units with land banking becoming more prevalent.
  • Urban Logistics units will become smaller, process fewer parcels and serve more compact catchments, but far more numerous.

 

The continued emergence of Urban Logistics as its own sub sector is here to stay. Could we even begin to see modern estates with homogenous tenant line ups in a similar manner to traditional high streets?