Why distribution warehouses?
- The UK is experiencing a period of dynamic growth in online retailing. This is impacting the UK real estate market, by creating increased occupational and investor demand for distribution warehouses.
- Since 2008 speculative development of distribution warehouses has been limited due to the recession. With increasing occupational demand and little speculative development there are now low levels of supply in core locations.
- Any economic recovery is likely to lead to increased occupational demand as retailers sell more goods, need more warehouse space and allocate more capital to improve their supply chain.
- Distribution warehouses have good income characteristics, with long leases to strong covenants providing secure income, combined with low capital expenditure risk (due to FRI leases).
Why South East multi-lets?
- The South East, and in particular London, has experienced significant reductions in supply as industrial space has been converted to higher value uses, such as residential, retail and leisure. In the last 30 years London industrial space has reduced by approximately 50%.
- Any economic recovery is likely to benefit South East industrials as SMEs need more space for improved trading.
- Since 2008 there has been a lack of speculative development of multi-let industrials due to the recession. And pre-lets in this sector are difficult.
- It is far cheaper to refurbish industrial property than other asset classes. See Clipstone’s refurbishment projects on our Case Studies Page.
- Multi-let industrial estates are capable of improvement by intensive asset management. Larger institutional landlords find it difficult to manage industrials intensively, particularly properties of £5m or less. Clipstone has a team of specialist asset managers who are experts in this field.
- The market for smaller and non-institutional industrial estates has not yet recovered, so Clipstone is able to uncover value in this sector.