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VALAD Q4 Update

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Robbie Bennett

on 22 February 2016

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Transcript of VALAD Q4 Update

What's Driving Demand in the Occupational Market
A Quick Run Through
Rental Growth Story
What's Driving Demand in the Occupational Market?

Current Supply & Constraints

Rental Growth Story

Investment Market Overview Q4

Projections for 2016
Industrial Investment Volumes 2015
Q1 - £1.6bn
Q2 - £1.5bn
Q3 - £1.3bn
Q4 - £1.6bn

2014 Total - £6.6bn
2015 Total - £6.0bn
Research suggests......
Current Supply & Constraints
Developers responded to lack of supply with spec developments

More stock needs to come to the market to keep up with demand

c2m sq ft
of completed spec development on the market within
10 buildings

A further
7m sq ft
is currently under construction or due to commence on site shortly within
52 buildings
Biggest issue on the UK logistics agenda currently is rental growth

After years of muted increases, rental growth is now firmly back on the agenda with investors keen to take advantage of the current market.
All quoting
sq ft, up
on the £5.75 sq ft that was being quoted 18-24 months ago for prime space,
quite a jump
In real terms - strip inflation out, prime rents in the Midlands currently stand circa
down on what was being achieved twenty years ago.

Therefore, despite the recent upswing in rents in the sector, there is
still more to come
particularly if the supply/demand imbalance continues.
Currently just one building over 500,000 sq ft...
On average, 75% of all deals done since the start of 2014 have been for space netween 50,000-250,000 sq ft

Nearly 300 deals completed in this size bracket, compared to approximately 50 of 250,000 sq ft or greater.
Investment Market Overview
Employment levels are
reaching record levels
, LA's are allocating employment land more sparingly.

As a consequence, employment land in prime distribution markets is in
short supply
and driving up both
land values
and price for build-to suits.

Eagle Farm, MK - Gazeley rumoured to have paid
£1.25m per acre
plus profit share.

shortage of lorry drivers
. Good distribution locations will need good labour profiles.
Hermes signed for 260,883 sq ft d&b at Rugby Gateway on
34 acre site
The four largest shopping markets in the world (UK, China, UK and Germany)
Will collectively grow by £320bn
Doubling to £645bn by 2018
Online currently accounts for just


of total retail spend
A further

growth to come in the next 5 years
UK parcel sector is £8bn and rising (according to Apex Insight
UK Mail signed for 231,000 sq ft at Prologis Ryton. As many as
24,000 parcels
can be processed each hour.
Demand to come from the UK’s automotive industry
More cars will be built in Britain than ever before by


(current record for UK-produced cars is

in 1972).
We currently produce

cars a year
The UK will be the 3rd largest car maker in Europe
Only 11 buildings over 300,000 sq ft available nationally
LogiCor's Sherburn 550
Chrome 102 - (102,750 sq ft)
Silver Bullet - (144,996 sq ft)
Unit B Northampton CP - (161,709 sq ft)
Rents on the rise from supply/demand imbalance
DPD Hinkley
350,000 sq ft
165,000 sq ft
The Buyers of 2015...
Single Lets
Address: Knowsley Business Park, Liverpool

Size (sq ft): 578,217

Tenant: Matalan

Income: 6 years

Yield: 6.27%

Achieved Price: £42,380,000

Vendor: Matalan Pension Fund

Purchaser: Tritax Big Box REIT
Knowsley Business Park
Address: Eddie Stobart, Warrington

Size (sq ft): 376,288

Tenant: Eddie Stobart

Income: 10 years

Yield: 8.24%

Achieved Price: £21,400,000

Vendor: DTZ Investors

Purchaser: GULF
Eddie Stobart, Warrington
Address: Levi, Swan Valley, Northampton

Size (sq ft): 170,000

Tenant: Levi Strauss

Income: 4 years (TBO yr 2)

Yield: 6.95% (6.25%)

Quoting Price: £14,000,000

Vendor: Levi

Purchaser: TBC
Levi, Swan Valley
M Star Portfolio
Address: M Star Portfolio (25 assets)

Size (sq ft): 1,517,148

Tenant: Multi-Let

Income: 3.75 years

Yield: 7.31%

Quote Price: £76,000,000

Vendor: M7

Purchaser: IOAM
Wellington Portfolio
Address: Wellington Portfolio (8 estates)

Size (sq ft): 845,309

Tenant: Multi-Let

Income: 2.50 years

Yield: 6.40%

Quote Price: £82,500,000

Vendor: Threadneedle

Purchaser: DTZ Investors / Cornerstone / Rockspring
IO Centre, Sutton
Address: IO Centre & Tradeway, Sutton

Size (sq ft): 169,992

Tenant: Multi-Let

Income: 11.40 years

Yield: 4.75%

Quote Price: £35,000,000

Vendor: Schroders

Purchaser: Standard Life
Projections for 2016
Investor appetite for industrial to continue however more caution

Buyers look for spec opportunities as up and built too expensive

Pricing expected to maintain current levels due to low interest rates

Unlikely to see further yield compression (unless super prime stock)

Q1 potential window for disposals due to lack of stock

Property Returns 2015 - 13% (16.5% for Industrial)

Property Returns 2016 - 9%

Property Performance - Total Returns
Initial Yields at Record Lows
UK Most Sophisticated Online Shopping Market
£174bn UK non food retail sales - back to peak levels
17.4% online sales of all non food in 2014
61.3% online shoppers double the OECD average
40% of sale online
54% of online click n collect
29% of sale online
40% of sale online
55% of sale online
32% of online click n collect
Full transcript