Logistics: A shortage of space for both occupiers and investors
Covid acted as a catalyst to pull e-commerce adoption forward, and operators have responded - bringing forward their expansion plans in order to capture a share of the growing market.
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This has meant a surge in occupier requirements, which has driven strong rental growth, attracting competition from investors, and in turn, is driving up end values. Many institutional investors were already looking to tilt their portfolios towards the logistics sector and the Covid-19 pandemic and the related surge in e-commerce, has led them to intensify their push.
Vacancies and void rates are now at a record lows, and pre-let activity at unprecedented levels. The supply response we’d anticipated in 2021 has been dampened due to shortages of construction materials and labour as well as rising costs. We expect that development activity will increase in 2022, but ongoing supply chain issues and inflationary pressures may mean that some schemes will be delayed and some may no longer stack up at current pricing levels.
Will 2022 see rents keep rising and go ever higher? And can current pricing levels be sustained? Given the current market dynamics and demand from both investors and occupiers, we certainly think so.