Our market

The multi-let sector in particular benefits from strong long term demand, because it appeals to a broad range of occupiers from wholesale trade and distribution, to manufacturing, construction and technology. Multi-let estates offer greater flexibility because occupiers can take multiple units and scale up or down according to their needs. At the same time, supply is constrained both by a tight planning regime but also because the rebuild cost of multi-let space is currently below its economic value.

Key structural drivers

  • Continued growth of online retail. While online retail in the UK has fallen back from its Covid-induced peak, it still accounted for 26.5% of total retail sales in the UK in March 2023, up from around 19% before the pandemic.
  • Focus on supply chain resilience. External events such as the pandemic, Brexit and the Ukraine war are encouraging companies to manufacture closer to home and hold more stock as a buffer. At the same time, speed of delivery to the customer is increasingly important, putting a premium on well-located space.
  • Drive towards sustainability and efficiency. Larger occupiers increasingly want buildings that support their sustainability objectives and are more energy efficient, particularly in the context of higher energy costs.

Strong occupier demand

UK take-up by size band (m sq ft)

Take-up was down across the market in 2022 following a record year in 2021, but the most resilient sector was the mid-box sub-sector (50k – 99k sq ft) which saw drops of around 15% and take up was still 7% above the ten‑year average. Demand was broad based, particularly for mid‑boxes which offer greater flexibility. In this sub-sector, manufacturers accounted for 29% of take-up, retailers and wholesalers for 28% and 3PLs 23%. (All data: LSH).

Investment market stabilising

All UK average prime logistics yield (%)

Investment markets were severely affected by the rapid increase in borrowing costs in the second half of 2022 with volumes for the year of £11.5 billion down 24.0% on 2021’s record year.

Prime logistics yields reached levels not seen since 2017 at 5.5% but early evidence suggests that this is starting to pull back as investors returned to the market. This reflects the favourable supply-demand characteristics of the sector although investor appetite is increasingly focused on good‑quality assets and, in particular, those with excellent ESG credentials.

Supply remains constrained

UK availability by size-band (sq ft)

While the volume of available space increased at the end of 2022, vacancy was low by historical standards, at 3.5%, with supply equivalent to only 1.1 years of average take‑up. For the mid-box sub-sector, supply rose by just 2%. (All data: LSH).

Recent data from Gerald Eve showed that construction starts were at their lowest in Q1 2023 at 3.3 million sq ft, down 50% on the prior quarter, reflecting the higher cost of raw materials as well as development finance.

Rental outlook for prime multi-let industrial

Prime multi-let rents and average annual growth 2023-25 (£ per sq ft)

The outlook for rental growth in the industrial sector is positive, reflecting the strong, long-term structural trends which are driving demand. Multi-let assets in particular have a broad appeal, because their flexibility means occupiers can scale up or down according to their needs. The frequency of lettings at a single site also provides stronger evidence on which to base ERVs, making it easier to raise the rental tone. Looking forward, Gerald Eve expect the strongest rental growth for 2023-25 to be in the North West, at 3.6%, where rents are expected to approach £15 per sq ft by 2025.