There’s growing demand for industrial and logistics sites from overseas investors amidst the global economic and geopolitical volatility triggered by Donald Trump’s controversial leadership.
That is according to commercial property consultants Lambert Smith Hampton, which said the sector is benefitting from sound fundamentals in the occupier markets and robust structural drivers.
Alex Carr, executive director – national head of industrial investment at LSH, said: “Set against a difficult backdrop, yet again industrial and logistics was the top-performing asset class for 2024, and we expect this to continue into 2025.
“Rents are up, and investment volumes are likely to increase, as supported by improving financing costs and a competitive buyer pool.
“There has also been a big increase in M&A activity, which we predict will provide additional stock to the market.
“Looking ahead, we may anticipate some modest prime yield compression later in the year as a result of confidence in the fundamentals, and a continued narrowing of the bid/ask spread.”
Last year ended strongly, with a Q4 industrial and logistics investment volume of £2.7bn driving the annual total to £8.2bn, the fourth strongest year on record.
LSH says 2025 promises more of the same, with overseas capital ready to be deployed from a mix of existing and new market entrants.
It forecast total returns of 8.4% per annum between 2025 and 2028, putting it ahead of all other core property sectors.
Industrial and logistics accounted for 33% of the combined volume of investment across the UK’s three core commercial sectors in 2024, significantly ahead of the long-run annual average of 19%. The total volume of investment into the sector also ran ahead of offices for the first time in history in 2024, reflecting comparatively weak investor sentiment in the latter.
The UK saw 361 industrial deals in 2024, up 28% on 2023. However, only three of these were for more than £200m, the largest being Lone Star’s acquisition of the Tiger Portfolio in Q3, which included around £360m of industrial assets.
Total overseas purchases amounted to £4.4bn in 2024, with net purchases standing 55% higher than in 2023, at £3.4bn. International investors remain dominant at the larger end of the market, striking 16 of 2024’s largest 20 deals, and North America dominated once again, accounting for three-quarters of overseas inflows.
Average prime rental growth across the UK’s key markets was 4.6% in 2024 and prime rents are predicted to grow by around 4% in 2025.
James Polson, executive director – national head of industrial and logistics at LSH, said: “2024 was a challenging year for occupiers, which was expected due to the sluggishness of the economy and rising operating costs.
“But necessity is the mother of invention – our clients need to innovate and drive efficiencies to help drive demand. We have seen this for example with Evri and their ongoing estates management and acquisition programme.”