Offices and industrials – the fundamentals
Offices continue to be resilient across the UK. This is not just due to the relatively constrained supply characteristics but also reflects the continued rise of technology and media adding employment. The move towards agile working across all industries (characterised by co-working offerings) seems to have had limited impact, although this remains an area to watch along with the increased take up of serviced office offerings, which could be skewing the vacancy numbers.
Urban logistics, last mile delivery, mid box logistics – call it what you want, but the rise and rise of on-line shopping means the tailwinds in this area continue to look compelling leading to rental growth in key locations. A softening of the pace of rental growth and total returns may have occurred in 2019 but the sector is still a leading performer.
So, both these sectors remain healthy despite years of political turbulence. Indeed, supply is limited by the increasing cost of construction year-on-year coupled with significant labour shortages which is likely to remain constrained.
Bringing this all together, what does this mean for our forecasts, which we set out below? Outside of retail, a very sensible outlook for the next 5 year period.