Schroders: Multi-let industrial estate

The function of these assets is to provide affordable space for a wide range of activities. Tenants  include those associated with lower-skilled or high-tech  manufacturing, wholesale, transport and construction. There are some  regional specialisms: manufacturing in the North West and the  Midlands, high-tech firms in the East of England and wholesalers,  communications and transport in London and the South East.  

What drives demand for space on industrial estates?  

The UK economy continues to improve with each passing quarter, but how and why has this translated into demand for industrial space? At  66 million sq ft, take up of units on multi-let estates was robust in  2013, with new lettings up 21% year-on-year for units below 100,000 sq ft. Encouragingly; increased levels of activity were recorded across all UK regions, with the exception of the North West. 

The reason behind this uptick in demand is the strengthening and diversification of the tenant base. Manufacturing has been a traditional driver of requirements for standard industrial space. In long-term  decline in many developed economies, output from UK firms has proven to be (relatively) more resilient due to the strength of its key industries. The automotive sector has been one recent British success story; car production is now back to pre-recession levels  and brands such as Nissan, Mini, Rolls Royce and Jaguar Land Rover are investing in new plants and storage in the UK. This additional  capacity also generates demand for floor space further down the  chain. For instance, suppliers are often located close to warehouses to assist ‘just in time’ delivery commitments. 

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