Overseas investors are putting their money in the UK’s golden logistics triangle, according to new research by CoStar.
Q3 2023 set records for this prime location, with it accounting for 27% of national industrial and logistics property sales for the period.
During the past five years, its share of national quarterly sales was at an average of just 13%, half of which was overseas investment. Q3 2023 also saw 75% of UK warehouse investments from foreign investors. Asian buyers, aided by cheaper debt and reduced competition from some other capital sources, have been particularly acquisitive in recent months, according to the new study.
Grant Lonsdale, director of market analytics, CoStar Group, builds on this: “Jing Dong Property’s purchase of the Project Venus portfolio comprising largely of the 1.1 million ft2 first and second phases of Ansty Park in Coventry was the headline foreign deal of the quarter.” CoStar’s models estimate the Coventry assets to be worth around £180 million of the £248m portfolio price.
What’s more, US investors have been the heaviest buyers of UK logistics properties in recent years.
“Baring’s acquisition of the Zeus portfolio from NFU Mutual a year after pulling out of a deal to buy it for a higher price lifted the US figures,” says Lonsdale. “The portfolio containing properties in Corby and Daventry, among other key logistics locations, sold for around £190m, reflecting a 4.3% yield and a price 19% lower than £234m reportedly agreed in 2022.”
Also of note was Realterm’s acquisition of a 300,000ft2, cross-docked distribution facility in Hinckley from Equites Property Fund. The Maryland-based investor paid £29.8m, or a 7.6% yield, for the Tesco-let warehouse.
Meanwhile, Kennedy Wilson purchased Great Bear Distribution’s hub at Moulton Park, Northampton for £12.3m, or a 4.8% yield. It bought the 100,000ft2 facility from Fidelity. The lease on this property expires in October 2025 and offers the purchaser a refurbishment or redevelopment opportunity.
“Recent transactions, paired with strong investor appetite, suggest prime yields across the golden triangle have found their level around 100 basis points above their 2022 floor. However, question marks remain over secondary warehouses and their owners’ ability to cope with a funding gap when existing loans mature, potentially leading to forced sales and ultimately softer pricing,” concludes Lonsdale.
