Prime yields on industrial and logistic property in the UK are some of the lowest across Europe. Calculated as a percentage, yields are a measure of a property's future income (return) on an investment. Although low yields may seem like a negative for investors, in terms of commercial property it most likely means that business is strong. Driven by customer confidence, demand, political and economical stability, yields are lower when demand is high. The higher the demand for property, the higher the cost of investment. In response to raised running costs, investors will boost rent to cover the increase in expenses. The demand for high-quality, well-located warehousing as well as a growing need for build-to-suit property means that in the UK yields and demand are likely to remain stable for the foreseeable future.
In the second half of 2019, prime rents for large warehouse units ranged from five British pounds per square foot to sixteen British pounds per square foot. The range of cost for smaller units was very similar. Driven by location and demand as well as construction and running costs, prime warehouse rents are highest in the London region. As one of the world’s busiest airports and a global distribution hub, London Heathrow had the highest prime rents in the UK.
Take-up, which includes new leases, renewals, expansions, and pre-lease deals is the volume of space leased during a given period. In the UK, take-up has remained strong since 2014. During the first three quarters of 2019, the manufacturing sector accounted for a third of take-up.
