Tuesday, January 28, 2014

News: Next warehouse is a big deal

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The 2013 acquisition of the massive Next distribution centre in Manvers, Rotherham by Legal & General Property was the largest deal for a single property in what was a record year for distribution warehouse investment.

Investment fund managers, Tritax sold the two units at Brookfield's Park, which total 1.1m sq ft, in a deal worth £87m and secured a yield of 5.5%.

According to research from Savills, 2013 was a record year for distribution warehouse investment with approximately £2.5 billion transacted, which is an increase of nearly 50% on 2012. The international real estate advisor notes that this rise was driven by a continued growth in demand for the sector from an increasingly diverse investor group from the UK and overseas.

James Williams, investment director at Savills, said: "Interest from investors in the logistics sector has gained incredible momentum over the last 12 months. While UK funds and REITs have dominated the market, we are also seeing increasing interest on a global platform from a diverse range of buyers from the USA, Russia, the Middle East and South Africa.

"This rise in demand has inevitably generated strong yield compression and resulted in distribution warehouses outperforming all other property sub-sectors in 2013, according to IPD, with returns of 15.2% being delivered."

Key deals that also took place in 2013 include: ProLogis' acquisition of a £247m portfolio from London Metric, Gazeley Properties' funding of John Lewis at Magna Park in Milton Keynes to Aviva Investors for £76.5m; Henderson's acquisition of RD Park, Hoddesdon for £74.5m; and the purchase of Marks & Spencer Distribution Centre in Castle Donnington by Tritax Big Box REIT for £82.57m.

Andrew Bull, industrial director at Savills, said: "Looking forward we anticipate investor demand will remain strong for the logistics sector, buoyed by a continuing improvement and confidence in the occupational markets. In addition, the absence of a loosening in supply of suitable investment stock will ensure yields remain robust during 2014. Further yield hardening is possible over the short term however we do not expect to see it on the same scale as 2013."

Developed by St Paul's Developments and opened in 2008, Next's Rotherham operation is home to around 450 employees. The two buildings can handle 110,000 pallets and includes the largest warehouse in Next's 13-site distribution network that handles a total 315 million units each year. The network makes 88,000 deliveries every year to 500 Next stores across the UK and 2.6 million active internet and Next Directory catalogue customers.

Savills website

Images: LSH

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