eCommerce boosts industrial property prices

eCommerce boosts industrial property prices

Industrial property given a kick-start by eCommerce

The growth of eCommerce has led to heightened demand for quality warehousing and storage options across the whole of Europe recently, and now supply is running thin. Online sales are currently growing at a double-digit rate annually according the Centre for Retail Research, and it is completely transforming the way that major retailers are looking at their supply chains. Many believe that what we are seeing now is merely the beginning of what could be a revolutionary time in the industrial property market.

As a result, the competition for suitable property is reaching fever pitch, and the rise in prices reflects just that. One UK-listed property developer, Segro, has reported an increase of 4.2 per cent on their rental income when judged on a like-for-like basis and its vacancy rate has tumbled from 6.3 per cent down to 4.8 per cent.

Segro’s Chief Executive, David Sleath has gone on record stating that he expects the trend to continue. “The shift to Internet retailing is only just beginning. We think there will be another five to 10 years of strong growth”, he said in a recent interview with the Financial Times.

What this means for those seeking commercial property

Naturally, companies sitting on commercial property at present are in good shape, but what about those who wish to purchase industrial property for their businesses? What does the future hold for them?

It would seem likely that there is going to be an increase in the development of industrial property to try and satisfy demand over the coming years, but as with the residential housing market, this is likely to fall well short of what is required. Therefore, it seems inevitable that prices are going to continue to rise well into the 2020s.

For businesses that are looking to obtain a commercial property mortgage, life could get a little rough if they intend to use the conventional banking system. Traditional high street banks are still in tightening their belts, so the likelihood of getting a mortgage agreed from them could be slim to none. This is especially true as the size of mortgage that companies will need to take out grows ever larger while prices continue to rise at such a phenomenal rate.

Commercial to battle residential

As we have already touched upon, the property demand problem is far from exclusive to the commercial market. The residential sector is in turmoil, too, as demand continues to grow and it’s showing no sign of stopping any time soon. This means that the land upon which new developments are to be built is being fought over by both residential and commercial property developers – something that is surely only going to push prices even further skywards.

The demand for UK logistics sites is higher than it has ever been, pushing prices to new record highs all the time. Where it ends no one can be certain, but one thing is for sure, it’s not stopping any time soon as eCommerce continues to go from strength to strength across the whole of the UK and Europe.

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