Multi-Let: Q4 2021

Q4 2021: Market overview

London and South East multi-let voids took a decidedly downward turn in the second half of 2021, which put paid to occupier affordability concerns. Meanwhile prime rents in 2021 increased by over 40% in London and 20% – 30% for regions outside of the South East. Nevertheless, there remains headroom and we still see some significant rental growth momentum carried over to 2022. Occupier demand is broad as well as deep and will be driven by demand for trade counters, grocery logistics, quasi-offices, film and TV production, electric vehicle charging stations and self-storage along with more traditional manufacturing and high tech engineering.

The weight of capital targeting the sector continued to drive down prime yields by as much as 130 basis points in 2021. This generated record positive yield impact and a sector-wide UK annual return of a quite astonishing 37%. Multi-let investment volumes finished the year strongly, particularly in December, with numerous portfolio deals. Sustained global capital targeting the sector at a time when some vendors will look to take profits will provide investment liquidity and makes further inward multi-let yield inertia quite possible in 2022. However, the multi-let yield risk premium over 10-year bond yields narrowed to its lowest point in 14 years in Q4. High inflation and a succession of interest rate rises expected over 2022 suggests lower leveraged multi-let returns and potentially higher exit yields factored into future purchase decisions. Consequently, while we see another year of double digit returns in 2022 this should drop back in 2023.

Contributors

Many thanks to the leading UK multi-let industrial property investors that contributed their tenancy data for the study.