Technology, innovation and the future of the logistics sector

The industrial and logistics sector stands to gain from the new economy more than any other significant real estate asset class. A market that has already had a stellar decade promises further growth in the years to come; Gerald Eve’s market-leading Multi-Let and Prime Logistics reports forecast rental and capital growth in every year from 2021-24. Some locations and warehouse types will benefit more than others, but the sector will continue to ride the wave.

On a fundamental level, the growing influence of technology will drive rising occupier demand for logistics space of all sizes at a rate that will outstrip supply. New development has trailed take-up for some years, and availability in early 2020 remains at a near-record low. Rents in general will rise, driven by both competition for space and the increasing profitability of the firms that occupy it. A post-coronavirus world, where occupiers are seeking slack in the system to deal with any shocks, will exacerbate this further.

Capital growth will continue in parallel, and if yield compression will be more limited than before – if only because yields are already close to historic lows – then whilst it may be practically difficult to deliver in terms of building structures, the money flowing into the sector will look to unlock new “last-mile” hubs in former retail parks, larger off-high-street properties and even some residential sites.

The outlook is a strong one, but the need to adapt to meet changing requirements will underpin everything. Futureproofing will be key, and that means flexibility. Occupiers will want space that can meet their changing needs over time, and where occupiers lead investors will follow.

Occupier expenditure on property and the technology inside it will be an increasingly complicated picture. For many, the investment in technology will be huge, and this will dictate the length of lease they require; for others, such as third-party logistics providers, a greater flexibility in leases will be required to better match occupational requirements.

In the full report, we explore five areas of technology that will have a fundamental impact on the industrial and logistics sector, how it will change the way that property is managed and the impact it will have on skills. We look at both the impact that these may have as well as the time horizon over which this may happen.