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Shed Yields Move Out As Investors Move Into Open Storage

Open storage: Cars waiting to be sold

Peloton Real Estate and Moorfield Group, the UK-focused real estate investment manager, have formed a joint venture to handle a £100M initial portfolio of open storage sites. They plan to add more to generate secure income, a statement said, starting with an 11-acre site near the Port of Liverpool, bought for £4M.

Moorfield is acting for its Real Estate Fund V, with Peloton primarily responsible for identifying acquisitions and operating the portfolio.

Open storage is a fast-growing real estate subsector in the UK, with demand being driven by HGV, van and private car parking, recycling, storage of building materials, containers and scaffolding, as well as potential from electric vehicle charging. Some data suggests investment volumes may be doubling each year. Yields have been moving in from 4.8%.

“Factors including very affordable rental levels and favourable underlying market dynamics, including an acute demand-supply imbalance, make this both a highly defensive and growth asset class,” Moorfield Senior Investment Manager Chris Perara said.

The background is a slight but real cooling in the UK industrial property market, with the scale of the change still uncertain. It ranges from a 25bps move out according to anecdotal sources, but just a 2bps move according to CBRE. Big-boxes are feeling the shift more sharply than urban logistics sites and open storage and other para-warehousing alternatives.

“The heat does appear to have come out of the investment market and we anticipate that the general reluctance to make capital investment decisions will continue over the summer, as investors take stock of the macro-economic/geopolitical situation,” Tilstone Investment Director Paul Makin told Bisnow.

“However, we continue to see healthy occupier demand being fuelled by a severe shortage of suitable space. Occupational requirements continue to come from across the full spectrum of economic activities, in particular the trend of an increasing number of light manufacturing requirements, as companies continue the process of on-shoring to increase resilience in supply chains.”