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First Retail, Now Offices Are Set For Conversion To Logistics

The Compass Centre in Heathrow, to the west of London

Differing fortunes for urban logistics and retail property means that for the past few years, it has often made financial sense to buy retail assets close to big cities and convert them to industrial.

The same may now be true of offices. 

It is only one example, but an interesting one: Prologis is in advanced discussions to buy an office scheme near Heathrow Airport to the west of London for close to £100M, Property Week reported.

Prologis has not commented on the deal, but as an industrial specialist, the presumption is that the scheme would be converted for logistics use. 

The scheme in question is the Compass Centre, which is being bought at a yield of 5.5%, Property Week reported. The building is leased to the airport itself until 2023. The site of the building totals 15 acres, including 4.5 acres of car park.

Prologis has form when it comes to retail-to-logistics conversions in and around London, having bought a retail park in Edmonton, north London for £51M in January 2020. That sort of deal has become possible because the rents and values commanded by urban logistics assets have risen while those for retail assets have fallen. 

Buying an office for conversion to logistics would imply that in some cases the same dynamic is in play in some parts of the office market. The numbers are most likely to stack up in areas like Heathrow, an established urban logistics market that serves Greater London, but where office rents are not as high as closer to the city centre.

CoStar reported in September that an unnamed data centre firm is in talks to buy an office campus in Slough, near Heathrow, for £420M, again presumably for conversion.