The New Post-Pandemic Asset Class That Is More Than Just A Waste Of Space
“Changing market conditions have caused demand to rocket, with rents increasing as a result. Additionally, new types of users, including some big-name brands, are pushing for higher specifications. As an emerging asset class, the sector has several attractive characteristics,” Carter Jonas Head of Industrial Andrew Smith said.
“There has been a surge of enquiries from operators needing bases for fleets, catering for overspill requirements not satisfied by many of the modern distribution centre developments," Smith added. "Some of the newer [urban logistics] developments have site coverage that is reaching 65%, leaving minimal external space for HGVs, etc. Parcel operators normally require a site cover of 25%-35%, so you can see why open storage sites are helping to fill the gap.”
The days when a layer of hard-core or some ancient tarmac was acceptable are long gone. Today it has to be in good condition, well-located, suitable for HGV parking and for last-mile logistics.
The amount of land required is changing, too, as last-mile users insist on lower site densities to allow more space for vehicle movements.
Carter Jonas has developed a four-tier classification index for open storage sites. This system is based upon certain factors, including surfacing, security, services and facilities, accessibility, and planning. For instance, class one provides the highest specifications — fully concreted, easily accessible, highly secure space with water, electricity and drainage, and unrestricted B8 use.
The firm said class one availability is particularly acute, because these sites so easily lend themselves to development as sheds or housing.
Recent investment deals include the sale of a 121 British Car Auctions site in Corby to DTZ Investors for £67.7M, achieving a yield of 4.8%. The site, surfaced with tarmacadam, has a long lease with a rent passing of £3.2M a year.
“Open storage is sparking the attention of investors looking for low-risk returns, with good reason," Smith said. "It benefits from long-term structural drivers supporting the outlook for occupier demand. Additionally, it offers the potential for rental uplift and supplementary income streams, including the provision of electric vehicle charging points, 5G/6G masts, and advertising hoardings.