Numbers 3&4 Capital Quarter, Cardiff
During this turbulent year the UK Investment Market has remained strong, particularly in sectors that have proved resilient or even benefited by the short term impacts of the Covid-19 pandemic. Retail, travel, hospitality and leisure were badly hit by lockdown measures, but social distancing has boosted demand for online retail – and by extension – warehousing. With enforced working from home and the closure of non-essential shops, those retail transactions that are taking place are at the supermarket or on the local shopping centres rather than in the city centre. The pandemic has brought about a change in retail spending habits – away from clothes and non-essential items – with increased focus on groceries and household goods.
These changes have sharpened investor focus on the warehousing and distribution sector, with heightened interest in ‘last mile’ locations and development opportunities. The sector typically offers longer leases and stronger covenants compared with other sectors, which has driven interest for many UK institutions, REITs and overseas capital who in many cases have been vying for these new investment opportunities.
These opportunities benefit from strong tenant demand which will drive rental performance and deliver enhanced equivalent yield returns well above other forms of investment provided to an investor. Purchasers need to understand, when acquiring any asset, the Local Authority’s vision for the future and the medium to long-term employment objectives for its area. Within this basic criteria Cardiff and its City Region stand strong with a clear vision for enhanced profile, improved connectivity and employment opportunities which together will drive investors to its door.
PRIME YIELDS (%)
Source: Knight Frank