Last year proved to be one of adjustment within the UK urban logistics property sector following the significant downturn which began in the second quarter of 2022.
However, as we enter 2024, we feel the market has corrected and we have conviction the new year will provide good opportunities for fresh investment.
Our confidence is evidenced by our acquisition of five sites in the second half of last year. Located in Horsham, Newmarket, Manchester, Birmingham and Milton Keynes, these sites will deliver 700,000 sq ft of Grade A urban logistics space with a gross development value of £180m.
Always of interest
Interest rates rose above consensus (and our) expectations in 2023 increasing to 5.25 per cent. The effects of this are now being seen with inflation coming under control but GDP growth anaemic.
We expect interest rates to fall from the second half of 2024. Swap rates provide a clear indicator that the market has more confidence that interest rates are on a downward trajectory.
Once interest rates do start to fall, we expect appetite for UK urban logistics property to increase quickly and positively.
The triumvirate of challenges we predicted at the start of last year that occupiers would face in terms of increasing rents, rates and inflation in 2023 were proven to be true.
We saw a significant uptick in viewings across our schemes in the final quarter of 2023 but it is undoubtedly taking potential tenants and buyers longer to make decisions to commit to new accommodation. Our view is that when interest rates fall and inflation is explicitly seen to be under control they will have the confidence to commit to taking new space.
Time for change?
The big question mark over 2024 is the outcome of the general election. Whilst the polls persistently predict a clear victory for Labour, this is not a given by any means.
Businesses operating within the urban logistics property sector can take much more confidence in today’s Labour leadership than previous iterations.
For example, on The Rest is Politics Podcast, Shadow Deputy Prime Minister, Angela Rayner, said Labour would focus on enhancing productivity and creating GDP growth to stimulate the economy, commenting that tax rises were not feasible given current levels. The agenda seems very pro-business.
It is also worth noting the United States presidential election will take place on November 5 this year. There will no doubt be plenty of twists and turns before that date but, whatever the outcome, global markets will be impacted.
Planning for success
Labour has indicated that reforming the planning system will be a manifesto pledge. This would, of course, be welcomed as the system is not currently fit for purpose. It will, though, be important that reform is structured, not just from the perspective of the need for housing, but also looks at the wider economy.
According to a report by the UK’s National Infrastructure Commission, the UK logistics sector moves around 1.6 billion tonnes of goods a year. The report states that “both government and local authorities often have little understanding of why and how to plan for freight, leaving the needs of the freight system far down the priority list”.
The Commission refers to this as “freight blindness”. We think it is high time a light is shone on the matter so that urban logistics provision is prioritised from the outset due to the ever increasing demand from the populaces of towns and cities for goods and services.
This time last year, we announced that we would accelerate our growth within Europe. At the start of 2024, we are in the process of appointing country heads for Ireland, Spain and Portugal and we have prominent last mile logistics sites secured in all regions.
We are very pleased with the progress we have made in the past 12 months and are excited by the opportunities we have found in Europe. The supply/demand imbalance for prime Grade A, sustainable urban logistics is palpable across all jurisdictions.
Our fundamental belief that we have a great opportunity to become important players in European multi-let urban logistics property development remains unchanged. This year therefore looks set to be another important one in our expansion on the continent.
The most important way we can ensure we act entrepreneurially, decisively and at pace is by making certain our most important asset – our team – is best-in-class.
To that end, we were delighted last year to appoint our head of development, Alastair King, and general counsel, Eva Holden, to our board of directors in June.
Both of them are actively shaping the strategic direction of our business and helping implement our ambitious UK and European growth plans.
In addition, we have recruited Simon Cowley as head of investment and asset management along with our new chief financial officer, Michael Treliving. They joined at the end of last year and start of this one respectively, and we are excited by the ideas and energy they are already contributing to Chancerygate.
As it unfolds, this next 12 months will no doubt have its share of challenges and opportunities. However, we believe Chancerygate is best placed to take advantage of each situation that presents itself to move our business forward in both the UK and Europe in 2024.
Chancerygate offers urban logistics units freehold or leasehold in strategic locations across the UK, and will soon also do so in Spain and Portugal. To view our latest developments, click here.