There is little doubt that the first half of last year was significantly more challenging than most in the property industry thought it would be.
Thanks to a steady trickle of macro events – including the lead up to a UK general election – it was very easy for people on both the occupational and investment sides not to make decisions.
This meant there was little inertia in the occupational market and trying to get investment deals or acquisitions, either initiated or completed, was also difficult.
That said, following the end of the summer, there was a dramatic increase in activity levels, particularly in lease up which is what drives our market and we finished the year feeling very positive.
Big picture
As we start the current year, an element of uncertainty has crept back into macroeconomic sentiment. The significant increase in gilt yields since the start of the year is concerning and leaves the Chancellor having to consider further spending cuts or tax rises so as not to break her own fiscal rules. It almost certainly means that the rate of further base rate cuts will be reduced.
President Trump was inaugurated on 20 January and he has been vociferous about imposing trade tariffs. This is likely to put renewed pressure on inflation and further reduce the likelihood of sustained interest rate cuts in the US. Policy there impacts the UK and Europe.
Home truths
Looking specifically at the UK, there are reasons to be upbeat. The Labour government’s rhetoric is positive and it has set an ambitious target of an average increase in economic growth of 2.5 per cent per annum. However, they have to back this up with action and growth focused policies.
One of the government’s major policy pledges was to reform the planning process to make it easier and faster for approvals to be granted. From a Chancerygate perspective, this could perhaps be the most positive policy (if implemented!) of the new government.
The new National Planning Policy Framework announced in December, whilst focused on residential development, also recognises the importance of logistics developments to the economy. It shows an understanding that when new houses are built logistics infrastructure is required to help create thriving, sustainable communities.
The government has pledged 1.5m new homes over the next five years. According to the British Property Federation’s What Warehousing Where? report, each new home requires an additional 69 sq ft of warehouse space to support its distribution needs.
If the government hits its housebuilding target, this equates to 103.5m sq ft of new warehouse and logistics accommodation. Our industry needs to lobby at both the local and national level to ensure this is delivered.
Europe
As a business now operating in Europe with ambitious plans to expand on the continent, we have some concern over how the trend to right wing political leadership is going to impact markets.
There is going to be a new leader in France, and probably one in Germany. Many populist candidates do not commit to specific economic and trade policies. If they do get elected no one really knows what this means for business, for the economy and, hence, for development. We will keep a close eye on political issues as we consider our growth plans in Europe further.
Continued momentum
We ended last year very positively and have carried that energy and momentum into 2025.
This included entering into a new joint venture with a significant sovereign wealth investor which is specifically targeting multi-let industrial (MLI) as a sector for the first time.
The partnership’s first deal was the £145m acquisition of Questor Industrial Estate in Dartford which completed in December and comprises 685,000 sq ft of MLI accommodation alongside a 10-acre development site.
The Questor deal is a great accelerant for our investment management business. Increasing our AUM has been a strategic priority of ours for the past 18 months.
Our development business remains the cornerstone of Chancerygate. This year we will be delivering more than 1m sq ft of Grade A sustainable urban logistics space with a gross development value of around £250m.
This includes our £77m, 270,000 sq ft Torque development in Birmingham and £35m, 114,000 sq ft Airport Trade Park in Dublin. Both sites will be developed in partnership with our long term funder, Bridges Fund Management.
We are very excited to be (hopefully!) breaking ground on our first development in continental Europe and anticipate work starting in Lisbon and Valencia, in addition to Dublin, during 2025.
Our ambition in Europe is unrequited and is a central tenet of our growth strategy, so we remain actively looking for further opportunities across the continent.
MLI rising
Thanks to our relationship with our new sovereign wealth partner we have the ability and appetite to deploy in excess of £250m on investment assets this year.
The fund’s commitment to investing in a significant manner in the UK MLI sector gives Chancerygate considerable firepower and demonstrates how MLI is becoming a truly recognised asset class amongst the biggest and most notable players in global capital markets.
MLI is no longer something that just fits into an industrial strategy. Investors see it as its own entity where the diversification and granularity of the asset class mitigates risk whilst simultaneously providing the potential for rental growth and, hence, strong financial performance.
Back to the future
Although this is a look ahead to 2025, this year also presents us with the chance to reflect as it marks 30 years in business for Chancerygate.
The solid foundations upon which our company has been built mean we enter this year with optimism and the ability to further grow and evolve Chancerygate throughout the UK and Europe.
We remain wedded to our roots in MLI development which began three decades ago, but are invigorated by the opportunities for expansion both within the UK and Europe.
There is plenty to be done to achieve that objective. However, we believe we have the people, capability and funding for 2025 to be a truly exciting and transformative year for the company.
Founded in 1995, Chancerygate is the UK’s largest urban logistics property developer and investment asset manager and the only one operating nationwide.
The business is also expanding throughout Europe and has established offices in Dublin, Madrid, Lisbon and Paris to further enable its growth plans. To view our latest developments, click here.
To find out more about how we can help with your urban logistics property requirements, call Richard Bains on DL: 020 3582 8072, M: 07880 727672 or E: rbains@chancerygate.com.
