Investment in distribution warehouses reached a total of £4.7bn in 2020, according to research conducted by Savills.
The global real estate provider’s Big Shed Briefing report claimed that the investment saw a 25% year-on-year increase, topping the previous high by £500m.
Portfolio purchases represented 44% of all sales, which mostly (76%) occured in the second half of the year once trading had resumed in a Covid-secure manner.
According to the research, there has been an increase in overseas investors, who now account for over half of all transactions, which could be adding to the “downward pressure on yields”.
Tom Scott, director in the industrial investment team at Savills, said: “The supply and demand dynamics of the occupier market will continue to drive competition for the best assets, which in turn will generate strong investment volumes into 2021.
“We will also continue to see downward pressure on yields, which with the sheer weight of capital and sentiment surrounding the market now stand at 3.75% for both distribution warehouses and multi-let estates.”
Also reported was a record year for take-up of units over 100,000 sq ft, as the 2020 total reached 50.1 million sq ft.
Kevin Mofi, head of industrial research at Savills, has suggested that firms forward fund projects as a way to gain entry into the increasingly saturated market.
He said: “The lack of Grade A stock in the occupational market, coupled with the lack of opportunities for investors to purchase prime assets could spell a change of thinking in 2021.
“We believe that investors should start to consider edging further up the risk curve, forward funding spec as a way to access the market at a discount.”