Retail warehousing investment market sees best quarter for three years
The retail warehousing investment market has seen its best quarter in three years, according to research from Savills.
According to the data, Q1 2025 was the best first quarter for the sector since 2022, with around £748m transacted across 22 deals, with more buyers looking to enter the market in Q2.
This quarter follows an active market in 2024 for the retail warehousing investment market, which saw a notable increase in transactions and improvements to pricing.
The second half of 2024 began with over 15 active fund requirements, most of which targeted the prime end of the market in the 5-6% yield range and an average lot size of between £20m and £30m.
The majority of these requirements were completed by the year-end, with £3.50bn transacted across 119 deals, compared to £1.937bn completed across 76 deals in 2023.
However, despite the strong start to 2025, the research noted a slow down with more institutions taking time to take stock and set their requirements for the year. Whilst there hasn’t been a further reduction in primary or secondary yields – with Savills prime yield currently at 5.25% for open A1 schemes and 5.75% for restricted schemes – the research anticipates a consolidation of those yields, as opposed to further improvement.
Jaime Dunster, director in retail warehouse investment at Savills, said: “The macro-market conditions are set fair with good retailer trading performance and restrictions on the supply of space. There will undoubtedly be retailer fluctuations, and the US tariffs provide an opportunity for reflection for buyers and sellers. Overall, the market is showing good early-stage recovery characteristics, providing sensible exit and entry opportunities.”
Sam Arrowsmith, director of research at Savills, added: “We’re expecting yields to stabilise rather than improve, thanks to higher bond yields and post-budget cost issues for retailers. This will likely hit some assets and locations harder, where the focus is more on rent continuity than growth. The off-prime market is also still very sensitive to interest rates, but despite rising costs like minimum wage, national insurance, and business rates, economists are generally expecting a further 75bps cut in interest rates in 2025.”