UK - Made-to-order could account for 40% of the UK market in new-build logistics over the next few years, raising questions over the value of legacy assets.

According to a CBRE report published this week, design-and-build deals will become more prevalent in the market as continued demand and lack of available new space push up prime rents this year.

The design-and-build market, which fell to 20% in 2009, recovered last year as a result of lack of readily available supply.

Andrew Marston, UK research director, said: "It depends on overall levels of demand. If occupiers want a large asset, developing one could be the only option.

"Demand for really big assets has only been around for around 10 years, but there's lots of second-hand space that isn't of sufficient spec for occupiers' needs. The stuff built over the past five years is better quality."

The shift in focus could drive investor interest from acquisition to forward-funding development.

Marston said the volume of available assets would depend on whether developers saw sufficient market demand to release land banks hoarded in recent years.

"There could be a role for investors," he said. "Developers still need funding to go ahead with the projects."

Despite a continued investor focus on assets with 15-year minimum leases, fixed uplifts and strong covenants, the report identified increased interest in assets providing short-term income.

That interest is predicated on a lower risk of vacancy when leases expire in a supply-constrained market.
Retailers accounted for 50% of the leasing market and 100% of the design and build market.

However, the report pointed to the potential for subdued demand as a result of weak consumer spending.

Several high-profile retailer bankruptcies and store closures had not adversely affected logistics to date, but there is the "potential for demand to weaken in the future", CBRE said.
In the meantime, retail failures and consolidation are likely to release second-hand space onto the market.

According to CBRE, diminishing supplies of prime would polarise rents on design-and-build and speculative buildings. 

An increase in competition for new buildings would push prime rents up, the report said, but "growing levels of supply will be a drag on secondary rents".