GIC, Kennedy Wilson to invest $1bn in UK logistics as take-up to break records

GIC, Singapore’s sovereign wealth fund, and global real estate investment company Kennedy Wilson have entered into a joint venture to acquire and manage up to US$1bn (€800m) in urban logistics properties in the UK, with the potential to expand into Ireland and Spain.

GIC will own 80% of the joint venture and Kennedy Wilson will own the rest and be responsible for the sourcing, acquisition and management of assets.

It will be seeded with a US$220m portfolio of 18 UK assets in prime locations owned by Kennedy Wilson.

Lee Kok Sun, CIO of Real Estate at GIC, said: “The logistics sector continues to be a long-term area of focus for GIC. We believe the urban logistics sub-market will benefit from positive fundamentals, due to increasing occupier demand driven by accelerating e-commerce adoption and changing supply chain management strategies.

“The joint venture’s focused strategy, with the management of a skilled partner such as Kennedy Wilson, is well-placed to capitalise on these trends and generate resilient returns in the long run. This partnership is part of GIC’s broader strategy to invest in this sector.”

Mary Ricks, president of Kennedy Wilson, said: “We have witnessed the rapid growth of urban logistics properties driven by strong demand from businesses looking to grow their distribution networks with limited supply of space across major cities in our target markets.

“Over the last five years, we have significantly grown our footprint in this asset class. We are thrilled to partner with a preeminent global long-term investor like GIC to further capitalise on the exciting opportunities in this sector and to build out a premier urban logistics portfolio.”

Cushman & Wakefield published a report today predicting take-up of logistics space in the UK to breaking records by the end of 2020.

Take-up volumes for the year are forecast to reach almost 50m sqft, eclipsing the previous record of 40m sqft achieved in 2008 and 2018.

Preliminary take-up for the fourth quarter is in excess of 12.5m sqft, 54% above the 10-year average.

E-commerce, led by the likes of Amazon, was the driving force of demand throughout the year as the sector rushed to secure additional space to meet soaring online sales during the COVID-19 pandemic, Cushman & Wakefield said.

“After a record-breaking year and dwindling availability in many regions, developers have sensed the opportunity and we are starting to see speculative development picking up again after a pause during the pandemic,” said Richard Evans, head of UK logistics and industrial at Cushman & Wakefield.

“We are currently tracking almost 5.3m sqft of committed speculative development for 2021, just above the annual long-term average. Looking ahead we expect to see more as the economy recovers and the sector continues to react to Brexit and the structural changes in retail.” 

Ed Cornwell, logistics and industrial capital markets partner, said: “There continues to be significant investor interest in the sector, and we have seen yield compression across the board during Q4.

“The robust occupational story is supporting the investment rationale and there remains substantial pools of capital wanting to enter the market.

“Strong investor appetite coupled with a lack of suitable investment opportunities will continue to drive pricing. In particular, well-let and strategic assets offering scale will continue to attract the most attention and command premium prices.”

Bruno Berretta, associate director for UK industrial and logistics research and insight at Cushman & Wakefield, said: “A last-minute Brexit deal is not yet off the table. Whatever the outcome of negotiations is, the rules of the game will change from January 1. In the short-term we can expect disruptions to supply chains, which is already visible in some UK ports.

“Many UK-based businesses are choosing to hold more stock to mitigate against such risk and this is boosting demand for storage and distribution space.

“The longer-term implications of Brexit will also depend on the terms of the new trade regime that will come into force from January.”