BREAKING DOWN THE UK IOS MARKET WITH KIERAN LEAY, FOUNDER OF KLIPA REAL ESTATE

Before founding Klipa, Kieran was a Director in CBRE's Industrial and Logistics team, advising occupiers and investors nationally. During his time at CBRE, Kieran was also seconded to Amazon’s EU Real Estate team to assist in establishing their EV Parking Team.  

Klipa Real Estate's core competencies lie in off-market investment and leasing, excelling in value-add creation, placing a strong emphasis on the occupier market.

Kieran, who are the largest IOS owners/buyers targeting the UK market?

2023 has seen several new entrants into the emerging IOS sector with new investment managers set up specifically targeting Open Storage. At a time where there is a combination of market uncertainty, higher cost of debt and a protracted planning process, investors are seeking greater returns with more focus on IOS.

Key national investors include Blackstone, ICG, Moorfield, Greenpoint and NW1. In addition, there are several asset and investment managers acquiring in the sector on behalf of a variety of investors such as Marchmont, Almcor, Roebuck, Infinium, Mileway and Modal. It is also worth noting, a large proportion of the market is covered by smaller regional businesses and owner-occupiers. 

How would you describe the various markets/submarkets within the country?

IOS as a specific sector is relatively new and until recent years has been covered more generally within Industrial & Logistics. Traditionally, the space has seen a greater proportion of owner-occupiers and fewer institutional investors. As a result, there is opportunity to modernise and improve how sites can operate, attracting more national businesses and enabling opportunities to grow rents. 

What are the various cities' attitudes towards IOS uses, and how will that impact future supply?

London and the South-East region remains a key focus for IOS due to limited land supply and strong occupier demand, however it is very competitive so this doesn’t necessarily mean the best opportunities for investors and occupiers are in this area. Strong regional cities and well located towns on main motorway networks often allow for larger plots at more affordable rates. 

How do UK tenants vary from US tenants in their desired property types and features?

Generally, occupiers are seeking good quality concrete surfacing, located on key road networks with the opportunity for more power to futureproof sites for EV. We’re also starting to see much more demand for improved staff welfare facilities. The sector itself is comparatively uncomplicated, which is why it is proving of interest to investors. 

What IOS type is most lacking (truck terminal, contractor yards, cross-dock, etc)?

Due to a large amount of warehousing development over the last decade, many IOS sites have been developed on. The supply is generally limited which makes it attractive for investors. Nationally there is a large shortage of secure truck and van parking, which is both in traditional industrial locations and more urban locations.

What is the interest level in EV charging capabilities from tenants?

Amazon have been the market leaders for fleet vehicle charging. The remainder of the market is starting to introduce more EV but there are challenges around the time and cost to deliver power to sites. This is combined with delays for the logistics businesses in being able to acquire sufficient electric vans/HGVs so the demand is being drip fed. Ultimately sites need futureproofing ready for these occupier requirements.

Any notable transactions that you would like to share?

Key transactions include Mileway’s acquisitions of Ridham Dock and Link Heathrow, as well as Moorfield and Peloton’s acquisition of a portfolio of BCA sites (car supermarkets). Data for transactions is generally limited but Klipa have been tracking all major transactions throughout the year for investments and lettings. We now have an extensive database of market evidence to build the most accurate view of the market.

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