Multi-Let: July 2024

Market overview 

There is ongoing rent momentum though annual ERV growth has slowed to single digits. Previously stronger segments further ahead in the cycle, such as Inner London, have underperformed peripheral segments recently. Rental reversion is widespread but being captured. High development cost has intensified prime/secondary rent polarisation but rising best quality secondary rents will continue to erode this gap.

Low void rates have only marginally ticked up for the most part since the rate of new development is so low. Broad scarcity of stock has maintained a high retention rate after expiry and a record low default rate in 2023 despite rising company insolvencies. Meanwhile, an encouraging acceleration in EPC refurbishments across the UK has reduced overall grade D multi-let space and increased EPC grade B.

There is more depth to investment demand and prime yields tightened 25bps+ in H1 2024. Reversionary multi-let assets (notably good secondary) are currently more sought after than long income index-linked single-lets. Low transactions should pick up as more buyers and sellers re-enter the market. Medium term industrial returns should trend upwards and outperform other property sectors.

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