savills.com

Savills Big Shed Breakfast Tuesday 25th November 2014

Introductions, Richard Sullivan, Head of Logistics and Industrial

Agenda

Market Update, Kevin Mofid, Head of Logistics Research

Panel Discussion

Audience Q & A

Refreshments & Networking

Panellists

Kevin Ashfield

Senior Development

Director

Chris Nicoll

Head of Industrial &

Logistics

Jason Jay

Senior Asset Manager

Adam Petrillo

Managing Director,

Industrial Services

savills.com

Market Overview Kevin Mofid – Associate Director, Research

Market Dynamics

Take-up – by volume

Source: Savills

0

5

10

15

20

25

30

2009 2010 2011 2012 2013 2014*

Mil

lio

n s

q f

t

2nd Hand New BTS Let prior to PC

* As at end-Nov

Proportion of take-up by grade

Source: Savills

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2009 2010 2011 2012 2013 2014*

2nd Hand New BTS Let prior to PC

Big Shed take-up by region

Source: Savills

0

1

2

3

4

5

6

7

East Midlands

West Midlands

North West

South East

Yorkshire & The

Humber

Inner M25

North East

South West

East of England

Mil

lio

n s

q f

t

2011 2012 2013 2014*

Big Shed take-up (size band % share, by deal count)

Source: Savills

0%

10%

20%

30%

40%

50%

60%

70%

80%

100-199,999 200-299,999 300-399,999 400-499,999 500,000+

2011 2012 2013 2014 YTD

Big Shed take-up (size band % share, by deal size)

Source: Savills

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

100-199,999 200-299,999 300-399,999 400-499,999 500,000+

2011 2012 2013 2014 YTD

Demand is pushing average size up

150,000

170,000

190,000

210,000

230,000

250,000

270,000

290,000

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014*

Sq

ft

Source: Savills * as at end-August

Big Shed take-up (business sector % share)

Source: Savills

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2009 2010 2011 2012 2013 2014 YTD

% s

hare

Retail Logistics (inc. 3PL) Manufacturing

However......

Supply

0

10

20

30

40

50

60

70

80

90

100

Q4 07 Q4 08 Q4 09 Q4 10 Q4 11 Q4 12 Q4 13 Q4 14

Mil

lio

n S

q F

t

Source: Savills

Big Shed Availability

0

1

2

3

4

5

6

East Midlands

North West West Midlands

Yorkshire & The

Humber

South East East of England

Inner M25 South west North East

Mil

ion

Sq

Ft

2nd Hand New

Source: Savills

Current availability by region and quality

Big Shed availability (regional % share; England)

Source: Savills

East Midlands 22%

North West 16%

West Midlands 15%

Yorkshire & The Humber

13%

South East 12%

East of England 6%

Inner M25 6%

South west 6%

North East 4%

Grade A availability

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

East Midlands

North East & Yorks.

South East North West West Midlands

South West

Mil

lio

n s

q f

t

Q4 2013 Q4 2014

Grade A Stock

Grade A availability

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

East Midlands

North East & Yorks.

South East North West West Midlands

South West

Mil

lio

n s

q f

t

Q4 2013 Q4 2014 Average Take-up

Logistics Developments

0

1

2

3

4

5

6

7

8

9

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

1.8

South East East Midlands North West West Midlands

Mil

lio

n s

q f

t

Sq ft in development Number of units

UK Total Investment

£0

£10

£20

£30

£40

£50

£60

£70

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014*

£ b

illi

on

Retail Office Industrial Leisure Other

Source: Property Data/Savills (excludes confidential deals)

UK Total Investment

6%

7%

8%

9%

10%

11%

12%

13%

£0

£10

£20

£30

£40

£50

£60

£70

2000 2002 2004 2006 2008 2010 2012 2014*

£ b

illi

on

Retail Office Industrial Leisure Other Industrial Proportion

Source: Property Data/Savills (excludes confidential deals)

All industrial investment

Source: Property Data/Savills (excludes confidential deals)

£0.0

£1.0

£2.0

£3.0

£4.0

£5.0

£6.0

2000 2002 2004 2006 2008 2010 2012 2014*

£ b

illi

on

Q1 Q2 Q3 Q4

* as at mid-Nov

UK: Distribution warehouses investment

Source: Property Data/Savills (excludes confidential deals)

£0.0

£0.5

£1.0

£1.5

£2.0

£2.5

£3.0

£3.5

£4.0

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014*

£ b

illi

on

Q1 Q2 Q3 Q4

* as at mid-Nov

UK: Distribution warehouses net investment by type

Source: Property Data/Savills (excludes confidential deals)

-£1.5

-£1.0

-£0.5

£0.0

£0.5

£1.0

£1.5

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014*

£ b

illi

on

UK Institution Financial/Bank Property Companies Overseas Investors Occupier Private Individuals

* as at mid-Nov

Key Take-aways

Take-up levels are buoyant, 2014 has seen take-up increase by 50%

Almost all regions have seen take-up rise

Retailers are the dominant force

The average deal size is increasing

Supply is falling drastically....

......especially for modern stock

It seems there isn't enough speculative development coming forward to meet

“average” take-up levels

Industrial investment volumes are rising....

.....with logistics investment volumes on course to double in a year

Panel Discussion

Kevin Ashfield

Senior Development

Director

Chris Nicoll

Head of Industrial &

Logistics

Jason Jay

Senior Asset Manager

Adam Petrillo

Managing Director

Supply Dynamics

Source: The Business Desk/IM Properties

Speculative Confidence Spreading

The impact of retail

“Disruption is the

new normal in retail”

“only 17% of retail

Chief Executives

believe their supply

chains are optimal”

Retail Disruption

“This is a once in 50 to 60 year change. The last big change was the supermarket [in the 1950s]. I think what you are seeing now is as fundamental.”

New models from Discounters?

Global Trade Flows

Manufacturing, Near shoring?

Due for release in Autumn 2014

Examines the resurgence of the UK

manufacturing sector

We expect 15 million sq ft of

manufacturing requirements per annum

This will have a ripple effect into the

wider supply chain

How does this impact the Landlord/Tennant

Relationship

Source: BPF/IPD

Lessons from America?

What does this mean for the Investment Community?

£0.0

£0.5

£1.0

£1.5

£2.0

£2.5

£3.0

£3.5

£4.0

2000 2002 2004 2006 2008 2010 2012 2014*

£ b

illi

on

Q1 Q2 Q3 Q4

Source: Property Data/Savills (excludes confidential deals)

Where are we in the Cycle?

2014 2015 2016 2017 2018 2019

Economy Peak

Occupier Market Peak

Pricing Peak

Finance Peak

Investment Demand Peak

Investment Supply Peak

Source: Savills

Rental Growth Forecast

Source: Savills/RealFor

-6

-5

-4

-3

-2

-1

0

1

2

3

4

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Ren

tal g

row

th %

yr/

yr

IPD Logistics Rental Growth Logistics Rental Growth Forecast

Audience Q & A

Thank you

Please join us for Networking & Refreshments