The Midlands continues to dominate the market as the distribution hub for the UK and over 60% of all last year's deal took place in the region. Rents in the Midlands grew by 10.7%, significantly higher than in previous years. In the South East rents grew by 10.1%, and much of this growth has been based around Heathrow Airport to the West of London. Land values of £1.3 million($1.85 million) per acre are now established at Heathrow, and in some areas prices as high as £1.8 million ($2.55 million) per acre have been agreed.
Demand stemmed from a variety of sectors including food retailers and manufacturers, third party contractors and parcel companies, and according to CB Hillier Parker there is a growing trend for the major supermarket operators to establish a small number of very large central warehouses from which product is transported to regional distribution centres.
During 2000, yields on prime rack rented high bay warehouses stabilised at 7.5%. Institutional demand has predominantly been focused on the South East region, while the rest of the UK has proved attractive to debt-driven investors. With the banks competing aggressively to lend debt on bond type investments, well-let high bay warehouses outside the South East offering yields in excess of 7% can be self-financing.
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