What real estate to buy in London? Warehouses

A London townhouse? Or perhaps a new condominium apartment in the swanky new Canary Wharf district? All these may be popular with real estate investors and buyers but an up-and-coming commodity that is now the hottest property are warehouses.

One Park Drive. Picture: canarywharf

Small warehouses popular with investors as e-commerce popularity soars

The savvy investors are or have already seized the opportunity to invest in these real estate as industrial space in cities become more limited, yet more city dwellers are buying into the ease and convenience of online shopping.

Online retailers such as Amazon are constantly on the lookout for local logistic hubs to cut delivery times. While these properties may not be cheap, investors are seeing their medium to long-term potential. Investors such as the Blackstone Group and Singapore’s GIC have also explored investment opportunities in this sector.

Rental yields alone are enough to get started on putting money back into the investment coiffures. Some property investors have reported 50% and more profits in rent.

For example, Amazon is leasing 2 warehouses in Zennor Road, London and paying 60 cents more than tenants who were on existing contracts.

Smaller warehouses in major European cities worthy investments

Blackstone, one of the world’s largest real estate investor, is putting their money in smaller warehouses in major European cities. They have for example taken just 6 years to build a business housing large European warehouses before selling it to China Investment Corp for S$19.5 billion. Their investment direction points towards the light industrial sector as one of the most profitable.

While London struggles to find the balance between providing sufficient affordable housing for their citizens and the growing lure of the e-commerce sector, it is worth considering if this trend will carry over to South-east Asia. Perhaps. Storage hub users are growing and and industrial spaces have become a common commodity for investment.

As these properties are generally small and affordable enough for pension funds to compete for them, perhaps investors will look into them with more conviction. And with the recent stamp duty hikes implemented by the local authorities, investors may turn their sights to commercial properties which may provide better returns in the short term.