Top Triangle


One Year On

Panattoni in the UK

What Difference a Year Can Make


Nearly a year on after the merger with Panattoni Europe and First Industrial, Panattoni has now over £600m of development committed to build in the UK, with a strong list of projects in the pipeline.  Panattoni’s ability to access global capital coupled with their entrepreneurial approach to business has been an effective cocktail in the UK.  The privately-owned US business, Panattoni Development Company, established in 1986 originally set up Panattoni Europe in 2005, and has since grown into the largest industrial & logistics developer of new-build facilities in Europe.  In less than a year Panattoni has already positioned itself in the UK as the largest developer of speculative product, with over 3.5m sq ft scheduled to be in production by the end of 2018, with further ambitious plans for 2019.

Robert Dobrzycki, Chief Executive Officer of Panattoni Europe enthuses “…I’m genuinely proud of our growing UK team; in less than one year the UK platform has had a tremendous impact on the market.  We’re now here for the long-term and determined to accelerate our position.  At the core we are developers who like to build a best-in-class product and lead the market; our business plan now is to have around $2 billion invested in the UK by the end of 2019.”

Matthew Byrom, founder of First Industrial and Managing Director of Panattoni in the UK, reflects “…2018 has been a transformatory year for our business.  Ambitious targets for development were set – and exceeded!  We’re running hard at the moment, but business is getting slightly easier as the market recognizes our abilities to execute and deliver a market leading product”.

2018 has presented Panattoni with a number of highlights.  Acquiring a 17-acre site unconditionally for over £3.35m an acre was one of highest industrial land prices ever achieved for the market.  Matthew Byrom explains “…sometimes we see an angle that the market misses, or other times we find value by taking a wider view on pricing.  Our philosophy on acquiring new sites is simple; we buy prime, then push values forward by putting assets into production.  If we don’t have the confidence to spec build, we won’t consider the location viable.”  

The market too has seen many changes in the last twelve months.  For the first time in the economic cycle we’re seeing prime industrial land afford higher values than residential; this is particularly true in markets where house-builders are constrained by slower land take and increased social housing and community contributions.  The thought that industrial sales values would exceed out-of-town retail prices would have seemed farfetched only a few years ago, however, the limited availability of development land continues to put pressure on pricing.  In the last fifteen years in Greater London, the market has lost nearly 3,300 acres of industrial land to competing users, as the political pressure to release land for housing shows no sign of abating.  Panattoni Research remains confident of the fundamental dynamics that underpin the UK industrial & logistics market, which have been borne out by strong net absorption figures in 2018 “…we’re seeing robust levels of take-up across the UK, along with strong rental growth in the prime regional and London markets, where historic low levels of vacancy and continued economic growth underpin our low net yield valuations.  We can see rents moving to between £15 – 18 psf by the end of 2019 for many prime London markets.”

The continued strength of the Greater London market has had a demonstrable concentric ripple out effect on rents in the surrounding regions, with a number of occupiers being priced out of the established industrial locations.  E-commerce drivers and retailers seeking to provide their expectant customers with an ever improving delivery service has provided the market new challenges.  The old adage of ‘over-develop at your peril’ has never been more apt, with a trend amongst occupiers wanting much larger yard areas to accommodate their fleet of smaller lorries and vans to service the major conurbations.  Fergie Taylor, Head of Development Delivery at Panattoni explains “…the difference this time round to last is that occupiers are prepared to pay a premium rent for a larger yards; this type of building is no longer the preserve of the bespoke freight forwarding company and we’re now looking very seriously at building low density logistics warehousing speculatively.  Overall, we see this as having a much wider application in the UK than perhaps multi-storey warehousing, which continues to capture the imagination of the industrial market”.

Panattoni Research summaries  “…the structural shift in retail shopping pattern seems an irreversible trend, which provides added impetus to the emerging growth in the logistics warehousing story.  With on-line retail sales still only touching 18% of total retail sales, it would be hard to argue that the market hasn’t got further to climb, particularly given the increasing growth of m-commerce (mobile phone commerce) where we’ve seen the highest acceleration of retail activity”. 

Across Europe the dominance of Amazon is worthy of note, and indeed without precedent.  As the business touches the $1 trillion market cap, its outstanding commercial success and break from the e-commerce peloton seems unlikely to be rivalled any time soon.  Robert Dobrzycki explains “…in Central Europe the growth we’ve experienced to a large extent has been driven by e-commerce, particularly in the Polish and the Czech Republic borders, which have been fueled by the strong German consumer market.  One of our principal reasons for expanding into the UK was the strong e-commerce story and lack of available speculative product being built.”

Matthew Byrom continues  “…the UK has one of the most advanced e-commerce economies in the world, with a higher percentage of sales being undertaken on-line than any other European Country, including Germany at 15% and France at 10%.  North American has just 9% of total sales being concluded on-line, yet the UK has a very tight supply of available land, with an increasing desire of customers wanting to consolidate their distribution networks in to larger, more efficient warehousing.  In 2017 around 75% of the UK market was pre-let, with 25% being speculatively built – in most Northern American markets this figure is inverted.  Our business model is not seeking to increase the size of the UK market, but simply convert a number of the existing build-to-suit requirements into spec product.”

Mark Connor, Chief Financial Officer for Panattoni Europe concludes “…we remain very positive about the solidity of the UK market.  With limited availability of debt finance, although frustrating for many developers, has provided a useful handbrake to the runaway investment market.  Despite a number of economic and political challenges in the last year, the weight of global capital seeking exposure to the UK logistics sector continues to increase.  Capital is fundamentally seeking security and certainty of return, then prices accordingly; while the UK has some internal political issues surrounding Brexit, as part of an international portfolio, global investors are still seeing the UK, with its historically low exchange rate and strong indigenous market, as a compelling place to invest.”

Whatever the outcome in the fast moving development market, it seems certain that Panattoni will be in the thick of the action, and despite a number of new entrants and increased competition, few commentators would bet against 2019 being another record breaking year for Panattoni.

Media Hub

Timelapse Icon

Panattoni increases speculative programme with over 200,000 sq ft scheme in Crawley, UK

Panattoni is working up plans for a 202,200 sq ft speculative, last-mile logistics development in...

Go to link
Timelapse Icon
Timelapse Icon
Timelapse Icon
Timelapse Icon
Timelapse Icon