Online shopping fuels urban ‘hub’ demand

Consultants at Deloitte said retailers and e-fulfilment specialists need to compete on delivery times which will lead to greater occupier demand for smaller warehouses in built-up areas.

Amazon, the US retail giant, has announced plans to open four new regional delivery hubs in 2014, including one in Yorkshire.

Angela Barnicle, of Deloitte Real Estate in Yorkshire, said: “The supply of well-located stock is likely to be far from sufficient, so we expect to see rents on such property rising, and yields being forced down, in 2014.”

In a report on the commercial property market, the Big Four accountancy firm said capital values would continue to show strong growth over the first half of the year as investors remain bullish about the sector’s prospects.

Deloitte says overseas demand will remain significant with the current wave of investors from the Far East joined by new entrants such as Taiwanese insurers.

Ms Barnicle said: “It is clear that the flow of overseas capital is not slowing.

“Indeed, it will continue to be reinforced by new investors from geographies yet to buy into UK real estate in any significant way, but with an appetite to increase their exposure.”

She warned that the increase in construction activity will lead to a spike in costs.

Ms Barnicle said: “Contractors are becoming more selective about which jobs they take on and the price at which they commit to delivering.”

She added a note of caution to the forecast: “2014 will not be without its share of hazards. Rental growth will need to pick up if the high level of returns predicted for the first half of 2014 is to be maintained, while a rise in construction costs will put pressure on development viability.

“Nevertheless, with an optimistic economy, new overseas investors adding momentum in the transactions market, and a number of structural changes taking place – 2014 is shaping up to be an exciting year for commercial property.”