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Winners and losers: The investment opportunity powered by online shopping

As well as the large out-of-town sites, the future for the logistics industry suggests that smaller urban warehouses will be increasingly in demand over the coming years. The increasing number of retailers willing to offer same day delivery of goods and services means that finding a solution to the ‘last mile’ of the ‘delivery puzzle’ will prove vital. This opens up yet another opportunity for developers to step in and provide the assets needed to coordinate goods on their way to delivery. 

At the opposite end of the size spectrum to big box warehouses are self-storage stores, REITs such as Big Yellow Group offer individual unit sizes as small as 10 sq. ft  The main driver of demand for self-storage is personal use, such as the need to store personal possessions when moving home.  However, self-storage assets are benefitting from demand beyond their individual customers with businesses also seeing the advantages of flexible storage space.  Attracted by shorter lease lengths and with no business rates to pay, some small and medium sized businesses are utilising these modern facilities as a flexible alternative to older traditional warehouse space.

When investing in the sector, it is REITs that can offer the best access to the robust and growing investment opportunity. REITs are managed by sector specialists who are experts in selecting the best assets to provide long-term, dependable cash flows. This specialism among managers in the REIT space is particularly beneficial when it comes to investment in a fast-growing but niche sub-sectors such as big box logistics and self-storage. 

Being aware of major trends such as urbanisation and the decline of UK retail is important when looking for REITs with the most promising potential for returns, as well as avoiding potential risks. With a broad universe that is growing far beyond the traditional retail and office space, REITs specialising in the logistics sector can offer investors a secure income where the contractual nature of assets means less volatility of dividends, as well as daily liquidity that may sometimes be restricted by funds which own property directly. REITs, by contrast are companies listed on a recognised exchange, like the London Stock Exchange, and therefore enjoy daily liquidity as only the shares change hands, rather than the underlying holdings.