Commercial property giants are being surpassed by smaller players focussed on warehousing and logistics

The landscape of Britain’s commercial property market has dramatically shifted following the pandemic, leading to the decline of long-established giants like British Land and Land Securities in favour of more agile and specialised companies focusing on logistics and industrial assets.

British Land and Land Securities were once synonymous with some of the UK’s most iconic landmarks, British Land owning the Meadowhall shopping centre and the Cheesegrater tower, and Land Securities being the developer of the Walkie Talkie skyscraper and large portions of the Bluewater shopping centre. However, both giants have now been overtaken by businesses like Segro, LondonMetric, and Tritax Big Box, all of which have embraced the booming demand for warehouses and logistics infrastructure.

Segro, which now owns Slough Estates, has surpassed both British Land and Land Securities to become the largest commercial property landlord on the London Stock Exchange. British Land has fallen so far that it now resides in the FTSE 250, replaced in the FTSE 100 by LondonMetric, which owns a £6 billion portfolio of warehouses. Tritax Big Box, a relative newcomer was only founded in 2013, but has ascended rapidly, becoming one of the largest property stocks listed in London, earning approximately £300 million every year in rentals from tenants such as Amazon, Ocado, B&Q and Argos.

The success of these newer players is rooted in their focus on logistics, an area that has thrived as online shopping and supply chain reconfiguration have driven demand for warehouse space. Over the past decade, the value of warehouses has surged by 79%, while the value of offices and retail properties has declined. This demand has resulted in rental rates for warehouses nearly doubling far outpacing the growth in retail and office rents, where the market has remained sluggish.

The COVID-19 pandemic only accelerated these trends, as businesses increasingly prioritised having more stock closer to consumers and reconsidered their reliance on global supply chains. This led to a surge in demand for warehouse space, with vacancy rates remaining low compared to the oversupply issues plaguing retail and office spaces.

Despite these clear market shifts, the traditional property companies have been slow to pivot, remaining heavily invested in the struggling retail and office sectors. As a result, their shares trade at significant discounts to their net asset values, reflecting investor scepticism about the future value of their properties. This is not surprising as once you are invested in one area of the market it is very often difficult to move quickly into another to match trends.

In contrast, companies focused on logistics and student accommodation, like Segro, LondonMetric, and Tritax Big Box, are trading at much smaller discounts or even premiums, indicating strong investor confidence in their sectors.

This transformation underscores the importance of adapting to market trends. Companies that have recognised and capitalised on the growing need for logistics and industrial spaces are thriving, while those that have clung to traditional sectors are struggling to maintain their relevance and value. This is a lesson for all businesses as we all strive to stay current for our core markets.