Firms in ‘race for space’ with lowest-ever warehousing availability
The UK is facing a “race for space” as it reaches the lowest level of available warehousing ever recorded.
The UK has just 18.1m sq ft left of space in large warehouses – defined as 100,000 sq ft or more – represensenting a vacancy rate of only 3.26%, according to research by investment management company Colliers.
It warned this may add to existing inflationary pressures as it anticipates rent will “strongly” rise throughout 2022, adding pressure to already-stretched supply chains. Demand for warehousing has rocketed following increased online sales throughout the pandemic and stockpiling. Colliers described businesses as being in a “race for space” with the “lowest level of supply ever recorded”.
Andrea Ferranti, head of industrial and logistics research at Colliers, told Supply Management: “This will challenge occupiers’ ability to expand or consolidate operations in more efficient warehouse space to reach greater economies of scale, while keeping up with consumer demand.
“It will drive further inflationary pressures on rents and prompt some occupiers to become less location-sensitive due to the lack of supply [of warehousing].
This in turn may make them lose some staff when forced to relocate existing operations away from where they are historically established.”
Availability of warehousing in the fourth quarter of 2021 was 53% down on the fourth quarter of 2019, while take-up increased by 63% over the same period.
Take-up of large warehouses reached record levels in 2021, reaching 50.7m sq ft.
To keep up with demand, the equivalent of 26 Wembley Stadiums of warehousing space was speculatively built in 2021, totalling 11.1m sq ft, up 49% on 2020. Three-quarters (75%) of these spaces have either been let or are under offer.
Ferranti further commented: “High levels of occupational activity and demand for new warehouses, due to the unceasing expansion of occupiers’ supply chains to keep up with e-commerce sales and online deliveries, will remain elevated throughout 2022.
“This will be supported by the provision of new space with global occupiers also working towards decreasing their carbon footprint.
“Despite demand remaining elevated relatively to historical standards, companies will continue to struggle to find space and it’s all about survival of the fittest and who will be able to expand operations in this challenging business environment.”
Figures from the Office for National Statistics (ONS) showed the share of online sales of total retail sales increased to 30.1% in 2021, up on 21.6% in November 2019. Len Rosso, head of industrial and logistics at Colliers, said: “The latest ONS figures point to the fact that consumer shopping behaviour has really changed over the years.
Rents will certainly rise, pushed by a landlord-favourable supply/demand imbalance, increasing land values and inflationary pressures on construction costs.
“As a result, developers and funds will be reluctant to agree a set rent in advance for pre-lets on purpose-built projects and speculative schemes.
This strong occupier market will continue to attract investors and we expect further yield compression over the first half of this year.”
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