A shortage of logistics warehouse space will put internet retailers and distributors under sustained pressure before the end of the decade, according to research.
Property consultancy Lambert Smith Hampton’s Industrial & Logistics Market Report said even if current elevated levels of new development continued, retailer and distributor requirements for logistics warehouses would exceed the country’s available stock by 25m sq ft by 2020.
It concluded a significant and unprecedented increase in construction would be needed in the next few years to enable internet retailers to continue to fulfil orders.
The report also said the supply of industrial and logistics space fell to a record low of 200m sq ft last year, down from a peak of 360m sq ft in 2012.
The relative lack of available stock means rental growth continued its strong run in many parts of the UK throughout 2015. Prime rents increased by 3.9% on average, with Liverpool recording the largest increase of any single location at 16.7%.
Steve Williams, national head of industrial and logistics at Lambert Smith Hampton, said e-commerce retailers’ attempts to satisfy consumer demand more quickly and efficiently was creating unprecedented demand for strategically located logistics warehouse space across many parts of the country.
“While we've seen new warehouses being developed over the past couple of years, the amount of new space being planned simply can’t keep pace with the demands of internet retailers and their distributors,” he said. “Unless developers start building warehouses at a rate that we haven’t witnessed during the 20 years I've been working in the sector, or major occupiers like Amazon are prepared to wait 12 months for delivery by building it themselves, we could run out of logistics space before the end of the decade.”
Williams said the logistics industry would need to adapt urgently to continue to support internet retailers in fulfilling orders.
“Some of the sector's more forward-thinking participants have already recognised this, but more needs to be done if we want to continue to enjoy the benefits of e-commerce,” he said.
According to the British Retail Consortium (BRC), online sales of non-food products in the UK grew 10.7% in February compared to the year before, when they had risen by 8.3% year-on-year.
However, this is the slowest growth since October and below the 3-month and 12-month averages of 13.7% and 12.9% respectively, the BRC said. Online sales represented 20.4% of total non-food sales in February, compared to18.9% in February last year.
More generally the Lambert Smith Hampton report said that overall 2015 was “a sound year” for the industrial and logistics occupier market. UK-wide take up was 7% below the record figure for 2014, but was 2% above the five-year annual average.