New distribution centre being built in Suffolk, UK.
New distribution centre being built in Suffolk, UK.

UK warehouse investment doubles as online sales cause surge in demand

13 August 2021

Around 3.4 million square metres of warehousing space will be built in the UK in 2021 as companies struggle to fulfil an explosion in online orders.

Warehouses totalling double the floorspace of Hyde Park are due to be constructed this year to meet the demand from e-commerce, according to research by property consultancy Knight Frank. 

The 3.4m square metres of new capacity marks a significant rise from the 2.1m square metres built in 2020. 

Overall investment in UK warehousing, including spending on new capacity as well as leases, more than doubled in the first half of the year, reaching £7.4bn – more than twice the £2.7bn spent in the same period in 2020. 

The drive to increase stock and storage facilities is taking place alongside worker shortages across both the warehousing and construction sectors. 

Research by recruitment firm Aduza found there were more than 84,000 unfilled vacancies within the logistics and warehousing industries in July.

There is also a shortage of 90,000 workers in the trade and construction sector, who will be vital for the construction of new warehouses.

Amazon is leading the charge by pumping investment into warehousing, having signed 18 leases for warehouses so far in 2021 compared with 19 for the whole of 2020.

The online retail giant is expected to sign a £97m deal to lease a 650,000 square metre site in Lutterworth, Leicestershire. 

Meanwhile, John Lewis has announced it is opening a 90,000 square metre warehouse in Milton Keynes to meet demand for online shopping. The company said the site will employ 500 people. 

Renowned for its physical department stores, the brand has seen online sales grow significantly during the pandemic, and they now contribute 60% of total sales, up from 40% pre-pandemic. 

The Milton Keynes site, which John Lewis is leasing from Tesco for 11 years, will be the firm’s second-biggest distribution centre.

Andrew Murphy, executive director of operations for the John Lewis Partnership, said the site was needed to “keep pace with customer demand – both for our products and for our wide range of fulfilment and delivery options”. 

It will be in operation in 2022, he added. 

A £1bn logistics hub totalling 734 acres is also being developed near Birmingham by Canadian real estate investor Oxford Properties and London-based Logistics Capital Partners.

The need for more UK warehousing space has been driven by a marked increase in e-commerce, as greater volumes of goods need to be stored and prepared for shipping and delivery. 

Onlines sales accounted for 32% of all UK retail spending in the first five months of 2021, up from 19% in the same period in 2019.

Clare Bottle, chief executive of the UK Warehousing Association (UKWA), warned there was an “urgent requirement for more warehousing,” with increased pressures being placed on UK warehousing space due to the Covid-19 pandemic, Brexit and staff shortages.

“This is extremely welcome news for UK business. For some time, UKWA has been warning that available warehousing space in the UK (of the right calibre and in the right location) is reaching levels of critical shortage,” she told Supply Management.

“This has been exacerbated by the massive acceleration in e-commerce during lockdown, plus some stockpiling and holding of more inventory closer to markets, to avoid potential supply chain delays at the border due to new post-Brexit customs checks.

“Staff shortages have been an issue for the warehousing sector for a long time and the so-called ‘Brexodus’ of immigrant labour, together with stringent new immigration criteria, haven’t helped us as an industry traditionally dependent on migrant workers.”

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