There will be a need to build new warehouses on greenfield sites ©  steve631/Getty Images
There will be a need to build new warehouses on greenfield sites © steve631/Getty Images

Warehousing space low as firms switch to 'just in case'

12 July 2021

Record take-up of warehousing space in the UK in the first half of 2021 has led to supply falling at its fastest ever rate, according to a report.

Savills’ Big Shed Briefing said supply chain pressures worldwide, including the shortage of HGV drivers and fallout from the blockage of the Suez Canal, were reinforcing the view that supply chains will shift from operating “just in time” to “just in case” models.

This in turn will lead to companies maintaining more inventory, stimulating more demand for warehouse space.

Clare Bottle, CEO of the UK Warehousing Association, told SM the cost of warehousing was “only going one way”.

She said the capital cost of holding inventory varied by sector. “But it’s not just the capital cost, it’s also the warehousing cost and depending where you are geographically the prices are only going one way, and that’s connected to the fact that warehousing is in short supply. At the moment it’s a suppliers’ market.”

Bottle said London and the Southeast was one of the most expensive places in world for warehousing. “We need more warehousing and I think that will be at the very enormous end and at the small local end.

“Everyone would prefer brownfield development but I think there’s going to have to be greenfield development too, and that needs to be done sensibly within a planning framework that works for everybody.”

Forecasts from Forrester suggest online retail will reach 37% of all retail sales by 2025, up from 20% before the pandemic, and this is likely to put additional pressure on warehouse space.

“Over the next 18–24 months, however, the key issue will be one of warehouse supply,” said the report.

“The availability of construction materials... will mean that the pace of delivery for new speculative supply will not be able to keep up with demand. This could cause a bottleneck effect as occupiers consider their options when looking to satisfy new requirements.”

In the first six months of 2021 take-up of logistics and industrial space reached 24.5m sq ft – up 83% on the long-term average.

This has led to a fall of more than 7.5m sq ft in supply, which now stands at 24.3m sq ft, with the lowest ever nationwide vacancy of just 4.24%.  

Kevin Mofid, head of industrial and logistics research at Savills, said: “At present the record levels of take-up we have seen in recent years show no signs of slowing, with demand continuing to outpace supply quite significantly. 

“Even if the entire development pipeline were to remain unlet upon completion, vacancy rates would only rise to just over 7%, well below the 12% figure that would hamper rental growth.”

He added that with a considerable amount of stock already under offer, vacancy rates are unlikely to increase in the short term.

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