The UK warehouse market struggles to keep up with insatiable demand from online retailers

05 December 2016

According to Savills, the UK warehouse market (units 100,000 sq ft +)  is set to have its best year since records began, with take-up surpassing the 34 million sq ft (3.1587 million sq m) of space transacted in 2014. This significant increase can largely be attributed to the continued growth of online retailers.

Savills research shows that online retailers now account for up to a third of the market, more than any other occupier segment ever. To put this into perspective, the next best performing sector were the grocers, accounting for up to a quarter of the market back in 2011.

As a result, the supply of existing warehouse space has fallen by 71% since 2009 and now stands at just 27 million sq ft (2.508 million sq m), which equates to just over 14 months worth of supply. For this reason, the availability of consented land, ready for warehouse development, will become increasingly important if online retailers are to continue building their supply chains.

Kevin Mofid, head of logistics  research at Savills, comments: “Up to 45% of current logistics demand is from retailers, with Amazon, for example, accounting for just over a quarter of total take-up in 2016 to date. If we drill down further still, this represents 82% of take-up specifically by online retailers. Availability of land for employment use remains critically low across the UK and with land continuing to be allocated for higher value uses such as residential, the industry is struggling to keep up with demand.”

Long term, Savills calculates that at the end of 2016 only 1,600 acres (647 hectares) of land remains available and primed for development in the South East, where demand for last mile distribution sites are at its highest. As a result, there remains just over five years worth of deliverable stock in the region.

Richard Sullivan, national head of industrial & logistics at Savills, adds: “The sector remains incredibly resilient in the face of economic and political uncertainty, due in part to the phenomenal growth of online retail. Although it appears to be dominating the industrial and logistics landscape, demand still remains high from a diverse range of occupiers and as a result take-up has hit unprecedented highs. In order to maintain this momentum into 2017 and beyond, it is now crucial that we tackle the supply issue and policy makers recognise the need to allocate more land for industrial and logistics, whether that be in a pure or mixed-use sense.”

 
 

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Douglas van Oers

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