Supply (chain) and demand
The battle for warehouse space continues as vacancy rates plunge to an all time low. It's well documented that the pandemic has accelerated the trend towards online retail leading to retailers having to increase their storage and distribution capacity. This alone would be putting strain on available stock but coupled with continued global supply chain issues and Brexit, we have a perfect storm.
Slow progress at borders and a dearth of containers and freight availability means that companies are having to store more stock than ever, moving towards a 'just in case' strategy rather than the more traditional 'just in time' approach.
The demand for storage space is not likely to subside quickly meaning warehouses and distribution centres remain an attractive proposition for investors. This has been demonstrated by the huge amounts of money being invested by funds and developers alike over the past 18 months.
There is no easy fix and those developers who are in a position to bring new stock to the market in the short term are likely to make a healthy return. Looking forward, the government will need to consider revising planning policy and improving surrounding infrastructure to allow these warehouses to be constructed quickly and for the surrounding areas to be able to cope with the increased HGV presence.
Companies continue to invest in automation and green energy (electric vehicles and the like) and so a stable and large energy supply is top of the list for would be occupiers. Developers will need to ensure capacity requirements are met but given the current state of the country's energy supplies that is easier said than done.
If you would like to know more about our Real Estate and logistics team, please contact myself or your usual Charles Russell Speechlys contact.
Britain is fast running out of warehouse space as the boom in online shopping leads retailers to open bigger distribution hubs.
The vacancy rate for logistics space has plunged to just 1.53%, or 7.1m sq ft, the lowest on record, according to CBRE. By contrast, this time last year about 5% of the UK’s total warehouse space was available to let.
Amid a desperate battle for space, several companies have agreed recently to pay 20% above the asking price, CBRE said.
