Warehouse sector sees phenomenal growth

By Liza Helps Property Editor Logistics Matters

THIS GROWTH said UKWA CEO Clare Bottle ‘provides powerful evidence of the critical importance of warehousing – not only to supply chains, but to the UK economy and to our national lives’.

“The role of the warehouse has never been more important, and the amount of warehouse space needed continues to rise.”

This is in part because warehouses have become central hubs of supply chain activity, absorbing tasks traditionally undertaken upstream by manufacturers and downstream by retailers. Warehouses also manage returns, repairs and recycling, and have become a vital part of the circular economy.

These activities require more space, more people and more technology. At the same time, global geopolitical events have underlined the potential instability of long supply chains, leading an increasing number of manufacturers to hold more inventory closer to consumer markets, building in supply chain resilience.

These twin pressures are driving not only the proliferation of warehouses, but growth in the physical dimensions of buildings.

In the decade since Savills produced UKWA’s first report, development of warehouses of over 1 million ft2 has risen by 345%. This move towards larger warehouse units has seen the average sized, build-to-suit unit increase from 297,000 ft2 in 2015 to 333,000 ft2 in 2023, and according to Savills, this trend is likely to continue.

3PLs remain the leading warehouse occupier group in 2024, with online retailers accounting for the largest increase in occupation by a huge margin – online retailer occupancy has risen by 813% in the last decade. This points to a need for more warehouses built close to population centres and alongside motorway corridors, to meet the ever-shorter delivery demands of online consumers.

Savills head of industrial & logistics research Kevin Mofid, said: “The growth of the UK logistics property market comes as no real surprise given its importance to manufacturing and retail supply chains. However, it’s not only the size, but also the geography that has changed. For instance, the Golden Triangle continues to spread eastward, with the amount of warehouse space developed in the East of England increasing by 104% over the past 10 years. With online retail continuing to grow and many companies looking to near or re-shore elements of their operations the story remains strong. What is less clear is whether or not we are allocating enough well located land to meet future demand.”

Bottle added “There is an acute shortage of both high-quality buildings and potential development land, yet the current government remains over-focused on delivering residential housing supply, to the detriment of the supporting infrastructure that can bring economic and societal and benefits, such as local employment.

“With a general election in prospect, it is vital in 2024 The Year of Warehousing that we communicate effectively our sector’s role in the national economy and look to a future government for the recognition and support we deserve. This timely report helps arm us with the tools to achieve that aim.”