UK witnesses a record-low supply of warehouse space

UK witnesses a record-low supply of warehouse space
Photo by Seika, is licensed under CC BY 2.0

New research shows the UK is witnessing a record-low supply of warehouse space due to an increase in demand for logistics locations in 2021 and pressures of e-commerce. 

According to Colliers’ recent data, there are just 18.1 million square feet left after about 50.7 million square feet of 100,000 sq ft+ distribution warehouses were taken up in 2021, indicating a 3.6 per cent rise over the previous year. 

Andrea Ferranti, Head of Industrial and Logistics Research at Colliers said: “The logistics sector continues to benefit from strong tail winds driving online consumer spending to constantly elevated levels. 

“High levels of occupational activity and demand for new warehouses, due to the unceasing expansion of occupiers’ supply chains to keep up with e-commerce sales and online deliveries, will remain elevated throughout 2022. This will be supported by the provision of new space with global occupiers also working towards decreasing their carbon footprint. 

“Despite demand remaining elevated relatively to historical standards, companies will continue to struggle to find space and it’s all about survival of the fittest and who will be able to expand operations in this challenging business environment.” 

The report emphasised investor and developer responses to demand, noting that 11.1 million sq ft of speculatively built supply of 100,000 sq ft+ will be finished in 2021, the equivalent of 26 Wembley Stadiums and 49% more space than in 2020. Despite the fact that about 75% of the property has been rented or is under offer. 

Len Rosso, Head of Industrial and Logistics at Colliers commented: “The latest ONS figures point to the fact that consumer shopping behaviour has really changed over the years. Rents will certainly rise, pushed by a landlord-favourable supply/demand imbalance, increasing land values and inflationary pressures on construction costs. As a result, developers and funds will be reluctant to agree a set rent in advance for pre-lets on purpose-built projects and speculative schemes. This strong occupier market will continue to attract investors and we expect further yield compression over the first half of this year. 

“While we are tracking circa 18 million sq ft of speculative supply advertised for completion by the end of this year, the sector really needs this extra space to function properly and given the strength of the demand, we believe that the market will not be oversupplied in 2022.” 

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