warehouse

The UK is facing a chronic shortage of warehouse capacity as years of under-development and growing demand, especially from e-commerce specialists, conspire to leave operators fighting for available space.

This will likely lead to considerably higher rents, according to Kevin Mofid, director of logistics research at Savils.

He told delegates at this week’s Multimodal event in Birmingham that, of the 420 million square feet of warehouse space in the UK, there was “very little on the market, and what there is, is going to see its rent increasing”.

 

He said research jointly undertaken by Savils and the UK Warehousing Association (UKWA), shows that in 2009, just before the financial crisis hit, there was 100m sq ft of warehouse speace on the market. Today that stands at 30m sq ft – 70% less.

“This is primarily because of strong demand from e-commerce and the grocers,” he said. “But also becaseu there has been no development.

“Between 2004 and 2007, there was around 40m sq ft of space developed speculatively. Since 2012, there has been just 10m sq ft of speculative development.

He added that in 2015, Amazon accounted for 10% of all warehouse demand, and “this is expected to continue in 2016 and possibly 2017,” he said.

And James Nicholls, partner at architect Stephen George & PartnersHowever, explained that while most warehouse space continued to be located in the “Golden Triangle” around the UK Midlands, the nature of e-commerce fulfilment meant that warehouse design was changing.

“Location is going to be very, very important, but warehouses are different today – there is growing demand for longer, thinner and taller buildings.

“The design today is all about getting goods out of the building much quicker, rather than using it principally as a storage space.

“Building longer and thinner means you can put in more doors; while in terms of height, we are seeing that racking is going up much more than it has done historically,” he said, adding that increasingly warehouses would be located near urban centres.

“It’s always been thought that populations can’t live near warehouses, but actually, they can co-exist,” he said.

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  • Ross Delaney

    May 12, 2016 at 12:15 am

    “The UK is facing a chronic shortage of warehouse capacity”

    Or in other words, as we say at Gilead:

    E-Commerce fulfillment growth is reducing velocity in the supply chain.

    The velocity for getting in and out of a warehouse is of secondary importance to the emergence of trend showing an overall build of inventory volumes in warehouses overall.

    The consequences of failing to take the opportunity to move the transport vs warehouse paradigm are costs are already plainly visible in E-merchant’s past earnings trajectories, but they are not reflected in their share prices which are being determined by what supply chain markers are showing as unrealistic views in respect of probable forward earnings.

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