Research revealed by the Real Estate Service Group shows that the amount of new space under construction from January-April 2021 was already double that completed annually in 2020. Much of the work under construction is already pre-let to retailers and distribution companies in long-term lease agreements. Investment in UK warehouses reached over £6 billion in the first 6 months of 2021 – investors from Europe, the US, Korea and China are notable contributors to this figure.
Property agent Cushman & Wakefield believe that warehouse demand will overtake supply within the next year. So why are we facing a warehouse space shortage?
The first reason for the current warehouse shortage is the recent boom in online shopping. E-commerce grew by 46% year-on-year in 2020, marking the strongest increase since 2008. A standout figure is December 2020, where e-commerce sales grew by 61.4% compared with the previous December. Online shopping has continued to evolve throughout 2021. As a result, demand is at record levels, driven by e-commerce companies, which need more space to store goods, and manufacturing and logistics businesses, who need the space to operate delivery services.
Between 2015-2019, e-commerce and post and parcel companies took on an average collectively of 6 million square feet a year. This more than doubled in 2020, when the companies collectively took on in excess of 15 million square feet across the year.
Unsurprisingly, Amazon is a large eater of available warehouse space. In 2021, the e-commerce giant accounts for more than half of the UK’s e-commerce-related warehouse usage. From January-July this year, Amazon has signed 18 letting deals, compared with 19 for the whole of 2020. A few examples of new warehouses include a 2.5m sq ft construction in Gateshead, 2.3m sq ft constructions in Swindon and Dartford, 2m sq ft constructions in Leeds and Wakefield and a 1.7m sq ft construction in Mansfield.
A second reason for warehouse shortage is shaky supply chains, hit by Brexit and border chaos, and exacerbated by Covid-19 and panic buying. Periodic shortages have encouraged manufacturers and retailers to seek more storage space as a buffer to unreliable global trade.
Supply chain disruption is also affecting the speed with which developers can build more warehouse space. Shortages push up the price of building materials and there are delays in sourcing cement, timber and mortar, meaning completion dates need to be extended.
LondonMetric Property is one of the UK’s largest property companies, with a 2020 revenue of £112.2million and over 100 property investments across the country. The company is listed on the London Stock Exchange and is a constituent of the FTSE 250 Index.
The warehousing landlord has recently embarked on a buying spree:
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