Internet retailers’ ability to deliver to customers will come under sustained pressure before the end of the decade because of a shortage of logistics warehouse space, according to new research from national property consultancy Lambert Smith Hampton.
The latest edition of the company’s annual Industrial & Logistics Market Report reveals that retailer and distributor requirements for logistics warehouses will exceed the country’s available stock by 25 million sq ft by 2020 – even if current elevated levels of new development continue.
Steve Williams, national head of Industrial and Logistics at Lambert Smith Hampton, said: “E-commerce in the UK is not just growing rapidly, but it’s also evolving as retailers attempt to satisfy consumer demand ever more quickly and efficiently. This is resulting in unprecedented demand for strategically located logistics warehouse space across many parts of the country.
“Whilst we’ve seen new warehouses being developed over the past couple of years, the amount of new space being planned simply can’t keep pace with the demands of internet retailers and their distributors. Unless developers start building warehouses at a rate that we haven’t witnessed during the 20 years I’ve been working in the sector, or major occupiers like Amazon are prepared to wait 12 months for delivery by building it themselves, we could run out of logistics space before the end of the decade. That has serious implications for internet retailing.
“The impact of the growth of e-commerce on the retail industry has been well documented and steps are being taken to try to address some of the issues facing our high streets. However, the logistics industry will also need to adapt urgently if it’s to continue to support internet retailers in fulfilling their customer orders. Some of the sector’s more forward-thinking participants have already recognised this, but more needs to be done if we want to continue to enjoy the benefits of e-commerce.”
The report also finds that the supply of industrial and logistics space fell to a record low of 200 million sq ft in 2015 – down from a peak of 360 million sq ft in 2012 – as take-up reached 96.4m sq ft, marginally above its recent average. This relative lack of available stock has meant that rental growth continued its strong run throughout 2015 across many parts of the UK. Prime rents increased by 3.9 per cent on average, with Liverpool recording the largest increase of any single location at 16.7 per cent.