Friday 30th Sep 2016 - Logistics Manager

Warehouse developers cannot build fast enough

An accelerating eCommerce sector has resulted in demand for new warehouses outstripping supply with developers unable to build new properties quick enough, according to a logistics think tank.

Comprised of Colliers International, Total Logistics, UMC Architects and KAM Project Consultants, the think tank has produced a white paper to address the distortion between accelerating eCommerce and the required new warehouses to meet demand. The group claims that the current lack of space will be compounded further if developers don’t adopt a new approach to building.

Martin Brickell, director at Total Logistics Supply Chain Consultants, said that a viable solution would be to design warehouses with flexible, future-proofing expansion facilities, including higher eaves to add mezzanine levels, sprinkler and utility expansion pipes, and additional land to allow for extension.

“In order to retain occupiers for longer periods, it is important for developers to help tenants meet their business needs, meaning the traditional approach to building a square shed is gone and strategic development is the future.

According to the white paper, internet sales volumes are anticipated to grow by 15 per cent year on year within the UK for the foreseeable future.

Steven Mitchell, Colliers International industrial and logistics director, said: “Online sales are growing exponentially and already there is not enough warehousing to stock and transport goods to meet demand. This is partially because there has been very little development in the past five years and partially because eCommerce is a new and emerging trade.”

In order to house stock and distribute goods, available warehouse space needs to increase in volume but it takes an average 12-18 months to develop, procure and deliver a new 100,000sq ft space meaning that by the time it’s constructed, it is already at capacity and cannot meet demand.

Brickell added that flexible warehouse designs need to be incorporated into new warehouses from today, in order to see the life of the asset extend in future years to meet rising volumes and consumer demand.

“While there may be additional development costs today to implement these provisions, it is a worthwhile investment and a less expensive alternative to building additional completely new warehouses,” said Brickell. “It will also help secure tenancies for longer periods if occupiers know the space can be expanded as their business grows.”

Large-scale Grade A warehouses of more than 100,000sq ft are extremely constrained with less than a 10-month supply currently available throughout the UK according to Colliers research. Colliers noted that the North East, South West, Golden Triangle and Wales currently have no Grade A supply of ‘Big Sheds’, with Scotland, West Midlands, East England and London all having less than two-months until they too have no availability.

Mitchell noted that traditional retail replenishment warehouses might expect to grow by five per cent each year.

“If it takes three years from project inception to occupation, then the facility would require capacity for an extra 16 per cent today and after five years occupation need approximately 50 per cent more capacity than today,” said Mitchell. “On the same timescale an eCommerce business with a 30 per cent annual growth rate would move in with over double the business size and need capacity for eight times business activity by the eighth year since inception.”

The think tank’s research also suggested that furniture and home retailers will see significant growth, while all manufacturers are increasingly moving into the business to consumer sector.

The whitepaper produced by the think tank is available in full from the Download Centre on the Total Logistics website here.