A record number of deals for warehouses above 500,000 sq ft have already taken place this year as occupiers deal with unpredictable inventories and surges in e-commerce.
According to the latest research by Colliers International, some 17 distribution warehouses in the 500,000 sq ft+ size band have been transacted so far this year.
“Occupiers are faced with a conundrum where a less favourable macroeconomic environment is accompanied by a strong upsurge in consumer appetite for fast online deliveries,” said Len Rosso, Head of Industrial & Logistics at Colliers International.
“Not only that, consumer preference for a greater product variety is met by unpredictability around inventory planning and this is all unfolding in a very low supply environment across all UK regions. In this respect, demand continues to be driven by strong occupier desire for grade A space with take-up for design & build and speculatively-built space accounting for 52% and 21% of the total, respectively.”
Meanwhile, more than 60 units sized between 100,000 and 200,000 sq ft were taken up. This compares to a total of 77 units acquired during the entire 2019 and with three months of the year remaining, Colliers expects this size band to exhibit stronger annual demand by year-end.
Andrea Ferranti, Head of Industrial & Logistics Research, said: “Demand dynamics often differ depending upon the occupier type. Businesses with a strong online presence and/or in-demand products are often able to make long-term capital investments to scale up.
“This has been the case for Amazon, for example, which has accounted for more than 30% of total take-up so far this year, and Pets at Home which has agreed terms for a purpose-built 670,000 sq ft warehouse in Redhill Business Park.
“Conversely, other businesses such as 3PLs, often absorbing extra capacity from retailers, have increasingly been looking for greater flexibility and rent affordability to navigate through this heightened uncertainty.”