Only 18.1 million ft2 of industrial space left due to pressures of e-commerce

LinkedIn +

Industrial occupiers are in a race for space as the UK is experiencing the lowest level of supply ever recorded, according to research from Colliers, with only 18.1 million ft2 left, due to demand for logistics units continuing to be driven by the structural change in consumer spending patterns.

Colliers states that take-up in 2021 for industrial distribution warehouses of +100,000ft2 reached 50.7 million ft2, up 3.6% year-on-year, a new record for the sector.

The research demonstrates that investors and developers are responding to this demand, with 11.1 million ft2 of speculatively built supply of +100,000ft completed in 2021. This is the equivalent of 26 Wembley Stadiums and 49% more space than in 2020. However 75% of this speculatively developed space in 2021 has either already let or is under offer.

“The logistics sector continues to benefit from strong tail winds driving online consumer spending to constantly elevated levels,” commented Andrea Ferranti, Head of Industrial and Logistics research. “High levels of occupational activity and demand for new warehouses – due to the unceasing expansion of occupiers’ supply chains to keep up with e-commerce sales and online deliveries – will remain elevated throughout 2022. This will be supported by the provision of new space with global occupiers also working towards decreasing their carbon footprint.”

The latest ONS figures reveal that the share of online sales of total retail sales have increased to 30.1% from 21.6% in November 2019 prior to the pandemic. So, Colliers predicts an annual e-commerce share of circa 29% for 2021, potentially a new record. Demand for new industrial warehouses will remain elevated and rents will continue to rise strongly as a result throughout 2022. This rental rises will continue to trouble occupiers looking to bolster their ability to keep up with the increasing demand for speedy and timely deliveries.

“The latest ONS figures point to the fact that consumer shopping behaviour has really changed over the years,” added Len Rosso, Head of Industrial and Logistics at Colliers. “Rents will certainly rise, pushed by a landlord-favourable supply/demand imbalance, increasing land values and inflationary pressures on construction costs. As a result, developers and funds will be reluctant to agree a set rent in advance for pre-lets on purpose-built projects and speculative schemes. This strong occupier market will continue to attract investors and we expect further yield compression over the first half of this year.

“Although we are tracking circa 18 million ft2 of speculative supply advertised for completion by the end of this year, the sector really needs this extra space to function properly and given the strength of the demand, we believe that the market will not be oversupplied in 2022.”

Share this story: