Supply chain challenges driving record warehouse take up
Knight Frank’s preliminary data shows that take up of warehouse space in Q3 2021 totalled 15.7 million sq ft, bringing the total amount of space leased this year to 46.9 million sq ft.
This is 27 per cent above the Q1-Q3 2020 total and puts the UK industrial & logistics sector on course for a record year, as the unprecedented levels of occupier demand looks set to ensure that the industry will beat the 51.6 million sq ft of space taken in 2020.
In addition to ecommerce-driven demand for warehouse space, the recent supply chain crisis has demonstrated the need for greater supply chain resilience, and this is driving new sources of occupier demand. The shortage of HGV drivers, labour and materials, due to a combination of Covid-19, post-Brexit customs measures, and the Suez Canal blockage earlier this year have highlighted the need for simplified, shorter supply chains and shorter more direct routes to consumers. Companies have accelerated efforts to secure warehouse space where they can hold high levels of inventory close to consumers, minimise delays and ensure uninterrupted service. Food manufacturing and indoor farming are examples of other occupiers taking space recently.
The strong underlying structural trends driving occupier demand has seen the sector attract GBP10.8 billion in investment from UK and global institutions in the first three quarters. This is already higher that the GBP10.2 billion that the sector recorded in 2020, with Knight Frank estimating total turnover for the year to reach GBP13 billion. This will exceed the previous record annual turnover of GBP11 billion which was reported in 2017.
Claire Williams, Industrial Research Lead at Knight Frank, says: “Strong levels of take up have been recorded over the past three quarters but the shortage of available space in the market is likely to dampen the level of uptake in the fourth quarter. Last mile logistics operators, parcel carriers, supermarkets and retailers have been competing for suitable space in a chronically undersupplied market over the past 18 months. Now with the driver and labour shortage and border delays causing severe disruption, aggravated concerns have caused companies to bring forward warehouse expansion plans across the logistics sector. Many are discovering that quality warehouse space that meets size, location and specification requirements is scarce, given high levels of take up and construction plummeting due to increased costs and lead times for materials.”