Retailers in race for space as e-commerce boom drives warehouse shortage

New research said there is only around 18.1 million sq ft of available industrial space left for firms, representing a record low in supply.

Parcels are processed and prepared for dispatch at Amazon’s Fulfilment Centre at Kingston Park in Peterborough (Aaron Chown/PA) (PA Wire)

The UK is witnessing a shortage of supply of warehouse space after a surge in demand for logistics sites in 2021, according to new research.

Experts at real estate advisory firm Colliers said the take-up for large industrial distribution warehouses increased to record annual levels.

Around 50.7 million sq ft of large distribution warehouses were snapped up in 2021, representing a 3.6% increase on the previous year.

It reported that the soaring demand for warehouse locations has been accelerated by the pandemic-fuelled growth in online retail.

The logistics sector continues to benefit from strong tail winds driving online consumer spending to constantly elevated levels

Andrea Ferranti

The Office for National Statistics said last month that UK online retail sales increased to 30.1% of all sales in November, surging from 21.6% against the same month in 2019, before the pandemic struck.

Len Rosso, head of Colliers’ industrial and logistics team, said: “The latest ONS figures point to the fact that consumer shopping behaviour has really changed over the years.

“Rents will certainly rise, pushed by a landlord-favourable supply and demand imbalance, increasing land values and inflationary pressures on construction costs.”

Retail property owners have banked on growth in e-commerce continuing despite the easing of pandemic restrictions.

The research also highlighted that there was 11.1 million sq ft of speculatively built supply of sites over 100,000 sq ft completed in 2021.

Around 75% of this speculatively developed space has either already been let or is under offer, Colliers said.

It added that there is only around 18.1 million sq ft of available industrial space left for firms, representing a record low in supply.

Andrea Ferranti, head of industrial and logistics research at Colliers, said: “The logistics sector continues to benefit from strong tail winds driving online consumer spending to constantly elevated levels.

“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.

“Despite demand remaining elevated relatively to historical standards, companies will continue to struggle to find space and it’s all about survival of the fittest and who will be able to expand operations in this challenging business environment.”