Online shopping makes warehouse space hot property

New research by Savills for the UK Warehousing Association shows a dramatic increase in so-called supersheds over the last six years. The amount of square footage available for warehouse spaces has risen 32% from 428m sq ft in 2015. That's 2,396 football pitches of extra space available for warehousing and logistics.

Established logistics firms are struggling to keep pace with the demand for online retail, a trend accelerated by the pandemic. Warehouse space is now hot property and construction is faced with a critical challenge.

Prologis is a case in point. Although its biggest park in Northampton can be seen from the M1, they're running out of space. Hundreds of construction workers are currently busy expanding the site, and while the work is speculative, the demand is not. Speaking on behalf of Prologis, Robin Woodbridge, head of capital deployment, said each shed was being let before completion which didn't happen very often.

Changing face of the high street

It's not so long ago that investors preferred to pump their money into the high street. But times have changed with the warehouse sector struggling to fulfil demand as the high street lies empty. The occupancy mix of the supersheds has also changed. Where once high street retailers dominated, now third party logistics providers like DHL and Yodel need the space for fulfilment centres.

But the biggest takeup has been by the pureplay online retailers. Operators like BooHoo who have no physical stores have increased their warehouse footprint by 614% and now occupy more than 60m sq ft, up from 8m sq ft just six years ago.

Jobs and training

It's estimated that for every billion pounds spent online, an additional 775,000 sq ft of warehouse space is required to support it. At Dirft work is currently underway on another warehouse space that will be Royal Mail's biggest parcel hub, capable of processing one million parcels a day.

When the park is finally complete, 15,000 people will be employed and a new training academy will support those wishing to make a career in logistics. As online retail has grown, the type of people required to work in warehouses has changed out of all recognition. Warehouses with their robots and automation are centres of technical excellence, requiring data scientists and robotics engineers, not men in brown coats.

Peak shed

It seems unlikely that the UK will reach the peak of the warehousing boom any time soon. Demand continues to soar, with companies requiring 232% more space in the first quarter of 2021 than in 2020. But does the race for space reflect something more profound than simply a change in our shopping habits?

Much of the demand for warehousing is coming from manufacturing and automotive as electric vehicles begin to crossover into wider acceptance. Some analysts also believe that Brexit will see companies storing more goods in the UK.

Peter Ward, chief executive of the UK Warehousing Association, says the government needs to start taking notice of this fast-growing sector and its importance to the economy. He says it's time to start baking the warehousing phenomenon into infrastructure planning as a million new delivery points are expected to be created over the next five years.