A shed shortage: how can the logistics industry keep up with demand?

The logistics industry is booming. The continual rise of ecommerce and rapid expansion of Amazon has meant it’s one of the few industries to go through a period of growth during the pandemic.

Even before Covid, people were becoming more heavily reliant on online services, and the current situation has served to accelerate the process.

Property agent Knight Frank say ‘that for every additional billion pounds of online retail sales, 1.36 million sq ft of warehouse space is required’.

Going by that metric, the marked increase in online sales during 2020 will create a need for 30 million sq ft of extra space. That’s the equivalent of 270 football fields.

It means sheds are in high demand, and across many different sectors. Retailers, online grocers, data centres, even food delivery services, all need space to store their increasing level of stock.

Added to that, the departure from the EU means UK companies increasingly see it as much more cost-efficient and operationally resilient to have as many of their storage units inside the country as possible.

And it’s also not just a case of how many sites the industry needs, but finding the right location to build them in. Traditionally, warehouses have found their home in what’s known as the Golden Triangle – an area in the east Midlands between the M1, M6 and M69 motorways – that serves as a central location to deliver goods out across the country.

But with the promise of slashed delivery times from Amazon and the like, there’s a greater need for sites closer to city centres. Especially the capital.

Any available space within the M25, however, is in short supply. Local councils are unlikely to agree for developers to build on the green belt and are cautious of any development that’s likely to bring more vehicles on to the road, and more pollution into the atmosphere.

Funders of these projects are equally environmentally conscious. Private equity firms are setting ambitious targets to reduce their portfolio’s carbon footprint, with net zero projects becoming increasingly more regular.

Many logistics companies are making more of a considered effort to explore renewable energy sources. Amazon pledge to be fully powered by renewable energy by 2025. But storing and generating renewable power means finding more space that hard to source.

Investors in the logistics sector are clearly going to have be creative about where they find the next opportunity. A growing trend looks to be in repurposing failing retail parks.

Last year, Prologis invested £50m in a 128,000 sq ft retail park in Edmonton north London to be converted into warehouses. Tritax and Delancey have also acquired six retail parks in the southeast worth a total of £290m with the view to turn all six sites into warehouses for online sales.

But there’s another sector in the market for redundant space too. Local councils are under immense pressure to green light more residential units and see these locations in the southeast as prime housing opportunity.

David Sleath, CEO at Segro, said in The Sunday Times that ‘he expects shed masters soon to be required to build flats on top of warehouses to satisfy the need for more housing. Warehouses could even be constructed underground.’

So once again, as society’s habits continue to shift, investment in mixed-use and repurpose looks to be the way forward for a thriving industry to keep pace with growing demand.

But the industry needs these warehouses now. And long delays at our planning offices mean planning permission decisions are taking even longer than usual.

At MX, our Planning Costs tool covers the costs of an application if planning isn’t granted. It safeguards the funders investment and allows a development to continue without having to wait for permission to be granted. Take a look at our product sheet to find out more.

https://www.thetimes.co.uk/article/property-industry-marvels-at-rise-of-the-shed-masters-tvmtmd80v?shareToken=d0ec8ac8667a8403956ae2604d0d34fb

https://www.knightfrank.co.uk/blog/2020/10/08/rise-of-online-retail-sales-will-drive-demand-for-92-million-sq-ft-uk-warehouse-space