The warehousing market in the UK has significantly outperformed other sectors in terms of growth in the last 12 months. However, further growth may be constrained by a growing shortage of available land, rising construction costs and the impact of Brexit now being felt by occupiers, particularly those in the e-commerce sector.
Recent data shows that 28.1 percent of all UK retail sales are now online, making the UK e-commerce penetration rate second to only that of China. This has grown from 19.7 percent in February 2020 before the pandemic and supports the prediction that 50 percent of all retail will be online by 2030.
While the demand for big-box warehouse development continues to be driven by e-commerce, new warehouses are also required to support the development of new technologies and clean energy. These new sources of demand mean the UK warehousing market is set to remain buoyant for the foreseeable future. However, the dwindling supply of available land and the availability of a suitable labour force to operate facilities are potential limiters on growth for the warehousing and logistics sector.
Warehouse construction costs have been volatile due to recent supply chain disruptions. Other macro factors are also having a destabilising effect, such as the instability in energy costs and the ongoing ramifications of Brexit.
The impact of the UK’s exit from the EU on 31 December 2020 is being profoundly felt by the supply chain and logistics sector, leading to delays and labour shortages. This, coupled with the shortage of suitable sites that can accommodate big box developments, means the sector will have to work smarter to maintain the equilibrium of supply and demand.
The logistics sector is potentially at a tipping point and requires strong leadership nationally and locally to maintain the contribution that the sector has to the wider economy.
Its central geographical position has made the Midlands the engine room of the UK’s logistics market. The so-called ‘Golden Triangle’ is an area that extends between Northampton, Birmingham and Leicester, and includes prime logistics parks placed along the M1 and M6.
However, the saturation point for large scale big box development in the Midlands warehousing is close to being reached, resulting in development pushing out onto the greenbelt, causing not only controversy but uncertainty over deliverability due to planning, labour and cost challenges.
Opportunities in the Northwest and Northeast of England are increasing with the continued investment by the UK Government in infrastructure projects.
With improved connectivity, a major focus of the Northern Powerhouse initiative and the new High Speed Two rail link on its way, the wider availability of suitable sites and greater access to labour, means the North is primed for the acceleration of warehousing developments.
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