Britain is fast running out of warehouse space as the boom in online shopping leads retailers to open bigger distribution hubs.
The vacancy rate for logistics space has plunged to just 1.53%, or 7.1m sq ft, the lowest on record, according to CBRE. By contrast, this time last year about 5% of the UK’s total warehouse space was available to let.
Amid a desperate battle for space, several companies have agreed recently to pay 20% above the asking price, CBRE said.
In part, there is a shortage of supply. Between July and September, 36 deals were completed for 10.9m sq ft of logistics space, compared with 45 deals for 13.6m sq ft in the same quarter a year ago.
But there is also a rise in demand. Some 39% was leased by online retail companies, with warehouse rents rising sharply. CBRE estimates that a top-quality shed around the M25 will rent at about £18 per sq ft, compared with £16.50 this time last year.
Investors have rushed to put their money into the sector. Big funds and developers invested more than £3bn in warehouses between July and September, meaning that total investment in 2021 has surpassed last year’s record £8bn.
More warehouse space is now under construction, with 13.75m sq ft being built during the third quarter.
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