The online retail boom is set to bring record levels of newly built warehouse space in the UK this year, according to Knight Frank.
Its research found that 40m sq ft of warehouse space is set for completion in 2021, double the amount finished last year. Much of the new space has already been let, as retailers and distributors increasingly order purpose-built logistics sites.
Online sales rose by £34bn year-on-year in 2020, and are expected to balloon to more than £150bn by 2024. Every £1bn of online sales equates to around 1.36m sq ft of warehouse space, researchers said.
Charles Binks, head of industrial and logistics at Knight Frank, said: “The robust forecast for online retail and increased competition for high-specification and well-located assets is driving development activity.
“Take-up over the past year has reduced the level of availability and Covid-19 has hampered construction, slowing the delivery of new stock to the market. Supply, particularly of high-quality space, has diminished.”
In 2020 online sales accounted for 27.9% of total retail sales and, with non-essential shops closed, e-commerce reached a record 36.3% market share in January. Retailers and distribution firms have responded by quickly growing their operations and expanding delivery services.
As a result, more than 50m sq ft of warehouse space was leased in 2020, compared to 34m sq ft in 2019.
Claire Williams, research associate at Knight Frank, said: “High levels of take-up in developments larger than 50,000 sq ft and the chronic shortage of quality space are encouraging both build-to-suit and speculative development… There is a need for more urban warehouse space, located close to the customer, in order to replenish stock in the required timeframes.”
The researchers added that warehouse rents are expected to continue growing over the next five years, in stark contrast with the uncertainty facing the retail and office sectors. The strongest annual rental increase is projected for London, rising by 3.2%. In the South East and East of England, rents are forecast to grow by 2.7%.
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