Recent reports have indicated that a number of Chinese businesses are investing in UK warehouses due to an increase in e-commerce activity. According to data presented by STO Express Europe, a delivery services company headquartered in Shanghai, Chinese exports make up 70% of the UK’s e-commerce market.
STO rents around 10 warehouses in the UK, with most of its warehouses established back in 2015. STO’s annual shipments grew 50% in 2016 thanks to its rental of UK-based warehouses.
According to experts, the trend on investing in UK warehouses will continue even after the recent Brexit vote, especially when the time comes that European ports will not be able to handle the bulk of items being imported to the UK.
When British voters chose to exit in the June 2016 referendum, it left a lot of uncertainty around whether the country would be able to trade freely in the European Union, and it is still unclear how those partnerships will be impacted. FXCM says that Brexit may represent the will of the majority of British voters but the road to actually implementing it from the EU is full of complications. One of such complications is mainly using UK’s ports as the central avenue for imports since transportation by air from countries in the Eurozone will be more expensive for UK-based merchants if a Hard Brexit is initiated upon the submission of Article 50.
Several British investment companies like Investec are already taking advantage of the trend by investing in warehouse businesses such as Prologis and Tritax Big Box. Additionally, PGC Capital, which was originally based in Shanghai, will be investing around £117.2 million to help Chinese investors garner revenues. PGC is already eyeing around five warehouses in Manchester as possible investments.
Atul Shinh, a spokesperson for Investec, said that putting money into warehouse management companies provides a steady stream of income, with big investment returns from rent and appreciation from capital.
Renting warehouses has seen a steadily increase due to the ongoing demand for storage.
Oscar Lin, manager of London-based Onetwothree Logistics, says that his company has seen rent increases every year. However, due to the e-commerce sector prospering in the current marketplace it seems companies such as Onewothree have no other option to pay the spiraling costs so it doesn’t impact their business
“We only found the Ipswich warehouse last year, after searching for about a year and a half, because warehouse facilities are in demand in that area,” said Lin. “With increased warehousing facilities, we are able to serve customers more efficiently.”
Chinese companies aren’t the only ones that have noticed the surge in foreign companies snapping up UK warehouses. This month, Australian retailer Bunnings opened its first UK warehouse as part of a £500m investment.
The opening of Bunnings’ first warehouse is a move by the company to try and tap into the UK’s £38-billion garden and home improvement sector. It is projected that the company will open a further 10 stores by the end of 2017.
Bunnings’ parent company Wesfarmers plans to invest £500 million in order to install warehouses across the UK and Ireland within the next 5 years. It has announced a proposal to rebrand former Homebase sites under the Bunnings’ name.