Much has been said about Brexit fears creating a warehouse landlord market, leading to very tight choice for top grade premises in certain areas but has it been overhyped, and in a post-Brexit climate are other forces at work which could favour warehouse renters rather than landlords?
There are signs that following a better than expected first half for landlords in terms of demand and take-up the market is easing. In the first half of 2109, which saw a 12.064 million ft2 take-up of big sheds, the figure was 6.7% down on the first half of 2016, and was only in line with a 10-year average. A dispassionate look at rent rises for big sheds over recent years also leads to wondering if certain quarters have tried to talk up the market, with Brexit used as a prodding fork. The fact is that rents for big sheds have increased only 3.9% a year on average over the last five years, according to Savills’ latest Big Shed Bulletin. Brexit, meanwhile, is only a temporary blip, if not a red herring. The scope for future rent rises is also looking less rosy as supply of speculatively-built premises rises, and could reach as much as 10 million ft2. According to market forecast house, Realfor, rent growth will be a more subdued 1.8% a year until 2023. But what other forces are at work which could favour renters/occupiers over landlords?
The need to cut logistics costs and bow to the paradigm shift in consumer buying habits has spurred large companies to go for ultra-large sheds, often taking advantage of height with automated stacker cranes. But what does that mean for existing smaller warehouses? Jaguar Land Rover (JLR) is a good pointer. It has revealed plans to build a giant parts distribution warehouse in the Midlands with developer IM Properties as part of a £2.5 billion cost-cutting drive. At 2.9 million ft2 it will be the second largest warehouse in the world after Boeing’s Seattle premises. It will gather spare parts for JLR cars from suppliers in the UK and abroad for shipment to dealers and garages in 80 countries. If given the green light by council planners, it will open in 2022, consolidating onto a single site the company’s 10 smaller UK facilities. That means a lot of smaller shed premises coming on the market from just one company. Extrapolated nationally, it seems that the market for smaller sheds could be far from bright.
Those companies feeling restrained by the uncertain global business outlook may have cheaper and safer alternatives to committing to big, long-term rental/leasing deals. If warehouse height is tall enough in existing premises there may be the option of adding mezzanine levels, and where the aisle space is typically 3.5 mt or more wide then consideration of narrowing the aisles to 1.6 mt for dedicated VNA or articulated forklifts could be another option.
The trend to monster warehouses brings certain increased operating risks and the worst of these is fire. The usual option is to go for sprinklers but these can be quickly overwhelmed, as was the case with the multi-million pound fire loss of the Ocado warehouse, plus significant future sales disruption, early this year caused by an electrical fault at battery charging units, which set fire to a plastic lid on top of a grocery-carrying robot. Stored goods can also be ruined by the sprinkler water. Depending on the circumstances, an oxygen reduction system, usually based on nitrogen, could be an option. The system is suitable in automated warehouses, cold and chill stores, food warehouses and paper mills.
Currently, two automated storage and retrieval systems (ASRS) will be protected by an oxygen reduced atmosphere to prevent fires at the 300,000 mt2 Saudi distribution centre for Binzagr Co, which will be storing goods for international food and drinks brands like Unilever, Carlsberg, Heinz and Hershey. The logistics consulting engineers, Miebach Consulting, expect the variety of automation schemes to triple productivity with the same labour force and cut processing time for each product by 10 days.
Bill Redmond
Features Editor
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