Record take-up, low vacancy rates and rising demand currently characterise the industrial and logistics real estate market. In fact, warehousing is the fastest growing sector of the UK economy, outpacing information and communication, as noted in the recent report from The Office for National Statistics (ONS). Consequently, the sector is gaining a profile amongst investors and policy makers that hitherto would have been undreamed of.
With take-up last year reaching a new record high of 55.1m sq ft, 86% above the long-term yearly average, Savills has reported that this demand for space means the vacancy rate has plummeted to an all-time low of 2.9%, causing rents for occupiers to rise sharply.
Clearly, we need more space. According to a report published by The British Property Federation and UKWA earlier this year, demand for logistics space across England has been underestimated in planning policy for a decade, with poor recognition of what it called ‘critical infrastructure’ in the National Planning Policy Guidance. If these constraints could be overcome, the report suggested warehouse expansion would be 29 percent higher than the already stellar growth seen across the UK.
UKWA has long been calling for fundamental change in land use planning, arguing that warehouses provide an essential service for communities and should be baked into planning policy in the same way that GP surgeries and schools are an accepted part of critical infrastructure planning. To date the government hasn’t been listening.
Warehouses need to be built closer to communities. As well as being better able to serve consumers, warehouses located in or near to populous areas are more attractive to potential employees. Proximity to place of work – as well as a conducive work environment – are key considerations for workers looking for a better work/life balance.
These market forces, along with net zero targets, are shaping the warehouses of tomorrow. Savills report for UKWA on the size and make up of the warehousing market has already identified that warehouses are getting larger and taller, while JLL has described human-centric warehouse design as ‘very much to the fore’.
JLL’s recent survey suggested that technology is expected to have the greatest impact on building design in the coming years, along with sustainability.
Warehouses that are both energy efficient and self-sufficient, with on-site renewable sources and technologies, are resilient sites. In a future where climate risk will be inextricably linked with financial risk and where resilience will drive competitiveness, the ability of warehouses to generate and manage their own power will be crucial to their continued long term success.
Clare Bottle
UKWA, CEO
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