A recent report released by Savills, in association with the UK Warehousing Association (UKWA), highlights a critical lack of warehouse space in the UK. Three factors that point to a rapidly developing issue for the sector are:
- Supply of warehouses in the UK is currently 32 million square feet
- There is a headline vacancy rate of 7.5%
- 20% of the stock is not fit-for-purpose
Lack of supply is not the only issue
The study also revealed that land will become increasingly scarce in prime logistics locations like the East Midlands. So it’s not just about lack of supply, attention also needs to be paid to the way that supply is used.
They report that, of the 424 million square feet of existing warehouse space, only another 32 million square feet is in development for future demand. And of the 32 million sq ft currently in development nearly 10 million is not fit for current warehousing requirements. This is an alarming amount considering that 51% of warehouses are purchased as Build to Suit units.
The UK economy relies on a supply of warehouse space that is fit for purpose and not addressing shortfalls now will negatively impact the UK economy.
Kevin Mofid, Head of Industrial Research at Savills, stated that: “The availability of modern and fit for purpose warehouse space has the potential to be a real pinch point for the logistics sector in the coming years”.
This isn’t a new concern. In 2012 the UKWA highlighted that the recession had made it increasingly difficult to fill warehouses and, to avoid paying the tax, many warehouse owners had simply demolished empty buildings.
Roger Williams, chief executive officer of UKWA, commented:
“When the Empty Property Rate Tax Rules were changed in 2008, Ministers justified the move on the grounds that the reforms would provide an incentive for owners to re-use, re-let or re-develop their empty properties.
“It was also felt that the changes would result in an increase in the supply of commercial property available to new and existing businesses, thereby helping to reduce rent levels which burden the competitiveness of the UK. Neither of these things happened.
“The fact is that the tax has not only encouraged the early demolition of older empty warehouse buildings but could also be said to have discouraged the construction of new speculative warehouses.”
As a result, companies looking for warehouse accommodation are still faced with a shortage of available warehouse space and are being forced to pay high rent rates for the use of decent facilities in prime locations.
A growing area within the storage sector is online retail fulfilment. With the rise of the internet and ecommerce opportunities, the way we shop has changed forever. As a result, the storage demands for online retailers will only continue to grow.
However, many businesses do not have the time, staff, specialist expertise or storage space to be able to handle all their own warehousing and transportation. One way to handle this would be to outsource these services with a growing number of companies who are now able to cover fluctuating business demands.
They also make considerable cost and time savings, boost profits and can provide their clients with a more efficient service, while enjoying more freedom to focus on their core business. At the same time, they are able to make better use of their own storage space, and can benefit from the expert knowledge and skills which specialist transportation and warehousing service providers have.
In order to satisfy the growing demand for storage and the use of e-fulfilment services, we have recently acquired extra warehouse space at both our Leicester and Essex locations. This extra capacity complements our existing international and domestic offerings and positions us to be able to fully service our customers’ requirements into 2017.
Your shipping, storage and distribution needs; all under one roof.