Warehousing: demand outstrips supply

The supply of warehouses throughout the UK has been struggling to keep pace with demand, with it being reported in January 2022 that the current vacancy rate in the logistics property market throughout the UK was only 2.9% – the lowest vacancy rate ever recorded.  It was also reported that supply had significantly reduced over the past year by 26% throughout London and the South East.  Kent has far fewer warehouses available at present than the UK average (just under 2%).
With supply struggling to keep pace with demand, this article considers the current demand for warehouses in the UK as well as outlining some of the reasons why warehouses throughout the UK are in such short supply.

Lockdowns

The Coronavirus pandemic lockdowns of 2020 and 2021 caused an unprecedented growth in online shopping and the lifting of those lockdowns then caused the pent-up demand for goods generally to be released.  The result has been a corresponding increase in demand for, and in the volume and size of, warehouses throughout the whole of the UK.  In June 2021, Savills released a report which found that online retailers have increased their warehouse footprint by over 50 million square feet yet demand remains.  This swift change has been felt particularly acutely in the South East where the supply of warehouses had already been very tight.  Indeed, industry experts were warning back in the Autumn 2021 that the UK could run out of warehouse space within a year.

Online shopping

The pandemic has completely changed the way in which everyday consumers view online shopping.  The consumer has come to expect next day, or even same day, deliveries for their orders which has resulted in some logistic companies having to completely change the way in which they operate. The growth in online shopping has meant that there has been an increase in demand for warehouses throughout the whole of the UK.

Brexit

In addition to the pandemic, Brexit has caused huge upheaval to the supply chains of logistics companies over the last few years.  International border restrictions and labour issues (such as the recent HGV driver shortages) has meant that many firms have started to look to move their logistical hubs/warehouses back to the UK from abroad. This process, known as re-shoring, has also contributed to the significant increase in demand for warehouses throughout the UK.

Planning control

Some commentators have looked to blame the UK’s planning system, arguing that it restricts growth.  They say that the strong future growth that is needed in the industrial and logistics sector will simply not be possible unless enough land is allocated to development, for example, to build  new warehouses.  Some experts believe that the UK’s National Planning Policy Framework prioritises the need for housing, and that more emphasis should be placed on economic need (such as the need for more warehousing).  It is argued that the Local Plans are not delivering enough viable sites for the development of warehouses throughout the UK.  Overall, there is a broad feeling amongst critics that the UK’s planning system, and the guidance contained within it, needs updating in order to facilitate the necessary growth within the industrial and logistic sector.