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Robust Growth and Ongoing Demand Forecasted for Warehousing Sector

Robust Growth and Ongoing Demand Forecasted for Warehousing Sector

A recent report commissioned by the UK Warehousing Association (UKWA) and conducted by Savills reveals impressive growth within the warehousing sector, indicating sustained expansion and a continuous surge in demand. Since 2015, the sector has witnessed a remarkable 61% growth, with total warehousing space nearing the 700 million sq ft mark. Furthermore, the development of warehouses exceeding 1 million sq ft has surged by an astonishing 345% over the past decade, paralleled by an 813% increase in occupancy by online retailers.

At the recent UKWA National Conference, the unveiled report underscores the pivotal role of warehousing in supply chains, the UK economy, and our daily lives, according to UKWA CEO Clare Bottle. It paints a vivid picture of sustained growth and the sector’s adaptability in response to evolving social and supply chain dynamics, including the surge in online shopping and nearshoring trends.

Highlighting the growing significance of warehouses, the report asserts, “The role of the warehouse has never been more important, and the demand for warehouse space continues to rise.” Warehouses now serve as central hubs for supply chain activities, encompassing tasks traditionally handled by manufacturers and retailers, including managing returns, repairs, and recycling, thereby becoming integral to the circular economy.

The escalating demand for warehouse space is driven by a confluence of factors, including the need for increased space, manpower, and technological advancements. Moreover, global geopolitical events have underscored the vulnerabilities of lengthy supply chains, prompting manufacturers to maintain higher inventory levels closer to consumer markets to enhance supply chain resilience. Consequently, there has been a surge in warehouse proliferation, accompanied by a trend towards larger warehouse units.

Third-party logistics providers (3PLs) continue to dominate warehouse occupancy in 2024, with online retailers witnessing the most significant surge in occupancy. This underscores the necessity for strategically located warehouses near population centres and along motorway corridors to meet the escalating demands of online consumers.

Geographically, there has been a notable shift, with the East Midlands retaining its position as the largest market for warehouse inventory, witnessing a 66% rise. However, other core markets, including the West Midlands, South East, Yorkshire, and the South West, have also experienced substantial growth. The North West, while exhibiting a comparatively lower growth rate of 41%, faces limitations in future growth due to inadequate allocated development land, as highlighted by Savills land supply data.

Kevin Mofid, head of industrial & logistics research at Savills, remarks, “The growth of the UK logistics property market reflects its critical importance to manufacturing and retail supply chains. However, the changing geographical landscape poses challenges in meeting future demand.”

In conclusion, Clare Bottle emphasises the acute shortage of high-quality buildings and development land, urging for government recognition and support for the warehousing sector’s vital role in the national economy. As the nation approaches a general election in 2024, it becomes imperative to effectively communicate the sector’s significance and advocate for necessary support and infrastructure.

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BDC 317 : Jun 2024