Take-up of industrial warehouse space in the UK is set to hit 3.06 million m2 by the end of 2019, a 33% increase on the long term average, according to new data from Savills.
Savills data shows that online retail is no longer dominating the market. Instead there has been a significant increase in activity by 3PLs, with take-up reaching 771,095 m2 by Q3 2019, the highest since records began. Whilst there has been little empirical evidence of Brexit stockpiling, 3PLs could be seen to be capitalising on the continued uncertainty, taking space in anticipation of businesses looking to hold more stock within the UK.
Key deals in 2019 include Europa Logistics taking 48,774 m2 in Corby, DHL taking 49,981 m2 in Manton Wood and DSV occupying space totalling 450,000 sq ft (41,806 sq m) in Appleby Magna.
Food in focus
Savills also notes the growth of the online grocery sector, which has intensified in recent years with the rise of Ocado and competition from the likes of both Hello Fresh and Amazon Fresh. Consequently, take-up by food production, grocery retail and wholesale occupiers has grown, on average, by more than 400% in the last decade.
Richard Sullivan, national head of industrial & logistics at Savills, comments: 'The growth of the online grocery sector has put focus on an interesting sub market that has garnered little attention until now.
'Due to the shift in consumer habits when it comes to food in particular, we are likely to see an increase in demand for cold stores, both chilled and frozen. Because of their highly bespoke nature, this kind of space is rarely built speculatively so it will be interesting to see how developers respond to an uptick in demand.'
The food market has changed considerably over the past decade, with bulk buying, discount grocers, convenience and ultra-convenience via delivery and trends such as veganism leading to longer, more complex supply chains.
Another key issue the industrial & logistics sector is seeking to address is climate change. Not only will cold storage be crucial to limiting food waste, but as the earth gets warmer, the Cold Chain Federation warns that the number of units will have to treble globally by 2050 in order to cope with levels of consumption.
Shane Brennan, chief executive of the Cold Chain Federation, adds: 'There is robust and growing demand for cold chain services in the UK. The problem is that the majority of facilities we rely on are old, inefficient and increasingly unfit for purpose.
'The next ten years will bring increasing energy costs, new carbon related taxes and tougher regulatory standards. This means that businesses across the supply chain must invest in refitting, rebuilding or replacing old facilities. The property sector will have a big part to play in helping to achieve this,' Brennan adds.