Login
With more people opting for online shopping than ever before, the demand for warehousing space is climbing steadily. Here in the East of England, this presents an exciting opportunity for property developers and construction firms to diversify their portfolios and tap into a market that shows no signs of slowing down. Ben Cussons, Business Advisory Partner and Property & Construction Lead takes a look at the changes to retail spending and the opportunities this presents.
Earlier this year I attended the UK Warehousing Association roadshow at Port One Logistics Park and was interested to hear a presentation by Will Laing of Savills, who talked in detail about how our changing spending patterns are having a direct impact on the need for warehousing, particularly in the East of England.
I caught up with Will again earlier this month to explore this further and see what opportunity this may bring for the Property & Construction sector in the coming years.
The move to online spending
There’s no doubt that our spending patterns are changing.
Predominantly driven by convenience, but of course accelerated by forced social distancing during the Covid-19 pandemic, more and more of us are all too guilty of ordering online rather than visiting our local high streets.
In fact, the current trend forecasts that by 2027, 31% of all consumer spending will be online. Compared to just under 26% in 2023.
To put that into context, consumer spending amounted to £1.6 trillion (with £510 billion retail) in 2023.
And for every additional £1billion of spending online, an additional 775,000 sq. ft of warehousing is needed.
So, using the figures forecasted, that means an additional 55 million sq. ft of warehousing space will be needed nationwide within the next 2-3 years across the UK. That’s 69 sq. ft per home.
Factor in the growing population on top of this – and the Government’s predicted needs of 300,000 new homes each year – that’s a further 20.6 million sq. ft (or 280 football pitches to you and I) added each year.
Based on the predicted 35,000 homes needed every year in the region, at least 12% of that additional warehousing is going to be needed in the East of England.
Current warehouse space in East Anglia
Currently there’s 1.81million sq. ft of space available over 7 units across the East of England.
Of these, just one unit of 179,000 sq. ft is considered to be of grade A quality – Southgate 179 in Peterborough.
Beyond this, Peterborough 736 is another of the 7 units that has some space – with 736,000 sq. foot of an old Amazon unit classed as second-hand grade B space, accounting for 28% of the available supply. The remainder is all classed as lower grade.
Newer spec development stock has all been let – with the recent developments at Orwell Logistics Park all now gone. Leaving us with a current vacancy rate of just 4.85%.
Opportunities for the future
As reported by Savills, the East of England is currently one of the lowest areas for take up of warehousing space. Mainly caused by a lack of supply.
As it stands there’s nothing speculatively under construction in the region – with foreign investment going into other areas. Potentially decreasing the vacancy rate further as space is pushed elsewhere.
But with changes to planning legislation making the process slicker and improving build quality, and data centres now being classed as national infrastructure, the opportunity to grow in this area is huge.
And with the recent further reductions in interest rates there’s scope in diversifying from residential to commercial builds.
For property and construction firms, this growing demand presents an exciting opportunity to diversify into the lucrative world of industrial real estate.
However, with Sizewell C waiting to kick off properly and as businesses continue to adapt to a world where fast, efficient delivery is crucial, the need for strategically located distribution centres has never been more pressing.
With this increased demand one would hope there is ample opportunity to tend for and win work over the next few years. That’s not even factoring in the much needed spend in our regions’ infrastructure, but that’s perhaps one for another day.
To discuss any of the topics raised in this article, please reach out to Ben Cussons by calling 0330 058 6559 or emailing hello@scruttonbland.co.uk
Statistics sourced from: Savills Research and Savills Research using Statista and ONS as presented by Will Laing, Associate Director at Savills at the UKWA Ipswich Roadshow Summer 2024
Back