Warehouses and industrial space are hot property for 2021

Jennifer Chappell Real Estate Counsel

The property industry is seeing a surge in demand for warehousing and industrial space which has been fuelled by the need for retail businesses to switch to online sales.

Earlier this week, it was reported that JD Sports Fashion entered into exclusive talks to buy Arcadia’s warehouse distribution centre in Daventry, with a frenzy of interest from several other retailers including Amazon, Ebay and Boohoo Group. In addition, Co-op’s 661,000 square foot regional distribution centre in Biggleswade has reached practical completion this week and will be Co-op’s greenest UK depot, with further plans for growth in London and the South East.

The boom in online shopping during the coronavirus pandemic has seen more than one in seven UK retailers create roles to allow for an increase in digital sales and boost online capacity, according to a study by Barclays Corporate Banking.

Analysts estimate that the expansion of online sales could drive demand for up to 92 million square feet of warehouse space across the UK in the next three years. The traditional high street shop lease is being replaced by short to medium term flexible warehousing space and we are seeing a change in the types of leases being signed up, including a rise in use of turnover rents.

It is not just retailers that are demanding more warehousing, but also the industrial sector that is fuelling demand for space. Restaurants, cafes, bakeries and small catering businesses have adapted to the change by taking industrial space to set up kitchens for takeaways and online food delivery services.

The DIY sector and builders merchants have also adapted to the new ‘normal’ by offering click and collect at warehouse units, leaving shop spaces largely redundant.

According to property agent CBRE, take-up of UK logistics space in 2020 exceeded that of any other year on record, with take-up for the year totalling 42.97 million square feet.

It will be fascinating to see what happens when lockdown in finally over and whether consumers will flock to return to the high street, or continue with the new habit for online shopping from the comfort of home.