Twitter
Facebook
Linked In
RSS
Login or Register
New to InternetRetailing?
Register Now
Internet Retailing

This is your 1 complimentary article for this month

Become a member for unlimited and immediate access.


Register
Already a member? Log in here

How ecommerce and social distancing measures will impact future industrial and logistics demand for space

Linked InTwitterFacebookeCard
Warehouse space is set to be at a premium to service ecommerce growth
Warehouse space is set to be at a premium to service ecommerce growth
Sharelines

Increasing demand for ecommerce is pumping up need for some retail logistics space, hits stores hardest, warns Colliers

With the latest ONS stats revealing that retail online sales reached a record high of 22.3% in March 2020, changes in consumer behaviour – driven predominantly by social distancing measures – will continue to stimulate e-commerce related industrial and logistics property requirements. So warns the latest insights from Colliers International’s Q1 Industrial and Logistics webinar this week.

 

Len Rosso, Head of Industrial and Logistics at Colliers told listeners: “The underlying structural shifts that were present prior to COVID-19 have not abated, including the increase in customers shopping online. The current circumstance has only intensified this market growth and the industrial and logistics sector has witnessed a number of clothing and grocery related requirements in the market as a result of the pandemic due to companies stockpiling their products.”

 

He continued: “Many clothing retailers would have hoped to have sold their spring summer space by now. However, we are seeing summer stock coming over from China, Turkey and other manufacturing hubs and as a result, there has been a big uptick in short-term storage space for around 6-12 months. This will undoubtedly cause problems from a profitably perspective for retailers as it will mean they will need to spend more money, that they don’t currently have, to store products that can’t yet be put in the physical stores.”

 

He said: “With social distancing measures potentially lasting until the end of the year, this could have a further impact on supply chains and as a result, retailers and supermarkets in particular will potentially be seeking out larger footprints of warehouse space to store their goods. In addition, Some companies which have really struggled with supply chain problems during the pandemic will certainly be looking to upgrade their logistics space post COVID-19 to ensure there are no future issues.”

 

Rosso concluded: “Yet, it must be noted that the continued growth in online only trading within these sectors is limited by the supply-side response. Whether occupiers have the physical ability to scale up with the current land and property supply side constraints in many core locations remains to be seen.”

 

Industrial and logistics demand

The Colliers research also revealed that in Q1 2020, there was 7.5 million sq ft of take-up for letting 100,000+ sq ft, an increase of 10 per cent relative to the same period last year. However due to the current pandemic, Q1 2020 came in 20 per cent below the five-year Q1 average.

 

The statistics demonstrate that activity remained buoyant in January and February 2020, yet March data shows that in general, occupiers have not been committing to signing new future leases.

 

Amongst some of the biggest deals of the quarter, Aldi submitted planning permission in March to build 1.3 million sq ft at Interlink South in Bardon, Leicestershire, as part of its long-term expansion plans.

 

The market has also witnessed leading supermarkets, such as Tesco and Sainsbury’s, taking advantage of their existing network by either re-occupying space or provisionally extending terms where possible.

 

Supply

In terms of new supply, Colliers has tracked 4.4 million sq ft of speculative space under construction. This is on top of the space already or soon to be completed in 2020, which amounts to 3m sq ft. When compared to 2019 speculative activity, this was recorded at 8.5 million sq ft.

 

Andrea Ferranti, Head of Industrial and Logistics Research at Colliers International said: “Supply has increased marginally and now stands at 36m sq ft but we expect this to slightly increase again as the new supply planned for delivery this year may not be swiftly taken up.”

 

Rents

Two weeks after the typical quarterly deadline, Colliers International’s Property Management team collected 63 per cent of rent and 57 per cent service charge across all sectors. This compares with a typical quarter at 99.5 per cent and 89 per cent respectively.

 

Industrial occupiers of units over 100,000 sq ft and between 10,000 and 100,000 sq ft have seen the highest percentage of paid rents, 82 per cent and 70 per cent respectively.

 

Latest monthly figures released by MSCI for March 2020 reveal that all of the industrial segments are showing a healthy monthly growth with Standard Industrial at 0.2 per cent, London Industrial at 0.4 per cent and UK Distribution Warehouses at 0.2 per cent. That said, quarterly data for Q1 and Q2 2020 will shed some light over the short term direction of rents over the coming months.

 

Ferranti added: “Rents and rent free periods are still holding firm as landlords are waiting to see how the current business environment will pan out. On a positive note, there are a lot of markets in the UK that still exhibit a very tight supply but on average, we expect rents to plateau over the medium-term with incentives moving out slightly over the coming months.”

Linked InTwitterFacebookeCard

The InternetRetailing Newsletter

A curated update containing news analysis, reports, podcasts and opinion - completely free and delivered three times weekly

Become a Member

Create your own public-facing profile
Gain access to all Top500 research
Personalise your experience on IR.net
Internet Retailing
We are the magazine, portal and research source for European ecommerce and multichannel retail, hosting the board-level conversation for retailers, pureplays and brands across all of our platforms. Join the conversation.

© InternetRetailing Media

Latest Tweet

Internet Retailing
Tamebay
eDelivery
Twitter
Facebook
Linked In
Youtube
RSS
RSS
Youtube
Google
Linked In
Facebook
Twitter