Fast online growth and Brexit uncertainty has led to record take-up of logistics space in 2020, new analysis suggests.
Real estate services firm Cushman & Wakefield predicts that by the end of this year, nearly 50m sq ft of UK logistics space will have been taken up during a year marked by Covid-19 lockdowns and preparations for Brexit. The nearest previous highs were of 40m sq ft in both 2008 and 2018.
In the fourth quarter alone, take up is set to pass 12.5m sq ft – 54% higher than the 10 year average, according to Cushman & Wakefield, which says that ecommerce, led by Amazon, has driven demand during the year. Extra space was needed as the industry adapted to high levels of online sales during the Covid-19 pandemic. Some 38% of space was taken up by ecommerce retailers, carriers and other delivery businesses – excluding 3.5m sq ft of short-term lettings that were required in order to deal with fast growth in inventory levels at the beginning of the pandemic.
The largest deal of the fourth quarter, for 870,000 sq ft for logistics company the Weerts Group in Bury St Edmunds – the Belgian group’s first UK investment – also showed strong demand from third party logistics providers (3PLs) both in response to the pandemic and ahead of Brexit, says Cushman & Wakefield.
Now availability has fallen by 5% to 62m sq ft, and speculative development is starting to come forward.
Richard Evans, head of UK logistics and industrial at Cushman & Wakefield, says: “After a record-breaking year and dwindling availability in many regions, developers have sensed the opportunity and we are starting to see speculative development picking up again after a pause during the pandemic. We are currently tracking almost 5.3 million sq ft of committed speculative development for 2021, just above the annual long-term average. Looking ahead we expect to see more as the economy recovers and the sector continues to react to Brexit and the structural changes in retail.”
Bruno Berretta, associate director, UK industrial and logistics research and insight at Cushman & Wakefield, says: “A last-minute Brexit deal is not yet off the table. Whatever the outcome of negotiations is, the rules of the game will change from January 1. In the short-term we can expect disruptions to supply chains, which is already visible in some UK ports. Many UK based businesses are choosing to hold more stock to mitigate against such risk and this is boosting demand for storage and distribution space. The longer-term implications of Brexit will also depend on the terms of the new trade regime that will come into force from January.”