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Demand for warehouse space continues to soar as online boom lifts prices

Camilla Rydzek
09 May 2022

New figures from property experts at Colliers have revealed that take-up and prices for logistics space have continued to increase.

The battle for logistics space is continuing to intensify despite the cost-of-living crisis and shoppers’ return to the high street, according to new data.

Demand for warehouses soared during the pandemic as shoppers increasingly moved online. However, new figures from real estate experts at Colliers reveal that take-up and prices for logistics space have continued to increase despite the easing of restrictions and pressure on consumer spending.

Colliers said take-up for large units – more than 100,000 square feet – grew to a total of 11.3 million square feet in the first quarter of 2022. The company said this represents an 11% rise on the five-year average for the quarter, and a 1.9% monthly increase.

It added that logistics site availability meanwhile has dropped by 22.4% year on year as facilities continue to be snapped up.

Andrea Ferranti, Head of Industrial and Logistics Research at Colliers, said the development of new sites is unable to keep up with demand, thus causing a surge in prices.

He added: “The demand is huge and the speed of developments means we don’t see any significant change in the next 18 months. It’s really difficult to get planning for these sites and there are a lot of requirements when it comes to locations and size, so that limits the ability for growth too.

"Construction costs are soaring and there are other cost pressures on the occupiers, so this becomes the latest pressure if they want to keep up with online momentum. And most can’t afford to miss out.”

Len Rosso, Head of Industrial and Logistics at Colliers, said: “The supply and demand imbalance for industrial space shows no sign of lessening despite the efforts of developers to bring new space online at a rapid pace.

“There is currently 15.5 million square feet of new space under construction but, given the strong levels of demand, this will do little to ease the pressure. We are also seeing large businesses investing in long-term operational efficiency. This will put further demand on the best of the best stock, with new space being the highest in demand.”

In April this year it was reported that inflation rises across various sectors were at a 30-year high, with occupiers of logistics and distribution spaces set to see significant rises in their business rates bills following the next revaluation in 2023.

In late 2021 online fashion retailer ASOS formally opened a new 437,000 sq ft fulfilment centre in Lichfield, Staffordshire and the facility will serve customers in the UK and more than 150 countries globally.

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