Logistics space was already at a premium pre-2020. Changes in consumer behaviours, a continued hunger for ecommerce and radical innovation as a result of technology were all creating some pretty significant shifts in demand. However, the arrival of the coronavirus pandemic has been even more seismic, generating record demand for UK logistics and distribution space that looks set to continue as long as the lockdowns do.
Peaking demand
In the third quarter of this year the demand for logistics and distribution space in the UK hit a record high as supply chains continued to expand to cope with the consequences of the pandemic. In the North West of the country take up spiked at 1.41 million sq ft, which boosted the total figure for the first three quarters of the year to an increase of 55% on the same period in 2019. This part of the country continues to be a focus for retailers and third party logistics (3PLs) keen to grow supply chains to ensure an ongoing resilient response to the COVID-19 crisis. Across the country as a whole take up for the first three quarters of the year has already outstripepd the whole of 2019.
Online retail likely to remain strong
Consumer habits were already moving in the direction of e-commerce prior to the pandemic but current conditions have meant that this has been embraced by a much broader demographic. Particularly notable is the older generation, many of whom have been forced to go online for the first time during the crisis to shop. It’s expected that this generation will stay online even after the lockdowns have eased thanks to discovering the benefits of shopping digitally. As a result logistics space that is well located and high quality has been in high demand with those who are looking to cater quickly to this new and much larger audience.
The logistics space boom
Warehouse space, last mile delivery centres and smaller fulfilment centres that are located closer to areas where lots of people live are at the heart of the logistics space boom. Across the UK the third quarter of 2020 was the busiest on record for this industry, with transactions processed on 16 million sq ft of logistics space. 40% of this space is attributable to ecommerce. However, this isn’t the only driving force – many short-term commitments have extended into longer term contracts as a result of the pandemic, such as space required for PPE storage. Amazon’s expansion and profit increases on the back of COVID-19 have been well documented and this has fed through into the retailer’s use of logistics space too, including expanding its big box and last mile network.
Looking beyond 2020
Brexit continues to be a factor for this industry despite the way that coronavirus has dominated this year. However, given the increase in demand the sector is in a good place to cope with even a hard Brexit. The only issues may be with supply of logistics space, which has reduced considerably as speculative development has dropped.
The e-commerce boom, combined with the pandemic, has created a huge spike in the demand for logistics space that looks set to continue for some time. Get in touch and see how we can help with your logistics space.
