The UK’s booming warehouse market can stand up to a pullback from Amazon, the boss of a number one logistics property developer has mentioned, as ecommerce fuels demand for area.
The ecommerce large took 1 / 4 of all UK warehouse area leased in 2020 and 2021, however mentioned earlier this month that it had overextended through the pandemic. That announcement wiped about 10 per cent off the worth of the most important shed builders within the US and UK.
But Andrew Jones, chief government of city logistics developer LondonMetric Property, mentioned that demand was more likely to proceed to outstrip provide, because of a rush to onshore provide chains and the expansion of smaller ecommerce companies.
“Amazon is so good, they are the high priest. But there are lots of smaller retailers playing catch-up,” Jones mentioned. “That’s supplemented by more onshoring, driven by geopolitical events but also black swan events . . . nobody expected a tanker running aground in the Suez to disrupt supply chains.”
LondonMetric on Thursday reported a giant soar within the worth of its property, that are principally warehouses near metropolis centres. The worth of the corporate’s portfolio grew nearly 40 per cent within the yr to the top of March, from £2.6bn to £3.6bn.
Shares within the firm rose nearly 5 per cent to 259 pence following the announcement.
“I’d rather own [warehouse hub] Park Royal than Bond Street right now,” Jones mentioned.
Analysts at Peel Hunt mentioned there was potential for additional progress and “the company is extremely well placed to navigate and take advantage of macro changes”.
Companies are already scrambling to seek out warehouse area nearer to their house markets to guard themselves from provide chain disruptions similar to these attributable to the pandemic, the struggle in Ukraine or the blockage of the Suez Canal in 2021, Jones mentioned.
Vacancy charges in UK warehouses are about 1.5 per cent, a “critically low” stage, based on property agent CBRE. The provide of recent inventory is more likely to stay constrained as a result of planning approval takes time and websites are arduous to return by.
That has pushed rents within the warehouse sector up quickly prior to now yr, and put strain on the availability of accessible area. LondonMetric’s internet rental earnings elevated 8 per cent to £133mn within the yr to the top of March.
A typical warehouse lease lasts about 5 years, and Jones mentioned that renegotiations going down now had been for rents nearly 50 per cent above their 2016 ranges.
He predicted hire rises would speed up within the coming yr and that they might most likely drive out some mild industrial companies that would not afford rents paid by new financial system corporations.
“Metal-bashers and MOT [test] centres might get pushed out by dark kitchens and q-commerce,” he mentioned, referring to so-called “quick commerce” grocery supply teams.