New data shows why UK warehouse investment has hit a record high

There has been a notable increase in the number of investors looking to invest in the UK’s retail logistics sector, as demand for warehouse space soars.

Investors are looking to take advantage of the boom in ecommerce by putting money into warehouses and last-mile delivery facilities, which have been in high demand during the pandemic.

Investment into distribution warehouses reached £4.7bn in 2020, up 25% year-on-year and £500m more than the record set in 2014, according to Savills.

The flurry of activity in this sector reflects the fact that there has been a structural shift away from the high street witnessed by the retail sector, which has been further accelerated by the Covid-19 pandemic.

Online retailers have increased their warehouse footprint in the UK from 8 million to 60 million sq ft in the past six years, a jump of 614%, the latest report by Savills, commissioned by the UK Warehousing Association (UKWA), shows.

Savills notes that in 2021 warehouse space has increased by up to 32% to 566 million sq ft in the past six years, however, vacancy rates remain at just 5.4%, compared with 7.5% in 2015.

In 2015 high street retailers were the dominant occupier of warehouse space accounting for 84 million sq ft, increasing their total footprint by just 5% in the last six years.

Kevin Mofid

In comparison, online retailers have seen a jump of 614%, now accounting for 60 million sq ft. For example, Amazon took 12.6 million sq ft in 2020 alone. Similarly, third party logistics operators (3PLs) and parcel delivery operators have seen an increase of 42% and 51% respectively.

As a result, 3PLs are now the largest group of warehouse occupiers, accounting for 106 million sq ft of stock. This increase is closely linked to the rise of online retail, reflecting the growing demand for fulfilment and direct-to-door delivery.

Kevin Mofid, head of industrial & logistics research at Savills, commented: “It comes as no surprise that we have seen a considerable increase in the amount of space occupied by online retailers, 3PLs and parcel delivery operators in the past six years.

“Whilst the shift to online has been talked about for years, these figures exemplify what a significant impact it has had on the makeup of the UK warehouse market in a relatively short space of time.

“Research from industrial developer Prologis has stated that for every £1 billion spent online a further 775,000 sq ft of warehouse space is needed to meet this new demand, and as we can see from the recently updated database, despite the growth in stock vacancy rates continue to decline.”

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