3.5.2023 | Industry matters

The rollercoaster warehousing market

Vanessa Penn from Penn Commercial reflects on the challenges from 2022 and what we can expect in 2023.

It’s now nearly three years since the pandemic changed everything, but the warehousing and logistics community continued to face disruptions throughout last year.

New challenges are arising, including a lack of warehousing space, the ongoing labour crisis and an uncertain economic climate, as our supply chains continue to recover and there is a slowdown in the pandemic-fuelled growth in e-commerce.

In 2022, record rents have been set across the board, particularly for well-located units and new developments, including several new schemes along the A14 corridor, amongst them Gateway 14, Suffolk Park, Suffolk Business Park, Port One, Orwell Logistics Park and Woolpit Business Park.

There is a lack of quality second-hand stock across all size ranges, and this is frustrating tenants and occupiers, who have outgrown existing facilities, but who may not be able to afford new build premises.

Rental growth is set to continue, as the vacancy rate remains tight, although there has been a slowdown in take-up.

The market has, however, avoided an oversupply, largely because of Brexit and the pandemic.

Locally, there has also been considerable consolidation within the industry, with company acquisitions and mergers within haulage, logistics and warehousing companies.

The 100,000 – 300,000 sq ft market has performed well in all regions, and a lack of supply remains an issue in East Anglia. Third-party logistics providers took the most amount of space in 2022, followed by offline retailers, omni-channel and manufacturing. Online retail was significantly down on the previous year.

However, this year has seen the return of investors, wishing to partner with developers to undertake speculative funding or forward funding. There is now over 15 million square feet of new speculative product under construction in the UK.

Some companies are turning to automation to help to increase warehouse capacity and hence address labour shortages. Landlords and tenants are investing in solar PV, EV charging and other energy-saving measures, which assist with ongoing running costs.

Blue Chip companies, especially, will need to meet their ESG targets, although this is not limited to them; thus, compliant buildings will be in greater demand. Poor second-hand buildings that do not meet EPC regulations will need to be upgraded by landlords in order to be re-let.

Inflation is forecast to drop significantly by the end of the year, and, if the UK avoids a recession, we should see a take-up of 30 million square feet by the end of 2023.

Please contact Vanessa Penn at Penn Commercial for any warehousing, distribution or logistics requirements, rent reviews or lease renewals at vanessa@penncommercial.co.uk | 01473 211933.

Penn Commercial, Suite C Orwell House, The Strand, Wherstead, Ipswich, Suffolk IP2 8NJ