Latest report predicts sustained growth and continued demand for warehousing

April 2, 2024

The latest report produced by Savills for the UK Warehousing Association (UKWA) shows that the sector has grown by 61% since 2015 and now stands at approaching 700 million sq ft. Development of warehouses over 1m sq ft has increased by 345% in the last decade, while online retailer occupancy has risen by 813%.

A UKWA report on the size and make up of warehousing real estate in the UK, unveiled at the UKWA National Conference this month, provides powerful evidence of the critical importance of warehousing – not only to supply chains, but to the UK economy and to our national lives, says UKWA CEO Clare Bottle.

It paints a picture of sustained growth, continuing demand and the sector’s adaptability to respond to changing social and supply chain trends, from online shopping to near shoring.

The report states that, “The role of the warehouse has never been more important, and the amount of warehouse space needed continues to rise.” This is in part because warehouses have become central hubs of supply chain activity, absorbing tasks traditionally undertaken upstream by manufacturers and downstream by retailers. Warehouses also manage returns, repairs and recycling, and have become a vital part of the circular economy.

These activities require more space, more people and more technology. At the same time, global geopolitical events have underlined the potential instability of long supply chains, leading an increasing number of manufacturers to hold more inventory closer to consumer markets, building in supply chain resilience.  These twin pressures are driving not only the proliferation of warehouses, but growth in the physical dimensions of buildings. In the decade since Savills produced UKWA’s first report, development of warehouses of over 1 million sq ft has risen by a staggering 345%. This move towards larger warehouse units has seen the average sized, build-to-suit unit increase from 297,000 sq ft in 2015 to 333,000 sq ft in 2023, and according to Savills, this trend is likely to continue.

3PLs remain the leading warehouse occupier group in 2024, with online retailers accounting for the largest increase in occupation by a huge margin. This points to a need for more warehouses built close to population centres and alongside motorway corridors, to meet the ever-shorter delivery demands of online consumers.

There has also been a geographical shift, with a number of interesting developments at a regional level. As in 2015, the East Midlands remains the largest market for total warehouse inventory. Rising by 66%, it now accounts for 130 million sq ft of space, an increase of 51.5 million sq ft.

Other core markets have also continued to see growth. On average the West Midlands, South East, Yorkshire and the South West have seen growth of 61%. The only anomaly is the North West where stock has risen by just 41%. Yet, looking at Savills land supply data for future warehouse development this can be attributed to the fact that the region has the lowest amount of development land allocated which is hampering future growth.

Kevin Mofid, head of industrial & logistics research at Savills, says: “The growth of the UK logistics property market comes as no real surprise given its importance to manufacturing and retail supply chains. However, it’s not only the size, but also the geography that has changed. For instance, the golden triangle continues to spread eastward, with the amount of warehouse space developed in the East of England increasing by 104% over the past 10 years. With online retail continuing to grow and many companies looking to near or re-shore elements of their operations the story remains strong. What is less clear is whether or not we are allocating enough well located land to meet future demand.”

Clare Bottle concludes, “There is an acute shortage of both high-quality buildings and potential development land, yet the current government remains over-focused on delivering residential housing supply, to the detriment of the supporting infrastructure that can bring economic and societal and benefits, such as local employment.

With a general election in prospect, it is vital in 2024 The Year of Warehousing that we communicate effectively our sector’s role in the national economy and look to a future government for the recognition and support we deserve. This timely report helps arm us with the tools to achieve that aim.”