Google ‘Warehouse space shortage in the UK’ and one finds multiple entries bearing variations of the same theme, many of the stories being built on a couple of surveys-cum-reports earlier in 2016 by chartered commercial property agents, in particular Lambert Smith Hampton (LSH). In summary, the message is ‘End of the [warehouse] world by 2020’.
Why the drama? Storm in a tea-cup to get one’s business quoted in the story-hungry national financial press; or a valid - if potentially too late - alarm call? The answer – as ever – is a bit of both.
First off the blocks are the scary facts – according to Kevin Mofid of Savills when presenting at Multimodal in May, there is 420m square feet of warehousing in the UK. (Statistical health warning 1: we are not clear whether this is third party warehousing only, whether it includes solus units that are used as warehouses by manufacturers/distributors, though could be manufacturing units or vice-versa; or whether it includes the non-discrete warehouse elements of manufacturing units). In 2015, only 30m square feet came up for rental. Not only is this a small share of the total – implying an illiquid market – but was dramatically down from 100m square feet on the market in 2009 (Stat health warning #2: if comparing patently different points on the economic cycle were the crime it ought to be, our jails would be full of politicians; in this case, suspended sentence only - it allows a good point to be made). In 2004-2007, 40m square feet was developed speculatively; since 2012, only 10m square feet. (SHW 3 – refer to SHW 2, particularly given the gestation period of commercial development).
Lambert Smith Hampton has stats with a similar story. But – as the statistical cynicism above indicates - this story is better followed with intuition than data. Here’s what’s happening:
Firstly, the development lag from coming out of recession means that new warehouse space availability lags the market’s underlying requirement, before any structural changes are accounted for. This made worse by the new build over-supply from 2004-2007 – reflected above in the availability in 2009 – taking several years to come off the market.
Secondly, Amazon. Perhaps even more than Tesco ever did - given Tesco keeps some of its product in its shops – Amazon can move the market on its own. It took 2.9m square foot of additional space in 2015, or the equivalent of 30 or so B&Q Warehouses (excluding garden centres). Amazon represented 10% of demand last year.
And finally, more generally and most importantly the relentless growth of e-commerce: specialists originally, then joined by omni-channel retailers as they reacted to the threat and now also an ever increasing share of our grocery spend. Grocery aside, as the majority is store pick, all these e-com purchases we love – coupled with the sub 48 hour or even same day delivery we require – has radically changed the location and type of space required by retailers and their supply chain partners. Three changes: location needs to be closer to the chimney pots centre of gravity; the shape changes to higher for more racked pick spaces, possibly automated (so really high), and thinner/longer for more vehicle docking bays; and more nodes are needed for the different parts of the supply chain, particularly to handle final mile.
Our belief is that these trends will accelerate, even if the rate of growth of e-com sales starts to approach the mean. In particular, the arms race towards shorter lead-times in general and same day delivery in particular is key. The Argos/Sainsbury’s merger has interesting implications on this front, given Argos’ aggressive development of its delivery proposition in recent years and the combined marketing and infrastructure resources of the two companies.
Here’s another stat; one we think we trust: about 50% of warehouse space is retailers. For the remainder: 24% 3PLs, 15% manufacturers; 10% wholesalers. So – in a way – the debate is about the tightness of half the market. So where to go to find available warehouse space in the other half?
Google ‘Excess warehouse space UK’… and Zupplychain is top of the list!
Whilst there are always some shortages of warehouse space in particular areas at particular times or of particular sizes, the opposite is equally true – plenty of warehouses with spare space looking for new customers with pallets to store.
To find those customers, those warehouses come to Zupplychain, the UK’s most modern search engine for warehouse space, providing instant results for available warehouses for short-term, long-term or seasonal storage. The search results even include full pricing for pallet storage by the week and handling costs. The enquiry process couldn’t be simpler – it’s all on-line direct between the customer and the warehouse. There’s even a free-to-use cloud based warehouse management system for managing your pallet stock in a third party managed warehouse.
As they say on the BBC when someone mentions the G word, ‘other search engines exist’. As they also do for warehouse space and pallet storage. But who uses Yahoo anymore?
For more information on the Zupplychain experience, visit our website where we solve your warehousing needs. We like old school too – phone us on 0161 705 4326 to ask us anything. Well, nearly anything!