Developers cannot build warehouses quick enough to meet ecommerce online retail demand
An industrial-logistics think tank has produced a white paper to address the distortion between the accelerating ecommerce sector and new warehouse space needed to meet demand, claiming that the current lack of space will be compounded further if developers don’t adopt a new approach to building.
The think tank, consisting of Colliers International, Total Logistics, UMC Architects and KAM Project Consultants, argues that the traditional approach to developing warehouses needs to change to be more strategic with assets lending themselves to easy expansion.
Steven Mitchell, Colliers International Industrial and Logistics Director, explained
“Online sales are growing exponentially and already there is not enough warehousing to stock and transport goods to meet demand. This is partially because there has been very little development in the past five years and partially because eCommerce is a new and emerging trade, so we are slowly becoming more sophisticated in our predictions for future growth. This white paper examines the growth of the online retail sector compared to the ability of logistics and supply chain to support the growing demand.”
Internet sales volumes are anticipated to grow by 15% year on year within the UK for the foreseeable future, with leading retailers already predicting stronger growth such as Asos +21%, John Lewis +23%, and Amazon +39%.
In order to house stock and distribute goods, warehouses need to increase in volume but it takes an average 12-18 months to develop, procure and deliver a new 100,000sq ft space meaning that by the time it’s constructed, it is already at capacity and cannot meet demand.
Large-scale Grade A warehouses of more than 100,000sq ft are extremely constrained with less than a 10-month supply currently available throughout the UK according to Collier's research. The North East, South West, Golden Triangle and Wales currently have no Grade A supply of ‘Big Sheds’, with Scotland, West Midlands, East England, and London all having less than two months until they too have no availability.
“A traditional retail replenishment warehouse may expect to grow by five percent each year. If it takes three years from project inception to occupation, then the facility would require the capacity for an extra 16% today and after five years occupation needs approximately 50% more capacity than today.”
“On the same timescale, an eCommerce business with a 30% annual growth rate would move in with over double the business size and need capacity for eight times business activity by the eighth year since inception.”
Martin Brickell, Director at Total Logistics Supply Chain Consultants, explained that a viable solution would be to design warehouses today with flexible, future-proofing expansion facilities such as higher eaves to add mezzanine levels, sprinkler, and utility expansion pipes and additional land to allow for extension.
“In order to retain occupiers for longer periods, it is important for developers to help tenants meet their business needs, meaning the traditional approach to building a square shed is gone and strategic development is the future.
“Flexible warehouse designs need to be incorporated into new warehouses from today, in order to see the life of the asset extend in future years to meet rising volumes and consumer demand. While there may be additional development costs today to implement these provisions, it is a worthwhile investment and a less expensive alternative to building additional completely new warehouses. It will also help secure tenancies for longer periods if occupiers know space can be expanded as their business grows.”
The Think Tank’s research also suggested that furniture and home retailers will see significant growth while all manufacturers are increasingly moving into the Business to Consumer sector.
The whitepaper produced by the think tank is available in full from the Download Centre on the Total Logistics website here.
With the rise of ecommerce warehouses are not being built quick enough to meet demand. Find out what action is needed to address the imbalance.