Continuing pessimism seems to be the spirit of the contemporary global logistics market,the latest development being HHLA, the German container terminal operator, talking down its profit expectations for the rest of the year due to slower growth in the container shipping market. Yet the condition of the UK warehousing market is a useful contrast, illustrating how agile the logistics sector can be and how demand for logistics services adapts to evolving patterns in the economy.
A just released survey by the United Kingdom Warehouse Association (UKWA) has described a market undergoing significant growth and facing a substantial shortage in supply. The market is estimated to be around 424m sq ft (39.3m sq m). Of the ‘own account’ users the largest group by far are retailers: of whom ‘home-ware’ shops operate 85m sq ft (7.8m sq m) and food retailers 62m sq ft (5.7m sq m), which combined represents a third of all capacity, and this excludes third-party providers serving these categories of retailers.
As the UK economy has grown the supply of warehousing has failed to keep up. This in great part is due to a lack of investment during the recession of 2008-2012, however there are other contributory reasons such as the shortage of land for development in the London and the South East. The result is that in 2009 there was 94m sq ft of warehousing space for sale, today there is just 21.9m sq ft on the market.
Although there is 5.8m sq ft of warehousing being built, this is probably insufficient to satisfy demand. There is also an insufficient supply of large facilities over 200,000 sq ft.
So the UK market for warehousing is under-supplied. Combined with secular developments such as the shift to multi-channel retailing and the increased demand for fulfilment centres that that entails, this suggests that there are opportunities for both logistics property developers and logistics service providers who can offer shared-user capabilities that will be more competitive in what is an expensive market.