Data: How the pandemic has supercharged the warehouse space race

More than 50.5 million sq ft of new space was leased in 2020 – 12 million more than the previous record year in 2016, according to data from property consultancy and estate agent Savills.

US giant Amazon was the most active, snapping up 25% of all new space leased in the UK. Savills also found short-term leases of five years or less accounted for 12% of all new warehouse space taken. 

Three business types – grocery, multichannel and pureplay – accounted for 21.3 million sq ft of the 50.5 million as businesses sought to capitalise on the huge demand for ecommerce during the coronavirus crisis. 

Data from IMRG-Capgemini published in January showed total online sales in 2020 rose 34% year on year to hit more than £34bn and ecommerce revenues are expected to exceed £150bn annually by 2024.

Savills also breaks down the three business types by the percentage of new space leased. On average, over the last decade, pureplay retailers have taken 12% of new warehouse space, but in 2020 that surged to 34%. 

Pureplays have muscled out more traditional bricks-and-mortar and multichannel retailers. Such retailers would lease around 17% of space on average, but in 2020 that fell to 8%.

Despite the increase in online grocery during the pandemic – Kantar figures showed that penetration reached as much as 16% of total sales some months – Savills found the space taken by food retailers also fell from a historic 10% average to 6% last year.

Savills head of logistics and industrial research Kevin Mofid said that was a result of many of the largest food retailers either switching on more delivery capability by ramping up pick-from-store models, such as with Tesco and Sainsbury’s, or ramping up existing partnerships with third parties, such as with Amazon. 

Savills also provided data tracking the rental growth per sq ft in average leases for warehouses over the last decade and vacancy rates for that space by region.

The data shows that the average pound per square foot of rents paid on warehouse space over 100,000 sq ft was the highest in London, as has been the case for well over a decade.

A senior source at a big warehouse property developer said finding suitable logistics sites within the M25 was “the holy grail” for retailers and developers alike. 

London was followed by the Southeast, where the average pound per square foot of rents surged to £10.20 – the highest for the region on record. 

The cheapest place to rent warehouse space in 2020 was the Southwest, where average pound-per-square-foot rents were just £4.67, although that was also a record sum for the region. The next cheapest region to rent in was Yorkshire and the Humber at £5.90. 

Across all regions of the UK, average rents hit £7.95 per square foot, again the highest figures on record. 

Warehouse vacancy rates as of January 2021 were the lowest in London and the Southeast, each hovering at approximately 3.5%. Vacancy rates were highest in Wales and the Southwest – both at about 10%. 

Despite 2020 being a record year in the race for new warehouse space, Savills’ Mofid expects 2021 to be even bigger. The company logged more than 112 million sq ft of new warehouse space requirements in the fourth quarter of 2020 alone. 

“This would suggest that demand remains strong and that requirements have shifted from short-term crisis management to longer-term strategies,” believes Mofid.