Editor’s Blog: The perfect storm for property?

Normally the phrase perfect storm, particularly in a business sense, is a convergence of unfortunate events. It’s the perfect storm that leads to some form of economic crash. Yet, right now, for commercial and industrial property in the UK there is a confluence of events happening that will change the market in the UK inalterably.

Firstly, there’s the impact that Covid-19 is having on supply chains. Many organisations are, slowly, looking to maintain a continuity of inventory within the borders of the UK, when so many borders are closed pr face the prospect of being closed at short notice. What high levels of inventory require is storage, and that means investing in a shed, somewhere…

Secondly, there’s the Brexit effect, and the increasingly likely prospect of a no-deal (which the country is now resigning itself to as one of the least of our concerns right now…). Many column inches have been devoted to this, but the impact of a no-deal on just-in-time supply chains, no matter what the length of phased customs controls. To ensure continuity inventory levels will need to be built up in the UK, both for import and export, to deal with the consequences. Again, that means buying a shed.

Finally, there is the accelerated rise of e-commerce. Lockdown brought the industry forwards years in the space of months, with supermarkets ramping up activity for online grocery orders, and retail outlets faced with reduced footfall on the high-street rapidly engaging with e-commerce in a way they should have done years ago. Be it 3PLs or in-house operations, all of the efforts required to get the goods to the customer means one thing. Sheds, and lot of them.

DPD hit the headlines last month with its eye-catching recruitment plans for 6,000 workers. Particularly when there are businesses shedding staff returning from furlough left, right and centre. The right-sizing of the jobs market is one thing,  particularly with DPD describing the past few months as the “biggest boom in online retailing in the UK’s history” but the other prong to DPD’s attack on the e-commerce market was the addition of 15 regional depots to its network.

Today Logistics Manager reports the first step in that process, with DPD taking a 25,000 sq ft warehouse in Leeds off the hands of DHL.

This perfect storm means just one thing for commercial and industrial property. Demand. Demand drives the supply, and demand is high. While some markets dropped off a cliff during the pandemic, demand for warehousing space remained resilient with occupiers committing to space both big and small during the height of the closure of the economy.

Yet the problem is that some retailers are currently in crisis mode, long-term strategies are falling away when compared to survival. There will inevitably be some shifts in the market over the coming months, but the demand driven by the perfect storm for property will outweigh the fall from the continuing shift in the economy.

Christopher Walton, Editor, Logistics Manager