Urban challenges

Just as most of us were getting into the mood for the bank holiday, Waitrose revealed plans to open a 110,000 sq ft fulfilment centre at Enfield in north London to complement the existing site in Coulsdon and drive growth in its online offering.

The move serves to highlight the rapid development of online facilities. In fact, Urban Logistics, the real estate investment trust, is now predicting an space race for urban warehouses as companies vie with each other for the space they need to keep pace with consumers’ online spending.

Unveiling its annual results last week, Urban Logistics predicted that rents for urban warehouses will rise by an average of 11.5 per cent by 2022, It warned that retailers and distributors are continuing to invest in distribution centres but supply of 20,000-200,000 sq ft logistics sheds has fallen by 36 per cent since 2012.

“A constrained development pipeline suggest vacancy rates in the sub 200,000 sq ft range will remain low in the medium-term. The most significant ‘space race’ going forward is set to be focused around urban locations. Greater London alone is deemed to have lost one third of its industrial land over the past ten years,” it said.

Not surprisingly, the strong market is attracting other investors. Warehouse REIT, for example, launched an IPO in September 2017 targeting the property market for last mile logistics. In its annual results, chairman Neil Kirton said: “The market outlook is favourable for 2019/20 and beyond. Demand for space is strong, with e-commerce continuing to grow and UK employment at record levels. Supply of small to medium sized warehouses will remain constrained, with build costs making it uneconomic to develop new space across much of the country. “

The demand for urban logistics services is certainly on the increase, but it is clear that as the market develops finding depots at the right price is going to become increasingly challenging.