Planners need to account for changing commercial property demand
Over 4.45 m sq. ft of big box space was taken up in the South East over the first half of 2020 according to Avison Young research. Speculative activity across Kent and Medway is strong with a pipeline of new sites including Goodman’s consented scheme at Crossways on M25 junction 1a, Panattoni’s planning application to develop the former Aylesford Newsprint site close to M20 junction 6 and the latest deal by Clearbell for the Woodcutt Farm site at M20 junction 8.
One deal that demonstrates performance in this sector is – Amazon’s take-up of the 2.3 million sq. ft. design and build by Bericote at Tritax’s Dartford. It will create almost two thousand new jobs and will represent the most sustainable distribution facility in the country, and probably one of the most automated too.
Yet despite these deals and the pipeline of more space, we could be heading for a shortage. According to analysis by the property firm Knight Frank, e-commerce growth could drive demand for over 90 million sq. ft. of warehouse space across the UK in the next three years.
Knight Frank’s prediction is based on examining five-year data for online sales, take-up of warehouse space and retailers’ warehousing networks. It led them to conclude that 1.36 million sq. ft. of warehouse space is required for every billion pounds of online retail sales.
Now if your home is anything like mine, buying from the couch has been the principal way new goods have been acquired for my family. Whether that is a box of wine, toilet rolls or masks. Those clever people at Knight Frank suggest that this online bubble we have all contributed to will create demand for an additional 30 million sq. ft. of space alone.
Cushman & Wakefield research suggests 40% of the 16 million sq. ft. let in the June to September quarter was from e-commerce occupiers. Leading the demand for logistics space is Amazon, accounting for a third of UK warehouse floorspace let this summer.
With 11% of all consumer spending being food, the grocery sector represents an important driver. Online grocery sales doubled from July 2019 to £1.44 billion in July 2020. That is why Kent has some of the largest food distribution centres in the country. The 1 million sq. ft. Aldi facility at Queenborough for example covers London and the South East down as far as Southampton. So, imagine the combined reach of the Kent distribution facilities for Asda, Sainsbury’s, Lidl, Morrisons and Waitrose combined.
So, with this trend only going to accelerate as consumer behaviour continues to shift in favour of online purchasing; how many local authorities are identifying sites to match the change in the way people spend and consume? As communities grow to meet the Government’s housing targets and we bring large residential developments on stream such as Otterpool, Ebbsfleet Whitecliffe and Hoo Peninsula, we must bring the new types of commercial space in parallel.
We need Local Plans to reflect that we shop online and consume at home and for that to happen that equals superfast broadband and local distribution facilities for the last few miles of delivery that connect with those big box schemes in the pipeline.
Should logistics development slow an imbalance between supply and demand in Kent would emerge because of our perennial real estate challenge of proximity to London. It could lead to prime rental growth, particularly for mid-box units, and that will then spill over to other sectors potentially pricing out small manufacturers already facing difficult market conditions.