The Queen’s speech to the nation last month rightly praised the NHS, shop workers and the hard-working teams staffing Britain’s warehouses in the pandemic.
At SEGRO, we are proud to see the sector playing its part in the current national effort, but think it could play a more important role in the long term as well.
Firstly, warehouses will now be viewed as essential national infrastructure. Food retailers have kept Britain moving, with Morrisons anticipating a 60% capacity expansion for its online service, Hello Fresh planning to increase its UK warehouse workforce by 50% and online grocery market share rocketing above its current 6%.
Savills reports that demand for new warehouse space in early April topped five million square feet, and Cushman & Wakefield notes that “almost all the supermarkets are searching for short-term warehouse space to cope with online demand”.
Demand for online non-grocery products is also soaring. Indeed, a second theme is the accelerated migration of wider retailing online, evidenced by recent Morgan Stanley polling. The bank asked people if they were now buying more non-food online and would continue to do so. The response was ‘yes’ for 66% in Italy, 56% in France, 53% in Germany, 56% in Spain and 46% in the UK.
This is a hugely significant development and research house Forrester now predicts online retail will account for 17.8% of Western Europe’s total retail sales by 2024.
Assuming industry standards of three times as much warehousing being required for online as for ‘bricks and mortar’, this indicates a substantial need for logistics facilities in Europe to cater for the growth in online retail over the next five years.
The third big change we will see is “re-shoring”. Heathrow will continue to be an essential global hub for high value, perishable imported and exported goods. However, we expect companies to re-examine their supply chains for longer lead time, slower moving goods and to rely on more locally-sourced materials and products.
This would mean companies holding an increased local inventory, which is another reason to think warehousing will be in high demand.
Finally, we are seeing the warehouse and logistics world re-thinking its place in society. Last month, we announced we would be accelerating our £10m Centenary Fund to help communities affected by Covid-19, by quickly distributing £1m to support local charities battling the disease.
Others are playing their part, too. Morrisons is working with DPD to add a new home delivery channel for vulnerable customers, for example.
In fact, across Europe, the industry is coming together and collaborating to find new solutions in a way I have never seen in my 30 years in property.
When all is said and done, some things are more important than profit.
Andy Gulliford is chief operating officer at SEGRO