Demand for small to mid-box warehousing has never been higher, despite serious economic challenges, explains Jason Rockett, MD of Potter Space.
Businesses in England are under pressure. Rising inflation, interest rates, and fuel prices are significant challenges across all industry sectors at the moment. But demand for small to mid-sized warehousing (sub-100k sq. ft.) continues to endure. Our Potter Space business parks, for example, are currently 99% let, with a good proportion of our customers indicating that more space will still be needed, despite the economic headwinds.
In reality, the small to mid-box property market caters for a large, diverse base of businesses – local, national and international – trading in many different products and services. It is no overstatement to say that these businesses, who have made their homes in small to mid-box warehousing across the country, have been productive for decades, proving their resilience through many economic cycles.
At Potter Space, for over 50 years we have prided ourselves on having great relationships with these businesses - our customers and their feedback always informs our thinking. This year, as part of our long-term strategic planning, we have also commissioned Savills to help us conduct granular research into the sub 100k sq. ft. space.
The sub-100k sq. ft. market is not often discussed, partly because the rapid growth of ecommerce and Covid-19 has meant that big-box has taken focus in recent times. This is despite the fact that our research has confirmed that 95% of all I&L property and 56% of all floorspace in England is in fact small to mid-box.
The I&L property market has also witnessed growth over the last decade and now generates £232bn Gross Value Added (GVA) annually, 14% of the total economy in terms of GVA. This is reflected in jobs too, many increasingly highly skilled and technical, which have risen 26% over the past decade – almost twice the level of the overall economy –This growth is a result of business start-up and expansion and benefits the local economies in many ways, including inward investment, as well as job creation
However, the continual decline in available I&L space, which has ‘tracked downwards’ for every year of the last decade and now sits well below the 8% ‘market equilibrium’ level (where supply and demand are broadly balanced), illustrates a problem that must be addressed imminently. Otherwise, we risk hampering the growth of the sector and impeding the development of the businesses housed in small to mid-box spaces – not to mention its impact on the wider economy.
According to the ‘suppressed demand’ calculation methodology developed by Savills – where demand for development land is unmet – within the sub-100k sq. ft. segment, it is revealed that the economy could be missing out annually on around £480m of Gross Value Added, as well as 8,600 direct jobs, and 7,300 indirect jobs.
Our research confirms the usual suspects in terms of regional ‘hotspots’ for growth – London, Birmingham, Bristol, Liverpool, Leeds and Manchester but also points to further opportunity in areas such as Leicestershire, Nottinghamshire/Derbyshire, Bedfordshire/St. Albans, but all of these areas are being suppressed in terms of land becoming available to develop.
Under supply is a major problem, especially in these regional hotspots, where companies like Potter Space are willing and ready to invest and support the growth of the local economy. Without more land allocation for the small to mid-box space, local economies will be held back.
We intend to work with local authorities and key stakeholder to continue to quantify the ‘economic miss’ occurring in the sub-100k sq. ft. market. We accept that there are growing concerns around the current economic climate, but property is about long-term strategic planning and this is not the moment to forget our principles and sit on our hands.
To find out more, download our report, BIG things in SMALL boxes, here.
Jason Rockett, managing director, Potter Space
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