The industrial and logistics sector remains buoyant, with demand for strategically located space pushed higher by the global supply-chain crisis, rising transportation costs and the economic implications of Brexit and Covid-19 lockdowns.

John Bell

John Bell

As companies seek to optimise their logistics networks to service denser city centres, it’s vital to maximise use of existing land and stock. 

Our Q1 2022 Databook shows that location remains a key growth driver, with inner-M25 markets performing stronger than areas outside the London orbital motorway. Leasing take-up reached 8.8m sq ft last year, the highest levels since the boom of 2007-08, with demand for industrial and logistics floorspace touching record levels in the second half of 2021 (28.6m sq ft).

Big-box demand has been at the centre  of this upswing, as retailers, logistics and last-mile delivery operators competed for  scarce supply of modern, efficient distribution units, with the London Gateway a focal point.

With availability down and most of the new stock delivered in the past two years already absorbed, industrial prime rents have surged by 31.5% across the eastern M25 region in the past year and 50.9% since the start of the pandemic. As the ongoing supply-demand imbalance is set to keep pressure on land availability heading into 2023, a careful approach to industrial intensification is imperative so that land is not underused.

The government’s London Plan stresses the need to ensure an adequate supply of land and industrial units to support the economic function of London and the needs of its rising population. The strategy makes suggestions including the introduction of smaller units, co-location, multi-storey warehouses and the addition of basements. Last year, SEGRO committed to delivering the first multi-storey logistics centre in the UK, and it is likely that the Greater London area will see more appetite for multi-storey warehousing. Other options may include multi-tenant premises, repurposing of older stock or alternative uses for redundant assets such as changing retail to industrial. 

Many in the market have already turned to establishing smaller hubs centrally while considering secondary locations for larger centres. Hotspots across the South East, such as Essex, have seen supply rise in recent months thanks to more secondhand space becoming available to the market. 

While there is a need for more speculative development across all sizes, the supply challenge can only be solved for the long term if we also take innovative measures to make fuller use of existing space.

John Bell is managing partner and head of commercial agency at Glenny

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