These are unprecedented times for all businesses. Some have locked the doors for the foreseeable future, some may have changed to operate from home, while others continue as key worker hubs providing essentials, such as food, medical supplies and key public services.
Events have moved very quickly and, as a result, the impact on our clients – existing occupiers, landlords and developers – has been mixed and the full effect unknown.
In Yorkshire, the market has been robust and has had a relatively limited supply of properties, especially at the smaller end of the market.
The B8 distribution market has witnessed a raft of short-term requirements from supermarket chains, home delivery companies and 3PLs with the focus on immediately available fitted facilities, as well as requirements to support the NHS and local government.
The nation’s growing dependency on online ordering and home delivery has the potential to accelerate the growth of online retail sales, particularly of grocery items and food, which we believe will result in a growth in demand over the longer term.
Before the lockdown, 18% of all retail sales were online, with only 5% in the food sector. The lockdown has forced people to try online shopping, so we are anticipating further growth in this area. Retailers with a good online offer will be best placed to survive.
3PLs are reportedly busy with short-term requests from customers, while their biggest challenge is getting enough people in the right place to service key contracts.
Knight Frank’s Industrial Tracker shows an immediate need of up to 5m sq ft nationwide, although many requirements are short term only. In Q1 2020, there was approximately 5.6m sq ft take-up of units of more than 50,000 sq ft, compared with around 9.5m sq ft in Q1 2019.
From a regional perspective, enquiry levels are down. While occupiers are still reporting requirements, they are pausing decisions until they can assess the impact of the lockdown on their business and the wider economy.
There was a real shortage of small to medium-sized units across the region before the lockdown and while we anticipate there will be some casualties, which will result in some units coming back to the market, we are hopeful of a resurgence in requirements post lockdown.
Another point to consider is that people’s habits will have changed. While many have been pushed to shop online, there has also been a shift to support local services such as milkmen, butchers and greengrocers.
These businesses, offering delivery services to our doorsteps, have quickly adapted. Will this warrant our loyalty when we are on the other side of the pandemic and generate requirements for small distribution units?
The new norm will undoubtedly be different to what we have known in the past.
While the impact on the market is unknown and we continue to watch closely to understand it, we are still working with a number of developer clients that remain interested in the region given its strong fundamentals with excellent connectivity to the road network, ports and nearby available workforce.
Rebecca Schofield is head of industrial at Knight Frank in Yorkshire