A record amount of space in big warehouses was taken up in the first half of this year, confounding fears that Amazon’s decision not to expand so quickly would leave a big hole in the market.
In the first six months of this year, occupiers leased 22.6 million sq ft of space in warehouses over 100,000 sq ft in size — 10 per cent more than they did in the same period of last year, according to data from CBRE, the property agent.
The record-breaking take-up has pushed the UK vacancy rate down to a new low of 1.2 per cent. Only two years ago, about 6 per cent of big box warehouses were empty. For the first time in at least five years, online retail was not the most active sector in the first half, having been overtaken by both logistics companies and manufacturers.
In the opening six months of last year, online retail accounted for 42 per cent of take-up, but it fell to only 3.6 per cent this time around.
The drop-off is a reflection of Amazon’s suddenly scaling back its expansion plans. The retail giant is the country’s biggest warehouse tenant having leased about a fifth of all UK space.
Its decision to rein in its growth hit the shares of landlords such as Segro. However, in response to the latest take-up data, Jonathan Compton, head of logistics strategy at CBRE, said: “There’s far more depth to the market than perhaps it has been given credit for. There is life beyond online.”
Given the chronic shortage of supply, rents have moved higher. A year ago, a prime warehouse in Milton Keynes, for example, would rent out for £9.25 per sq ft per annum but that has risen to £10.75 — a 16 per cent increase. The big occupiers happily pay higher rents as they need warehouses in areas with good transport links and available labour.
Rents are set to stay high as Compton says the UK has only six weeks’ supply. “If everything being built was delivered now, you’d still have less than six months’ supply, which is wholly insufficient.”