83 BUSINESS ADVICE The number of business premises used for warehousing and logistics has almost doubled in the last decade, according to the Office for National Statistics. This has been largely driven by the massive increase in e-commerce and online retailers such as Amazon – a company that accounts for a quarter of all warehousing space in the UK. In late 2021, property agent Cushman & Wakefield predicted that the UK could run out of warehousing space within a year. Over 12 months later, demand continues to be at an all-time high, with vacancy rates having been sat at less than two per cent for the past year. This is way below the rate needed to balance fluctuations between supply and demand, which is eight per cent. Here, with some insights from Slingsby, one of the UK’s leading suppliers of industrial & commercial equipment, we’ll investigate what’s behind the demand and why businesses need to adapt. What’s driving the demand for warehousing space? Where e-commerce has dominated the take-up of warehousing space over the past couple of years, recent analysis has also shown that the increase in demand is also because of stockpiling. More retailers and manufacturers are now using third-party logistics providers to store their goods, which drove almost 20 per cent of all warehousing take-up in the first half of 2022. This is likely due to businesses wanting to make their supply chains more resilient rather than relying solely upon ‘just-intime’, a model that is highly vulnerable to any disruptions within the supply chain. Stockpiling goods means that even if there is a disruption, the business will have enough stock to fulfil orders and keep up with customer demand. This, along with what’s seen as chronic under-development of storage space, has created a perfect storm that is affecting businesses across the UK and limiting their growth. Which industries are worst affected? The lack of space is bad news for all industries that require storage for their stock, regardless of the sector. Most industries are so intertwined with the global supply chain that struggling for space to store goods puts them all at risk of being unable to fulfil their orders. Industries that rely on the availability of many different parts, such as manufacturing, tech and automotive, could see production held up. Recent joint analysis from Savills, the British Property Foundation (BPF) and the UK Warehousing Association found that the lack of space has meant that rents have risen around 61 per cent. This is most harmful to small businesses and those that work with slim margins, which may struggle to keep up with rental costs and could see their profits squeezed even more. Consumers may also feel the bite of this, with some businesses forced to pass on extra costs to their customers. The impacts are not just felt across specific sectors, but also in locations around the UK. Warehousing and logistics are the dominant industries in some areas, particularly in the Midlands where the concentration is known as the ‘golden logistics triangle’. Telfordbased businesses are some of the worst affected by lack of space, which can have a knock-on effect on the local economy – especially since these issues inhibit the ability of businesses to expand and scale up. How can businesses adapt to the lack of space? Given the lack of space and higher costs, optimising available space will be essential for businesses to keep their operations moving as smoothly as possible. Here are some of the things that should be considered going forward. • Greater use of height Utilising all available space will be vital – especially vertical space. For small storage facilities, shelving units, stacking systems, and warehouse steps may be enough to maximise the height. For Adapt and conquer How can UK businesses adapt to the lack of warehouse space? Slingsby Group Chief Executive, Morgan Morris, tells us more…
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