82 It’s now the time of year where many retailers and their supply chain partners will be starting to plan and secure their warehousing space and resource requirements for the Big One – the ‘golden quarter’ and the Christmas peak. Predicting requirements seven or eight months ahead is always a nightmare, and this year looks particularly fraught. There is, of course, a ‘cost of living crisis’ but strangely, although full figures aren’t yet in, it looks as though consumer spending in the Easter peak held up much better than expected – indeed, anecdotally it appears that some retailers and suppliers were short of stock as demand exceeded their somewhat gloomy expectations. Price inflation remains painfully high, but may decline rapidly over the course of the year. Or we may be trapped in a rerun of the high-inflation Seventies – both views are available, often from the same economic forecasters. One rather firmer prognostication is that e-retailing seems to have found its new natural level – around a quarter of retail trade. So omnichannel is the way forward for many retailers, with the additional complexity that this brings to warehouse space planning. Pressures on margins Given the uncertainties, many firms will have held back on committing to space for the winter peak, and some, with pressure on margins and anticipating subdued trading, will have decided not to renew leases on some of their existing estate. That in itself is no bad thing – in our experience it very rarely makes sense for a business to scale its ‘permanent’ warehousing facilities to accommodate the highest peaks in demand. This ties up capital, or drains cashflow, whilst making an inefficient use of scarce and increasingly expensive labour and other resources during the off-peaks – which for many firms is most of the year. And this year, particularly, isn’t a good time to be entering into long-term space commitments. Despite some big names, especially in e-commerce, rationalising their warehousing estate, quality space is still in short supply, whilst landlords are facing eye-watering increases in the interest they are paying. Unsurprisingly this is reflected in rents: the agents Colliers report that in 2022 there was a year-onyear increase of 10.5 per cent in rents for large (100,000 sq ft plus) units, and a huge 13.2 per cent on smaller and multilet facilities and, say the agents: “these will continue to rise, albeit at a slower pace”. Meanwhile, the bills for rates, electricity and other utilities, insurance and all the other costs of operating even a half-empty warehouse continue to increase. Embrace short-term leasing The solution is to adopt strategies that embrace and make a virtue of short-term leasing. While the headline rates per square foot may look high, the business is only paying these for the time that the space is needed, and in practice rates are often highly competitive as the space provider is keen to see any return on what is otherwise an underutilised or idle asset. Nor is the renter paying throughout the year to heat, light, staff and otherwise maintain largely empty space. And often, Festive success Bis Henderson Space Managing Director, Steve Purvis, shares an in-depth look at the Golden Quarter and how to properly prepare your supply chain for success
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