Online retail growth during lockdown results in record take-up for the industrial & logistics sector

According to Savills, take-up of industrial warehouse space (units of 100,000 sq ft +) is set to exceed 50 million sq ft (4.645 million sq m) by the end of 2020, a record year for the sector. This is largely due to the phenomenal growth of online sales as a result of the Covid-19 pandemic.

Savills data shows that online retail accounted for 37% of the 46.8 million sq ft (4.347 million sq m) of take-up to date, 29.6% of which has been taken by Amazon. It is important to note, however, that even without the online retail giant’s contribution, take-up would still surpass the previous record of 37 million sq ft (3.437 million sq m) in 2018. What’s more, in line with the growth of e-commerce, 3PLs have also seen the highest level of take-up ever.

Savills has also seen demand soar from alternative sectors such as data centres and film studios as a result of the need for increased IT capability as people remain working from home and the popularity of streaming services such as Netflix and Amazon Prime.

Consequently, due to this significant demand from a cross sector of occupiers Grade A supply is at its lowest level since 2016, with national vacancy rate now averaging 6.01%. In response, speculative announcements have picked up in Q4, with 8.54 million sq ft (793,391 sq m) of warehouse space now under construction and due for delivery in 2021.

Kevin Mofid, head of industrial & logistics research at Savills, comments: “Even with a month still to go until the end of 2020, the sector has reached unparalleled heights and demand remains strong as we head in to the new year. However, despite the current supply and demand imbalance, we are seeing the availability of second hand stock creeping up, which could increase further still as we see more tenant defaults as a result of the ongoing economic uncertainty.”

Richard Sullivan, national head of industrial & logistics, adds: “This year has proven just how critical industrial & logistics is to keeping the UK moving. Whilst online retail continues to dominate, it is important to recognise the breadth of occupiers that make up the market. With new sectors emerging and existing ones constantly evolving, we must ensure we have the right size space in the right locations to cater to this demand and it is encouraging to see speculative announcements pick back up in line with growing confidence.”