Record breaking year for UK logistics as e-commerce demand hits new high

Richard Scott, Partner, Logistics & Industrial at Cushman & Wakefield in Newcastle

Take-up of logistics space in the UK reached record breaking levels by the end of 2020, as e-commerce continued to be the undisputed driving force behind the sector’s growth, according to Cushman & Wakefield.

Take-up volumes for the year reached 49.8 million sq ft eclipsing the previous record of 40 million sq ft achieved in 2008 and 2018. Take-up levels in the North East during 2020 hit 3.7 million sq ft, an increase of 143% on the previous year.

E-commerce, led by the likes of Amazon, was the driving force of demand throughout the year as the sector rushed to secure additional space to meet soaring online sales during the COVID-19 pandemic. It accounted for almost 38% of total annual take-up (including parcel delivery and postal operators), an all-time high.

2020 was a busy year for the North East logistics market with the number of deals above the 10-year average. Amazon again dominated the figures with their 2.15 million sq ft development at Follingsby Max in Gateshead. However, demand was also driven by the local manufacturing base and parcel delivery operators such as DPD and Hermes.

The market also welcomed the news car battery maker British Volt’s decision to build its first UK Gigafactory in the North East. The 4 million sq ft plant will be built in Blyth, Northumberland and should be operational in 2023.

Richard Scott, Partner, Logistics & Industrial at Cushman & Wakefield in Newcastle, commented: said: “Take-up in the North East was once again driven by Amazon in 2020, with other occupiers such as DPD and Hermes also driving demand for space due to the lockdown.

“Supply in the North East is now at critical levels with only one Grade A unit available in the 50,000 sq ft size range. There are some speculative schemes starting in 2021 but these won’t be ready for occupation until 2022 so with continued high demand we are likely to see the continued increase in rents and capital values.”

Bruno Berretta, Associate Director, UK Industrial & Logistics Research and Insight at Cushman & Wakefield, added: “The uncertainty linked to Brexit has dissipated following the last-minute deal between the UK and EU and should facilitate decision making in 2021. Many occupiers are still busy working out the practical implications of the deal and how to best serve in a cost-effective manner the UK and continental markets. In some cases, this could mean setting up a dual UK-EU distribution model, albeit the cost of such an option will have to be weighed against the costs (£/delay) of dealing with customs.

“Overall, the longer-term implications of the deal hinge on the ability of UK businesses to remain competitive in the face of rising costs associated with red tape and tariffs in the event, for example, UK exports didn’t satisfy Rules Of Origin (ROO) requirements.”