Latest online spending data signals new norm for retail market

Andrea Ferranti, Head of Industrial & Logistics Research, Colliers International

The latest data from the Office for National Statistics shows online sales, as a proportion of total retail sales, have reached 25.5% for two consecutive months (June and July 2021), which according to Colliers’ analysts marks a step-change in consumer behaviour and could signal a new norm in spending habits for the retail market.

“During the various lockdowns, online sales’ share of total retail sales reached monthly peaks of 37%. Following the re-opening of the high street, this figure understandably contracted, however, there seems to have been a clear step change in consumer behaviours with monthly online spending levelling out at 25.5% for two consecutive months,” said Andrea Ferranti, Head of Industrial & Logistics Research, Colliers. “This is a reliable signpost that we may have found a new status quo for online consumer spending habits post-lockdown.”

Colliers’ hosted its latest I&L panel debate ‘Pressure to deliver | Managing costs in challenging times’ this week, which was attended by over 300 industry professionals. During the webinar, the audience was polled to see if they thought this data signalled a new norm for the market, and 73% agreed that it did.

Colliers’ analysis shows a clear correlation between the strength of online sales and occupier demand for industrial logistics space. In Q3 2021 take-up was just shy of 12m sq ft, resulting in a year-to-date take-up of 34.2m sq ft for units over 100,000 sq ft, only 10% below the record levels seen in 2020.

Current supply, including speculative space, at the end of Q3 2021 stands at circa 20m sq ft – the lowest ever seen in the sector, representing a decline of 38% y/y. By the end of 2021, more than 11m sq ft of speculative space will have been delivered, however, Colliers’ data shows that circa 7m sq ft of this has either been let or is under offer, suggesting that supply will remain suppressed over the next 12 months at least.

Len Rosso, Head of Industrial & Logistics, Colliers, explains: “The strong demand for industrial and logistics space is expected to remain well in to 2022 as the consumer appetite for online deliveries continues unabated. However, the challenge around the lack of new space available to meet this demand persists and, as a result, we have seen a major uptick in take-up of speculatively developed units, with this share reaching 36% of total take-up in Q1-Q3.

“Supply has reached historically low levels for the sector, with significant amounts of Grade A supply having been absorbed already. Meanwhile, the development market is struggling to keep up with insatiable occupier demand. Any occupier looking to acquire space will need to act fast while planning well in advance if they are to satisfy their requirements.”

Looking ahead to 2022, Colliers’ analysis shows more than 15m sq ft of space scheduled for completion with a healthy mix of unit sizes. Assuming demand remains elevated, Colliers fully expects there to be sufficient ongoing demand over the next 12 months to satisfy this supply.