Scores of firms want to develop shorter supply chains as driver shortages and logistics problems bite, a property agent said as it calculated more than £2 billion has been invested in London warehouses in the year to date.
Investors have been attracted to the UK industrial property sector, betting on online retail demand remaining high and firms wanting to improve their supply chains. That could fuel more tenant demand for storage and distribution space.
That is well ahead of the £1.4 billion and £1.7 billion of transactions recorded respectively for all of 2020 and the prior year.
Charles Binks, partner at Knight Frank, said: “The surge in demand for urban logistics space has been mainly fuelled by ecommerce growth, but also the need for supply chain resilience.”
He added: “The Suez Canal incident in March and the more recent HGV driver shortages have further underscored the importance of supply chain resilience and suppliers are looking to increase their stock holdings, and develop shorter, more dependable supply chains to ensure their operations can withstand any further shocks.”
Overall, the company said investment into the industrial and logistics sector has topped the full-year UK total for 2020, with £10.6 billion invested, and this figure is expected to reach an all-time record of £13 billion by the end of the year.
Knight Frank’s Johnny Hawkins said: “Due to strong occupier demand, and limited opportunities, some investors are increasingly looking to gain exposure through development. Strong growth in land values and rents mean that in some locations, industrial developers are now competing with residential developers for land.”
Earlier this year landlord Urban Logistics said: “The urban logistics segment of real estate continues to enjoy strong structural momentum as tenants invest into their logistics real estate footprint, the growth in e-commerce continues, vacancy rates on ready to occupy space remain low and, overall, demand for logistics space outstrips supply.”