Supply Chain Woes Give Helping Hand To Already-Hot Logistics Sector
It didn’t need the help, but thanks anyway: The current issues hitting the supply chains of many British companies and causing the panic buying of petrol have boosted take-up in the already-strong logistics sector.
The third quarter of 2021 saw warehouse take-up reach 15.7M SF, data from Knight Frank showed, and take-up for the first three quarters hit 46.9M SF, not far short of the 51.6M SF leased in the whole of 2020.
Knight Frank said that on top of long-term trends like the shift toward e-commerce, the supply chain problem facing British businesses of all stripes was causing them to bring forward warehouse leasing plans.
The shortage of heavy goods vehicle drivers, labour and materials — due to a combination of Covid-19, post-Brexit customs measures and the Suez Canal blockage earlier this year — have highlighted the need for simplified, shorter supply chains and shorter, more direct routes to consumers, Knight Frank said. Companies have accelerated efforts to secure warehouse space where they can hold high levels of inventory close to consumers, minimise delays and ensure uninterrupted service. Food manufacturing and indoor farming are examples of other occupiers taking space recently.
It can sometimes seem like anything that is bad for retail is a benefit for logistics property. Analysis from Income Analytics produced for Bisnow showed that those same supply chain problems for already struggling retailers could tip some into bankruptcy if they can’t maximise the crucial pre-Christmas trading season, meaning more pain for retail landlords.
“Strong levels of take-up have been recorded over the past three quarters, but the shortage of available space in the market is likely to dampen the level of uptake in the fourth quarter,” Knight Frank Industrial Research Lead Claire Williams said. “Last-mile logistics operators, parcel carriers, supermarkets and retailers have been competing for suitable space in a chronically undersupplied market over the past 18 months.
"Now with the driver and labour shortage and border delays causing severe disruption, aggravated concerns have caused companies to bring forward warehouse expansion plans across the logistics sector. Many are discovering that quality warehouse space that meets size, location and specification requirements is scarce, given high levels of take-up and construction plummeting due to increased costs and lead times for materials.”