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Warehouse builders respond to online demand with development boom

A record amount of new warehouse space is due to be built in Britain this year as developers respond to rising demand for storage from online retailers.

Research by Knight Frank, the property consultancy, found that 40 million sq ft of new space is due to be built this year, double the amount completed last year. Much of the new space has already been leased to retailers and distribution companies ordering purpose-built properties.

Online sales rose £34 billion year-on-year last year and are expected to exceed £150 billion by 2024. Every billion pounds of online sales requires about 1.4 million sq ft of warehouse space, according to Knight Frank.

Charles Binks, head of industrial and logistics at the consultancy, said: “The robust forecast for online retail and increased competition for high-specification and well-located assets is driving development activity. Take-up over the past year has reduced the level of availability and Covid-19 has hampered construction, slowing the delivery of new stock to the market. Supply, particularly of high-quality space, has diminished.”

The volume of warehouse space leased last year reached a record of more than 50 million sq ft, compared with 34 million sq ft in 2019.

Claire Williams, research associate at Knight Frank, said: “High levels of take-up in developments larger than 50,000 sq ft and the chronic shortage of quality space are encouraging both build-to-suit and speculative development . . . There is a need for more urban warehouse space, located close to the customer, in order to replenish stock in the required timeframes.”

Rents are expected to increase over the next five years, in contrast with the prospects for retail and office properties. The strongest annual rental growth is expected in London, rising by 3.2 per cent. In the southeast and east, rents are expected to grow by 2.7 per cent.

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