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E-commerce and social distancing measures to further impact future industrial and logistics demand

30 04 20 industrial research

With the latest ONS stats revealing that retail online sales reached a record high of 22.3 per cent in March 2020, changes in consumer behaviour, driven predominantly by social distancing measures, will continue to stimulate e-commerce related industrial and logistics property requirements. This is according to latest insights, which were revealed at Colliers International’s Q1 Industrial and Logistics webinar this week.

 

 

If you cannot view the above video, please click here.

Len Rosso, Head of Industrial and Logistics at Colliers: “The underlying structural shifts that were present prior to COVID-19 have not abated, including the increase in customers shopping online. The current circumstance has only intensified this market growth and the industrial and logistics sector has witnessed a number of clothing and grocery related requirements in the market as a result of the pandemic due to companies stockpiling their products. 
 
“Many clothing retailers would have hoped to have sold their spring summer space by now. However we are seeing summer stock coming over from China, Turkey and other manufacturing hubs and as a result, there has been a big uptick in short-term storage space for around 6-12 months. This will undoubtedly cause problems from a profitably perspective for retailers as it will mean they will need to spend more money, that they don’t currently have, to store products that can’t yet be put in the physical stores.
 
“With social distancing measures potentially lasting until the end of the year, this could have a further impact on supply chains and as a result, retailers and supermarkets in particular will potentially be seeking out larger footprints of warehouse space to store their goods. In addition, some companies which have really struggled with supply chain problems during the pandemic will certainly be looking to upgrade their logistics space post COVID-19 to ensure there are no future issues.
 
“Yet, it must be noted that the continued growth in online only trading within these sectors is limited by the supply-side response. Whether occupiers have the physical ability to scale up with the current land and property supply side constraints in many core locations remains to be seen.”

 
Industrial and logistics demand

The Colliers research also revealed that in Q1 2020, there was 7.5 million sq ft of take-up for letting 100,000+ sq ft, an increase of 10 per cent relative to the same period last year. However due to the current pandemic, Q1 2020 came in 20 per cent below the five-year Q1 average. 
 
The statistics demonstrate that activity remained buoyant in January and February 2020, yet March data shows that in general, occupiers have not been committing to signing new future leases.

Amongst some of the biggest deals of the quarter, Aldi submitted planning permission in March to build 1.3m sq ft at Interlink South in Bardon, Leicestershire, as part of its long-term expansion plans.

The market has also witnessed leading supermarkets, such as Tesco and Sainsbury’s, taking advantage of their existing network by either re-occupying space or provisionally extending terms where possible. 
 
Supply

In terms of new supply, Colliers has tracked 4.4 million sq ft of speculative space under construction. This is on top of the space already or soon to be completed in 2020, which amounts to 3m sq ft. When compared to 2019 speculative activity, this was recorded at 8.5 million sq ft.

Andrea Ferranti, Head of Industrial and Logistics Research at Colliers International said: “Supply has increased marginally and now stands at 36m sq ft but we expect this to slightly increase again as the new supply planned for delivery this year may not be swiftly taken up.”
 
Rents

Two weeks after the typical quarterly deadline, Colliers International’s Property Management team collected 63 per cent of rent and 57 per cent service charge across all sectors. This compares with a typical quarter at 99.5 per cent and 89 per cent respectively. 
 
Industrial occupiers of units over 100,000 sq ft and between 10,000 and 100,000 sq ft have seen the highest percentage of paid rents, 82 per cent and 70 per cent respectively.
 
Latest monthly figures released by MSCI for March 2020 reveal that all of the industrial segments are showing a healthy monthly growth with Standard Industrial at 0.2 per cent, London Industrial at 0.4 per cent and UK Distribution Warehouses at 0.2 per cent. That said, quarterly data for Q1 and Q2 2020 will shed some light over the short term direction of rents over the coming months.
 
Ferranti added: “Rents and rent free periods are still holding firm as landlords are waiting to see how the current business environment will pan out.  On a positive note, there are a lot of markets in the UK that still exhibit a very tight supply but on average, we expect rents to plateau over the medium-term with incentives moving out slightly over the coming months.”

For more information and sector research please visit our
Industrial & Logistics web page


Related Experts

Len Rosso

Head of Industrial and Logistics

Industrial and Logistics

London - West End

Len has more than 30 years' experience in the commercial property sector. Having started out as a trainee surveyor in 1983 he moved on to set up Jansons in 1990, a niche agency specialising in industrial in North and West London. In 2004/5 the business was voted Industrial Agency of the Year, this being the first ever non West End national practice to have won this prestigious award. In that same year the business transacted in excess of 3.5 million sq ft which accounted for in excess of 50% of the total transactions for the North and West London market.


Since joining Colliers International, as the Head of the UK Logistics and Industrial Department, the objectives are the same as always, to outperform all competitors whilst providing the highest level of service to all our clients. In 2018, the Colliers International UK Industrial & Logistics team completed over 250 deals totalling over 15 million sq ft. 

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Andrea Ferranti

Director for Industrial Client Engagement

Research and Forecasting

London - West End

Head of Industrial & Logistics Research working closely with the Research & Forecasting team whilst supporting the Industrial and Logistics teams nationally in providing research and advises to clients. Andrea leads on the division’s key research papers which include, but not limited to, the Industrial & Logistics Barometer and the UK Speculative Development Map – both of which have become key benchmark publications highly valued by UK investors and developers alike.

View expert

Hannah Zitren

Associate Director

Marketing & Communications

Manchester

I am responsible for media relations and generating coverage in top tier broadcast and print media. I work across a range of Colliers’ UK & Pan-EMEA business lines advising on their strategic and tactical PR needs.

My role includes:

·         Developing and executing PR plans for the various business lines to help promote their key messages across all aspects of the media - print, broadcast and social.

·          Media evaluation and reporting objectives, targets and successes across the business.

·         Reputation management and crisis management.

·         Media training.

·         Media engagement: setting up meetings with top tier media and various internal spokespeople to continuously expand and build a presence with property and vertical media network.

·         Consistently delivering service excellence, meeting with business heads of a regular basis and trying to influence the research as much as possible to ensure our content has a strong enough news hook.

·         Key campaigns that I work on include MIPIM; MAPIC; REVO; Midsummer Retail Report; IHIF; Cities of Influence in addition to a host of all alternative property sector research reports.

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