New build property shortage will add to supply chain costs

Posted on 17 Jul 2012 by Hazel Jeffs

The UK’s logistics industry is under pressure due to the acute shortage of good quality, affordable warehouse and distribution space and the inflation in rents.

John Maguire, chairman of the United Kingdom Warehousing Association (UKWA)

That was the message from John Maguire, chairman of the United Kingdom Warehousing Association (UKWA) in his address to UKWA members at the Association’s annual general meeting, held recently at the Dorchester Hotel, London.

“Throughout the UK there is a lack of new buildings and sites under five years old built to a high specification and this has tipped the market in favour of landlords,” Mr Maguire said.

“It would appear inevitable that any increases in rents will result in price increases across the supply chain – which will not help the broader economy as it seeks to recover from doldrums.”

Over the past three years the supply of new build or refurbished industrial accommodation has fallen steadily to the point where it now represents just 11% of all available stock. Currently 84% of all available storage space in the UK is classed as second hand.

“Along with the retail industry, the third party logistics service sector continues to drive demand within the industrial property sector,” Said Mr Maguire, who is the first representative from a company whose core-business is not third party logistics, to take up the chairman position at UKWA. “But the lack of good quality accommodation is leaving many 3PLs with little alternative but to put off decisions to take space rather than take poor quality stock. In many cases companies are reconfiguring their existing facilities to accommodate new or growing accounts,”

The situation is unlikely to ease soon as uncertainty arising from the euro crisis seems certain to delay the return of significant levels of speculative development activity.