The IT revolution never delivered the promised ‘paperless office’, and strangely enough, supply chain techniques like ‘Just-In-Time’ haven’t eliminated the need for warehouse space either – in fact, quite the contrary.
A tight squeeze…
Despite near-record levels of investment in speculative development, warehouse vacancy rates are low at around 5% (and as low as 2.4% in areas such as London and the South East) and prime rents surged by 6-8% in 2018. For more specialist facilities such as temperature-controlled warehousing, supply is even tighter.
This is not just a short-term consequence of Brexit fears. It reflects major and continuing structural changes. The headline is of course the continuing growth in online retail. Amazon alone occupied 23.4 million sq ft at the end of last year and couriers and distributors need more space to support this activity, often in hard to find ‘last mile’ locations.
What does this mean for manufacturers?
The online mantra is ‘always available’ and the demand is for customisation, so there are implications for manufacturers’ inventories of finished and near-finished goods. Meanwhile demand, even around established seasonal peaks, is ever less predictable. For many firms online logistics is an addition to, not a replacement for, more traditional warehousing requirements. Even bricks’n’mortar retailers are looking to avoid paying High Street rents and business rates for back room storage if they can hold stock in a cheaper but still accessible ‘unit’ somewhere else.
The nature of warehouse operations too is fast changing. No longer a simple matter of receiving, storing and dispatching goods by the pallet, the warehouse is increasingly an extension of the factory, where picking, kitting, assembly, packing, labelling and other operations are carried out – not to mention the growing challenge of handling returns. All this takes space, and a shed isn’t just a shed any more.
What are the implications of Brexit?
Brexit may yet have long-term implications for warehouse space. If border delays turn out to be significant and lasting it may be appropriate for some manufacturers to ship in larger batches, with implications for both despatching and receiving warehouses. Traffic flows and modes may change to find less congested routes, but this will influence warehouse location. What’s more, companies seeking to mitigate Brexit delay by going down the Authorised Economic Operator or ‘trusted trader’ route may find that older or multiple occupancy facilities fail to meet the criteria for safety and security.
Meanwhile on the supply side, planning regulations are increasingly restrictive, with domestic housing favoured over commercial development – especially on those sought-after close-to-market brownfield sites – and resistance to greenfield and green belt development is growing. Companies seeking to increase their warehousing capacity, to relocate to get closer to their markets, or simply needing temporary capacity to meet seasonal demand, or to ramp-up for a launch or promotion, face some serious challenges. That is especially true if the need is for something more sophisticated than a bare shed – an available workforce and some basic IT capability are often essential too.
Manufacturers face significant challenges ahead on finding suitable warehousing space, but there are solutions available if you know where to look.
How we can help...
Bis Henderson Space are experts in sourcing warehouse and logistics facilities, whether temporary or permanent, and from bare sheds to fully serviced, exclusive or shared, facilities. We have an extensive network of suppliers, with an inside track on properties and facilities becoming available.
Steve Purvis, Operations Director at Bis Henderson Space says:
Increasingly variable consumer demand and an uncertain regulatory environment is without doubt fuelling the demands on logistics. Flexible Warehousing is a key solution to this. In the past too many businesses have taken a knee jerk approach to flexible warehousing but increasingly smarter operators are factoring it in to an effective strategy.