The UK could need more than 112 million ft2 (10 million m2) of new industrial and logistics floorspace over the next five years, according to the latest calculations from global property adviser Knight Frank based on current capacity utilisation rates.
The additional demand is linked to the UK’s growing population and its increasing dependence on distribution and manufacturing hubs, though the long-term trend in manufacturing is toward high-value sectors.
Increased automation in the manufacturing and distribution sectors could however ease pressure on the UK’s industrial and logistics stock.
Oxford Economics forecasts the number of dwellings in the UK to rise by 958,640 over the next five years. London is expected to see the strongest growth (6.7% vs current stock), followed by the South East region.
According to Knight Frank’s latest Future Gazing report, this growth will result in a high volume of additional delivery addresses that need to be serviced by logistics facilities.
Growing urban populations will also place greater pressure on industrial and logistics land in UK towns and cities.
By 2033, 85.6% of the UK population is expected to be urban, compared to 84.5% today and 82.1% ten years ago. The UK’s ongoing shift toward city living will generate increased demand for urban industrial and logistics space in the coming years.
Growth vectors
The research ties the growth of the industrial and logistics occupational market to the continuing health of the retail, service and manufacturing sectors.
Furhtermore, surging demand for logistics space over the past ten years, coupled with constrained supply of new space, has increased rents and limited the availability of existing stock.
Since 2013, occupied industrial floorspace has risen by 17%, precipitating a drop in vacancy rates from 9.2% to 5.2% over the same period. Market rents have risen 63% on average across the UK over that timeframe, while prime rents (units over 50,000 ft2) have almost doubled (+93%).
Charles Binks, head of logistics & industrial agency at Knight Frank, commented: 'It is clear that the projected growth of the UK’s population will necessitate the delivery of new industrial and logistics space, particularly when one considers the near record-low vacancy rates and level of availability of existing stock.
'However, assessing the forecast rate of population growth alone fails to account for the impact of our shifting lifestyles, consumption habits and economic activity on demand for industrial and logistics floorspace across the UK, which when taken together demonstrate the growing dependence of each household on well-located manufacturing, distribution and service hubs.'
Claire Williams, head of UK and European industrial research at Knight Frank, added: 'Where we live, how much we earn, how we shop, what we spend our money on and how we spend our leisure time are all driving changes in our requirements of the industrial and logistics sector.
'By exploring the changing nature of demand from the perspective of the household, our analysis aims to bring into focus the diverse nature of demand and better understand how requirements in terms of the uses, locations and facilities may change going forward.'
