Warehouses Creating Boom in UK Realty Sector

The UK is in the midst of a record-breaking boom in the construction of cavernous sheds to support the soaring growth of online shopping during the pandemic, with floorspace more than twice the size of Hyde Park, London, due to be built this year.

BY Realty Plus
Published - Friday, 13 Aug, 2021

Warehouses Creating Boom in UK Realty Sector

The UK is in the midst of a record-breaking boom in the construction of cavernous sheds to support the soaring growth of online shopping during the pandemic, with floorspace more than twice the size of Hyde Park, London, due to be built this year. According to research by Knight Frank, nearly 37m sq ft (3.4m sq metres) of warehouse space is slated for construction in 2021, up from 23m sq ft last year and 21m in 2019. Investment in UK warehouses totalled a record £6bn in the first half of 2021, more than double the £2.7bn recorded in the same period last year, and 54% higher than the previous record in 2018. Overseas investors from the rest of Europe, the US, Korea and China accounted for more than half of the total. Unsurprisingly, Amazon is a major player in the warehouse boom. In July, data from estate agent Savills showed that the online retailer had signed 18 letting deals since the start of the year, compared with 19 for the whole of 2020. Last year’s total will soon be met, according to Property Week, by the signing of a 20-year lease on a 700,000 sq ft site at Magna Park in Lutterworth, Leicestershire, a deal worth a cool £97m. James Seppala, the head of real estate for Europe at Blackstone, said: “Whilst historically, occupier demand in the logistics sector was closely correlated to GDP growth, the ongoing e-commerce revolution is driving meaningful increases in demand for warehouse space throughout Europe. That in turn is driving vacancy levels to historic lows, resulting in market rental growth.” It isn’t just about cardboard box deliveries, though. Real estate developer and investor Goodman this week broke ground on a 117,500 sq ft warehouse just to store fine wines on behalf for Britain’s oldest wine and spirit merchant, Berry Bros & Rudd, according to Logistics Manager. Data centres which store digital information, process orders and handle shipping and supply chain logistics are another component of the soaraway warehouse market. The UK has the second-biggest hub of them in the world, after Virginia in the US, based all around the M25.