Rise of the warehouse

FIERA REAL Estate and developer Wrenbridge recently secured the former Wood plc offices at Shinfield Park in Reading in an off market acquisition with the intent to redevelop the site for warehousing.

While it is not unusual for a site to be redeveloped  for another use – typically industrial to residential – it is unusual for offices to give way to industrial and logistics warehousing especially in the well-heeled home counties.

In general, the local population and council planning committee members tend to disfavour warehouse development as evidenced by Basingstoke & Dean Council rescinding planning permission for a warehouse development put forward by Newlands Developments and rejecting further planning iterations for the site for logistics despite obvious demand for the space in that location. In their defence, this was a greenfield site not a redevelopment, but the principle still holds in that it is well known that many planning committee members in the region go against planning officer recommendations almost as soon as they hear the words ‘logistics’ or ‘warehouse’.

Earlier this year in conversation with me for the Southeast feature Haslams managing partner Neil Seager, noted that the local authorities to the west of the region are the richest outside central London and have been historically against warehouse development usually citing poor quality job offerings, aesthetic issues etc with committee members frequently going against planning officer recommendations leading to costly appeals and public enquiries even on brownfield employment sites.

In the past whenever there has been a downturn which makes the development of industrial and logistics space financially viable on sites in the area, these local authorities have in effect been bailed out by the return of demand for office space.

But that has all changed.

Work practices post Covid are vastly different to those pre-covid and there has not been a re-bound in office take-up per se.

Lambert Smith Hampton’s South East office report noted that the amount of available office space has consistently trended upwards over the past five years. Total supply increased by 11% y-on-y to 18.3 million ft2, standing 44% above the low point of Q1 2019 and the highest since 2012. Not surprisingly there is research from Savills noting that office space take-up is down on the ten year trend by about 16%.

Many office occupiers have been curtailed in their ambitions for new, consolidated or larger space due to economic conditions, and there is also the issue of flexible working/work-from-home to factor in.

In July 2024, approximately 12% of workers in Great Britain worked from home exclusively, with a further 26% working from home and travelling to work, while 41% only travelled to work. In 2019 the hybrid working figure was 14.2%.

Seager noted: “Regardless of what the economy does, three days a week in the office is never going back to five days a week 100%.”

With the labour Government pushing the right for flexible working from day one for all employees, it is now incumbent on companies to persuade workers to come into the office and stay there – similarly to industrial and logistics companies creating the right environment to attract and keep workers – the right aesthetic environment is high on the agenda. So, while there is a drop in take up that which is being taken up is of the highest quality. According to Savills Grade A space accounted for 81% of take up in Greater London and the Southeast.

The disparity between Grade A prime office space and secondhand lesser grade space is at its most marked since records began and for the councils in the Southeast, where large swathes of employment land was almost exclusively out of town offices, there is a risk that many of the older or less prime office facilities, have, or will shortly, become ghost zones.

It is these facilities that have attracted investor and developers to redevelop as industrial and logistics space particularly as small to midbox schemes. Developers have said that reusing defunct office parks would fulfil unmet needs for industrial and logistics space especially in the Southeast where securing sites is most problematic and expensive.

Where industrial redevelopment has taken place, investor and developers are securing good rents in some cases record ones. Only recently investor Picton let a 22,500 ft2 facility in Bracknell that was speculatively refurbished and converted back from a data centre to an open plan warehouse for £15.50 per ft2 – a healthy prime rent.

For industrial and logistics occupiers looking to relocate from Greater London this looks like an excellent discount from Park Royal rents of £25 per ft2 plus.

Expect to see more redevelopment in the future and not just in the Southeast with upwards of 50% of existing commercial property in the UK, currently failing to reach the Minimum Energy Efficiency Standards (MEES) regulation of a minimum EPC rating of ‘C’ by 2030.