New build property shortage will add to supply chain costs

The lack of speculative industrial property development in recent years has resulted in an acute shortage of good quality, affordable warehouse and distribution space.

This paucity of decent facilities in prime locations is driving above inflation increases in rents as landlords seek to cash-in which, in turn, is putting additional pressure on the already tightly squeezed margins of companies operating in the UK's logistics industry.

That was the message from John Maguire, National 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,” John 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 per cent of all available stock. Currently 84 per cent of all available storage space in the UK is classed as second hand.

The situation is unlikely to ease in the immediate future as uncertainty arising form the Euro crisis seems certain to delay the return of significant levels of speculative development activity.

“Along with the retail industry, the third party logistics service sector continues to drive demand within the industrial property sector 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,” John Maguire added.

John Maguire is sales director of articulated forklift truck manufacturer, Flexi Narrow Aisle Ltd. He was appointed chairman of UKWA in 2011 and is the first representative from a company whose core-business is not third party logistics, to take up the position.