Shopaholics

THE DEALS in question are Amazon’s acquisition of a 50-acre plus site at SEGRO’s SLP Northampton scheme in the East Midlands where it is set to self build a 2.86 million ft2 next generation customer fulfilment centre as well as its move to secure Panattoni’s 882,000 ft2 speculative warehouse at Panattoni Park Avonmouth in the South West.

But that is not all – there are other eCommerce companies doing exactly the same thing though possibly not on quite the same scale.

Chinese eCommerce company Furnolic has taken the 166,748 DC4 unit at Prologis Park Ryton near Coventry Airport while eCommerce provider Super Smart Service, has snapped up NFU and Ergo joint venture Aver’s 354,00 ft2 warehouse at Fradley Park, Lichfield in the Midlands.

Rapley’s James Porter reports that following a survey of clients to test sentiment in the market one of the key findings was the ever growing dominance of eCommerce fuelling demand for warehouse space.

We are certainly not in the realms of eCommerce dominating take-up levels such as when we saw Amazon take 12.6 million sq ft in 2020 alone accounting for some 20% of the market. According to reports from Savills take-up from online retailers is just 5% of the market in the first half of the year. 

But there is an air of change.

Tritax Big Box is indicating a resurgence in the sector noting that eCommerce performance is improving – driven by gross margin recovery from lower levels of discounting and normalised inventory across the market. That is, the pandemic hiatus which saw many online retailers over expanding and getting ahead of demand, has now given way to enough rising demand to absorb the supply.

The statistics certainly seem to bear this out with Colliers national head of industrial and logistics Len Rosso noting: “The stats point to the share of online sales increasing with eCommerce making up 27% of retail sales up in May 2024 and with renewed consumer confidence on the back of economic stability we believe it will go to 30% by the end of 2025.”

(The Office for National Statistics recorded online retail taking 27.2% of total retail sales in May 2024 – up 5.4% from the previous month.)

GLP UK’s managing director Bruce Topley says some may be surprised at the statistics showing consumer resilience regarding eCommerce, but they should not be – as a cost conscious shopper myself especially when the cost of living has been so tight, the freedom and convenience to shop around to get the best deal cannot be underestimated. I secured £100 plus saving through online shopping for a replacement tumble dryer after mine finally gave up the ghost just last month.

Just looking at Amazon, which got truly bitten by expanding too much during the pandemic as it sought to squeeze out rivals and deliver goods to cash-rich housebound populations, Savills head of EMEA industrial and logistics research Kevin Mofid notes: “There are signs of renewed optimism. For Amazon on a global level, Q1 retail sales were up 12.5% year on year in the USA. They will add a further 43 million ft2 to their network in 2024, a trend we expect to see in the UK and Europe as we move into 2025.”

That notwithstanding, the increased penetration of online spending already recorded will itself drive further take up – Prologis research notes that eCommerce operators require three times more space for their operations than bricks and mortar retailers because 100% of inventory is stored within a warehouse, which allows for greater product variety, deeper inventory levels, space-intensive parcel shipping operations, and additional value-add activities such as processing returns.

The issue in the UK and for occupiers in general is - is there enough space going forward to accommodate the resurgence?