Changing demands in industrial sector not reflected in supply chain

19 December 2017

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The industrial sector in the UK is growing, according to the Q3 2017 RICS UK Commercial Property Market Survey. This shows that tenant demand has increased strongly across industrial space, despite falling across other areas such as the retail sector.

The strong demand has been partly fuelled by a range of alternative occupiers to the traditional industrialists, with tenants often attracted by the possibility of a low cost alternative to office and retail premises. These occupiers include the growth of artisan brewers, creative industries often linked to television and film, and sports users providing rock climbing and trampoline parks, children’s nurseries, doggie day care centres and even artists.

Significantly, a greater number of online retailers are now also utilising warehouse and logistic facilities, as they restructure their supply chains to deliver increasing internet sales. According to the Office of National Statistics (ONS), internet sales in the UK make up 16% of total retail sales, significantly up from less than 4% just a decade ago.

In Wales this demand for industrial space is still not reflected in the level of new developments.

The lack of industrial sector development and continuing take up of existing stock, is leading to high occupancy rates and a squeeze in the supply chain. Whilst this is pushing up rents in prime industrial properties, speculative development is still scarce.

This is good news for landlords and investors (the Q3 stats showing an increase in investment enquiries in the industrial sector, including growing interest from overseas buyers), but not so good from an inward investment perspective, as larger requirements struggle to find suitable space.

Another consequence of the lack of development is that existing and available stock is often unsuitable for the evolving demands of e-commerce- there appears to be a growing need for custom-built, high-tech industrial sheds that fulfil the logistics for picking, prepping, packing and shipping of online orders.

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