Warehouse demand continues to rise despite pressure on consumers

Prices and demand for warehouses and logistics sites soared in the first half of the year despite pressure on consumer spending, according to a study.

Experts at real estate consultancy Colliers said the boom in the third-party logistics sector has kept demand strong as retailers have outsourced the processing and delivery of online orders.

Andrea Ferranti, head of industrial research and logistics at Colliers, told the PA news agency that there had been “some early signals” of the cost of living crisis affecting buyer activity.

However, he pointed out that the “chronic shortage” of warehouse supply means that there are still many more interested buyers than available warehouses or land opportunities.

“I don’t see the balance between demand and supply easing although there may have been some early signs of pressures in the economy,” he told PA.

“Some companies have been firmer on their offers, tougher in negotiations, but for those who sell, there are still so many interested parties that the price is still much higher than we have seen before.

“I also don’t see anything that reduces supply barriers in developing sites, so we will see capacity well below demand even if the economic backdrop is causing more distress.

“Despite what you might expect, the lack of supply means prices keep going up.”

Demand for large sites remained particularly strong, with Colliers revealing 26 deals took place involving warehouses over 300,000 square feet, up from 23 deals in the same six months last year.

It comes after the pandemic proved to be a catalyst in rapidly accelerating the shift of many shoppers to shopping online rather than in physical stores.

Still, some companies such as AO World and Ocado reported that online sales growth had slowed more significantly than expected so far this year as shoppers returned to stores or tightened their belts with spending more broadly.

Len Rosso, head of industry and logistics at Colliers, said “online retailers have decreased activity” in the market over the past six months.

He said about half of all transactions last year came from retailers, but accounted for just 13.6% so far this month.

“Part of this can be explained by the increase in third-party logistics activity, which many online retailers are currently using for logistics solutions,” Mr. Rosso said.

“It should also be noted that the year-over-year numbers are heavily skewed by Amazon, which alone accounted for 35% of the total in the first half of last year, they clearly reflect a base of robust occupants in the market.”

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