Packaging Insights: The factors driving industry change and what it means for property

The UK packaging industry is undergoing a significant transformation, driven by the coming together of Government sustainability initiatives, technological advancements, and evolving consumer preferences.

Governments worldwide are implementing stricter environmental regulations to promote more sustainable packaging practices.

Here in the UK, the extended producer responsibility (EPR) scheme, set to be enforced in 2025, mandates that producers cover the costs of managing packaging waste, incentivising the use of recyclable and biodegradable materials. Initially projected to cost the industry £1.4 billion annually, the scheme has faced criticism for potentially increasing consumer prices.

In response, the Labour government plans to reduce the proposed £1 billion “packaging tax” after industry backlash, aiming to balance environmental goals with economic considerations.

But what impact will these regulatory changes have on packaging companies and their property needs? David Thomas, Occupier Advisory Partner at property consultancy, Vail Williams, explores.

Shift towards more sustainable materials

There is growing consumer demand for more eco-friendly packaging, with 81% of UK consumers seeking sustainable options.

This shift has prompted companies operating in the packaging industry to transition from using traditional plastics to materials like paper-based solutions and bioplastics.

Such is the demand for biodegradable plastics, that global biodegradable plastic market was valued at a massive $5.43 billion in 2023 – a figure projected to grow at a compound annual growth rate of 9.2% until 2030.

This shift towards more sustainable materials is likely to impact commercial property requirements in a number of ways.

• Manufacturing Adaptations: Facilities may require modifications or new equipment to handle alternative materials, impacting factory layouts and workflows.
• Research and Development (R&D) Spaces: Dedicated areas for developing and testing sustainable packaging solutions could become essential, increasing the need for specialised R&D facilities.

Technological Advancements and Industry 4.0

The integration of Artificial Intelligence (AI), automation, and digitalisation is revolutionising packaging design and manufacturing.

Approximately 48% of packaging companies are utilising AI to enhance processes, which is leading to more efficient production and reduced waste.

As a result, we are likely to see smarter facilities which require a greater focus on space optimisation.

• Smart Facilities: The adoption of Industry 4.0 technologies will require buildings with robust digital infrastructure to support automation and data analytics.
• Space Optimisation: Advanced manufacturing equipment may require reconfigured layouts which will influence the design and size of production areas.

E-commerce growth and demand for logistics space

The rise of e-commerce has heightened the need for efficient packaging and swift distribution. In turn, this has increased demand for warehouses and logistics premises.

Companies like Segro and Tritax Big Box have expanded their portfolios in recent years, to accommodate this surge, reflecting a broader industry trend.

This growth will likely result in expansion of warehouse requirements in strategic locations, close to transport infrastructure.

• Expanded Warehousing: Packaging companies are likely to require larger or additional warehouses to manage the ever increasing inventory and distribution demands.
• Strategic Locations: Facilities located near major transportation hubs will continue to be vital to ensure timely delivery and operational efficiency.

The coming together of regulatory change to drive sustainability efforts, technological innovation, and the e-commerce boom is reshaping the packaging industry’s commercial property landscape.

Companies operating in the industry will need to adapt and invest in specialised facilities, which will allow them to embrace new technologies, and strategically position themselves to meet evolving market demands.

For help and support with your industrial, warehouse or logistics needs, Vail Williams’ industrial property agents can help.