Following the 2008 recession, demand for industrial warehouse units across the UK waned and investors and developers moved away from speculative into build-to-suit (BTS) industrial schemes.
The net result was a reduction in availability of good quality stock for many years, which is now being exacerbated by the rise in e-commerce coupled with the current pandemic.
As businesses navigate the unsteady waters of the COVID-19 recession, according to property consultancy Vail Williams LLP, a surge in demand for industrial space, driven by the e-commerce sector, is leaving many manufacturers struggling to find new premises.
So far in 2020, over 50% of industrial transactions have been built-to-suit solutions with logistics companies snapping up much of the market’s existing supply, including Amazon which has accounted for almost a third of total take up.
According to Jeremy Firth, head of building consultancy at Vail Williams, this is creating a challenge for manufacturers who want to grow their property footprints, leaving them unable to respond quickly enough to their changing business needs:
“Many manufacturers own the freehold where they are located and have extended their premises over the years, slowly adding to and amending their accommodation as the business has grown or contracted. This can leave many manufacturers restricted by their freehold and the legacy of existing buildings which often cannot evolve at the same pace as the business. As a result, relocation to a new site with capacity for the future is often the only answer.”
However, from the day that a manufacturing business decides to make a move to new premises, it can take a minimum of two years to find an appropriate property, whether this is the redevelopment of an existing building or the freehold acquisition of a site on which to construct something new.
“What we are seeing currently is that much of the existing industrial warehouse supply is being snapped up by logistics and e-commerce businesses, which is making it difficult for manufacturers to find appropriate space to grow.
“The process of locating, building and moving to new premises is a long-winded one and needs a great deal of thought and consideration, from creating space budgets to carrying out a site search and acquiring the land, through building the facility and slowly making the move maintaining stock levels and continuing to service the customers” explains Jeremy.
This is where, according to Vail Williams, having a five-year property plan in place is vital:
“Not only does it ensure that your business is able to respond quickly to your changing property needs, it also means you can plan effectively for future growth, no matter how scarce land supply is.
“As part of the plan, it is important to consider what the future looks like for your business, so you can anticipate future space needs. Unless your business is changing dramatically and quickly, it can be better to invest in the freehold acquisition of space,” continued Jeremy.
In the majority of cases, this means the development of new, more efficient, space which will add value to businesses operating in the manufacturing sector, in the long term.
“To achieve this, it is important to get a third party view of your business and its operations, to work out how much space you have, what is over or under-utilised and where production flow does and importantly does not work, so a space model and budget can be crafted for your particular needs.”
Having a good project management team on board will help with everything from searching for and acquiring new sites or buildings, legacy site value maximisation and disposal, to planning, design, project management of the development and delivery of new premises.
And despite the lack of industrial supply, opportunities do exist for manufacturers to grow their property footprints in the current market.
Jeremy concluded: “With an experienced and effective project management team on side, it leaves you able to focus on your core business.”
For more information about the issues discussed in this article, contact Jeremy Firth at jfirth@vailwilliams.com
