With extensive shutdowns across development sites and manufacturing plants, industrial output is likely to see a sharp drop in H1 2020. However, this crisis has shown just how important the logistics sector is to the everyday running of the country.
In this latest update we consider how occupiers, investors and developers have adapted to current market conditions and highlight some potential long-term implications for the industry as a result of this change in behaviour.
‘Social distancing’ has had a substantial impact on every facet of the industrial and logistics market:
- All supermarkets have experienced a sustained surge in demand for food and household goods, consistently surpassing even pre-Christmas levels of demand. Supply chains are struggling to meet demand, especially for home delivery. This has led to some urgent requirements for short term warehouse space.
- Occupiers that manufacture or distribute other essential items are in urgent need of flexible extra space to keep up with the increase in demand. Faced with delays in the supply chain, many companies are forward planning to bring logistics and production lines back to the UK.
- Some ‘non-essential’ retailers, such as some fashion brands, have shut online stores because warehouses have been forced to close over staff safety concerns or absences. Those without online platforms have found store closures particularly challenging to cashflow, but even retailers with online-only platforms are reporting reduced sales as discretionary spending is squeezed by reduced consumer confidence.
- Other retailers, especially white goods and home & garden, are making every effort to capitalise on increased demand and keep online channels open. In some instances this has led to additional short term storage requirements.
- The industry has come together to collaborate in this crisis, and the NHS reportedly took an extra 14.25 million sq ft of industrial space in one week at the end of March. Clipper Logistics has been contracted by the NHS Supply Chain to provide services to establish a new supply chain for the delivery of personal protective equipment to NHS facilities.
- Developers on site now expect delays to the build process and some are rethinking future development plans, with a general reluctance to speculatively develop for the rest of 2020.
Gerald Eve is well-established in the logistics property market and covers the full range of property services, from national occupational and investment agency through to lease consultancy and valuation. Please contact them directly for more information.