Demand for small warehouses creates construction opportunities

One promising area for new work in the buoyant industrial/logistics sector is for smaller warehouses, below 100,000 sq ft, which typically suit smaller businesses needing to store and distribute goods close to their premises.

Much of the new capacity, which has been built across the sector in recent years, has involved so-called ‘big box’ sheds over 100,000 sq ft which the larger retailers and e-commerce groups use as distribution bases. These larger warehouse projects have driven much of the 55% increase in the value of industrial project starts which was seen in 2021 and the 11% rise in starts in the sector which Glenigan is forecasting for this year.

But space in smaller warehouses, which many SMEs require to strengthen their supply chains, remains in short supply. According to Savills, the vacant space available for smaller, sub-100,000 sq ft industrial sheds has reached a new record low. In all, the agent estimates that there has been an unmet demand for some 62 million sq ft of space in small warehouses over the past decade and it calls for planners to allocate more land to the sector to encourage growth. Space in smaller warehouse units is keenly sought in traditional industrial areas such as the East Midlands.

Adding new capacity 

Glenigan data suggests that developers and businesses themselves are beginning to address the shortage by adding new warehouse capacity in units of well under 100,000 sq ft (9,290 sq m).

In Ipswich, detailed plans have recently been granted for a smaller, 2,561 sq m industrial unit at Anglia Parkway North in a £2.9 million scheme for Reads Property Developments. Work on the project, which is at the pre-tender stage and includes infrastructure works and access roads, is due to start around the end of this year and run for six months (Project ID: 21181846).

Meanwhile in Hertfordshire, detailed plans have been granted for a £5 million scheme of two warehouses across 3,019 sq m at York Way in Royston for Kiafield Properties, which will also involve seven smaller trade units. A main contractor has yet to be appointed on the project where work is due to start next spring and run for 9 months (Project ID: 18391862).

Companies’ developing

As well as property groups, companies are continuing to develop smaller warehouse space for their own use. In Uckfield in Kent, Kennedy Hygiene Products has recently had tenders returned for a £1.1 million warehouse development with 2,210 sq m of space. Alongside a new warehouse, the project involves the relocation of six storage containers and work is due to start early in the new year and run for six months (Project ID: 16157193).

Meanwhile, some of the larger retail food groups are also investing in smaller warehouse capacity. Ocado Zoom Bristol has recently awarded a contract for a £2 million warehouse conversion involving a 1,429 sq m unit in the city involving the conversion of a light industrial unit to storage and distribution space. Ashe Construction is the main contractor on the project where work is due to start in the spring and run for ten months (Project ID: 22195761).