The Shift Towards Industrial and Logistics in Commercial Property

Here at Boxpod, we are always watching what is going on in the commercial property market throughout the UK. One of the biggest changes that we are noticing relates to the nature of commercial business in the country. As we see an increase in logistical and online businesses, we are seeing this reflected in demand for industrial and logistics commercial property.

The COVID-19 pandemic has given us an acceleration in the nature of business in its trajectory towards e-commerce in certain areas of the market and with more and more businesses taking on these business models, we are seeing more and more demand for the commercial properties that allow for these models. Demand has never been so high and it is meaning that we are seeing a greater shift towards not only the building of industrial and logistics property but also more creative ways of satisfying this demand.

What are Industrial and Logistics Commercial Properties?

Industrial and logistics commercial properties cover property such as warehouses and factories. They are the places where products are manufactured and/or distributed from. Whether businesses are manufacturing their own products due to Brexit or distributing to customers that have ordered online in a short amount of time, more and more people are looking to rent industrial commercial property.

Depending on the nature of your business there are several factors that should be considered when you are looking to rent a warehouse or other industrial property. These include:

  • The amount of space that is required
  • The location in relation to your customers, delivery sources, and access to transport routes
  • Other criteria that are specific to your business

Increased Demand

According to Statista, in the “final quarter of 2021, investments into logistic and industrial real estate reached an all-time high and exceeded half of commercial real estate investment volume”, with 42% of warehouse property being used by online retail. This is what we are also seeing in the commercial property rental market as well. In other words, warehouses, distribution centres, and factories are what people are wanting at the moment.

Increased Demand for Great Location

Location is a key aspect to choosing the right industrial property for your business – especially if you are working in logistics. Your warehouse needs to be in a place where it can be reached easily by your suppliers – whether they are from within the UK or from abroad. It also needs to be in a place where you can easily reach your customer base within the time limits that you have set. This is likely to be an integral aspect of your business and is a major consideration that must be made.

Many businesses choose to locate their industrial or logistics commercial properties outside the big cities where they get more space for their money, and often better (quicker) transport links.

Offices and hospitality Shift

In addition to the rocketing demand for industrial and logistical commercial properties, we are also seeing changes in offices and hospitality. Businesses are having to adapt to post-pandemic life and this, for some, is meaning changes in hospitality and office culture – a change to hybrid working, for example. Whilst businesses are seeing the merits of having staff at work for some of the time, they are also seeing the benefits of working from home at times.

This is all means that the face of commercial property is shifting significantly in the UK.

One of the most telling changes that we are seeing is the adaptation of some commercial property that was previously being used for offices or hospitality and being re-purposed for use in logistics or industrial businesses.

Commercial property such as large offices on the outside of town, for example, are being transformed into warehouses or logistics storage facilities for the use of online delivery businesses to satisfy the demand for online shopping. We have even seen large hotels on the outskirts of logistically useful towns and cities being re-purposed to provide rented premises for logistics and industrial businesses. Well-connected retail parks are another prime target for re-purposing to logistical and industrial premises.

Hurdles

Although this might seem to be a logical solution to changes in demand in the commercial property industry, it is not a straightforward solution by any means. There are many hurdles in the way to just getting an existing office space and turning it into a distribution centre or data warehouse, for example.

Planning laws will often stipulate what the property can be used for, for example, and some places have a legal covenant that explains that a particular building may only be used for offices.

There is also the moral question of how ethical it is to take a building such as a hotel that may be struggling presently due to the COVID-19 pandemic but has a good chance of recovery in the future, not to mention the fact that many hotels are located on protected land that would not allow for warehouses to be built on.

Final Thoughts

The business model of online shopping and distribution – and, to an extent, manufacturing in the UK looks set to stay. And with the increased demand for products on a here and now basis, we are likely to only see demand rising for industrial and logistics commercial property in the UK for some time to come.

Although we are likely to see, to an extent, a re-purposing of some commercial property into warehouses, distribution centres, and factories, it will not necessarily be the only response. We still do not know how the hospitality sector will respond as we move on from the worst of the COVID-19 pandemic.

It is likely, however, that some properties with a prime location of good transport links and access to transport hubs may get snapped up and re-purposed.

The reality is that the way that the country consumes and does business is changing, and demand for commercial property will change accordingly.

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