An oversupply of PPE stockpiled during the Covid-19 pandemic, combined with a shrinking economy, the decline of the Covid-fueled online shopping boom and a major expansion in storage space are creating a glut of new warehouses which will struggle to find occupiers, a senior figure at one of the UK's biggest logistics operations warned this week.
According to recent research by Knight Frank, nearly 37m sq ft of warehouse space was slated for construction in 2021, up from 23m sq ft in 2020 and 21m sq ft in 2019.
However, a senior source at a major logistics enterprise told MT that demand for warehouse space is already falling.
He said: “Six months ago warehouse brokers would have 50 enquiries for space and they would struggle to find any warehouse keepers to take that.
“But in the last six months the pendulum has swung with brokers more likely to have 50 warehouse keepers contacting them looking for customers. But at the same time we have seen tens of millions of square feet of big sheds brought to market, which is creating a glut of new warehousing.”
The source warned that the decline in online shopping, which saw an unprecedented boom during the pandemic lockdowns, will also result in a softening in demand for warehouse space.
Retailers are already feeling the pinch. Ocado recently reported that its customers are reducing their use of delivery for online grocery shopping orders.
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Ocado’s e-commerce collaboration with Marks and Spencer saw a fall-off in sales of 8% in the first half of this year.
The shift in demand has prompted the company to consider a reining in of its facility expansion plans.
In a recent report connected economy analyst Pymnts warned: “The surge in e-commerce fueled by the pandemic is now slowing down as more people return to shopping in stores, a shift that could affect the amount of warehouse space needed as retailers and marketplaces expanded to meet demand.”
The report also noted that since the end of the pandemic lockdown Amazon has closed or shelved 28 hubs or fulfilment centres in the US – a strategy which the online retailer has not, as yet, employed in the UK.
Another factor driving a warehouse glut are government plans to offload an oversupply of PPE, which it ordered in 2020 at the start of the pandemic but never used, the source warned. These stocks are currently being stored in warehouses across the UK.
He said: “A million pallets of PPE have been stored since the pandemic outbreak which the government is now seeking to dispose of. The sheer volume of those PPE supplies, which had to be stored, created a false demand in the market.
He cautioned logistics firms against taking on new sheds at what may be the top of the market. “To rack out a shed in 2020 cost £50 for every pallet location, that is now £100 a pallet.”
