The Covid-19 pandemic has undoubtedly challenged traditional consumer behaviour. The demand for online services has been increasing over the past decade but the pandemic has certainly accelerated this trend. The closure of the high street meant businesses and consumers had to become dotcom ready as people from across all generations were forced to use the internet to purchase everyday items.
Behind the screen, however, the traditional bricks and mortar still exist. Goods marketed online require open, manned and well serviced premises. It's therefore not surprising that the biggest e-commerce platform, Amazon, operates one of the largest industrial units in the UK in Dunfermline, Scotland, which can be comparable to the size of 14 football pitches.
While traditional restaurants and food outlets had their shutters rolled down, there was an increased demand for takeaways, cook at home kits and fresh produce. This gave increased impetus to a new phenomenon – dark kitchens. Essentially, these dark kitchens, or cloud kitchens, are used to prepare food without the customer seeing the process; located away from the prime real estate pitch.
As the changing levels of restrictions continue to ebb and flow, it's fair to say that industry has had to adapt to restricted use of front of house space and customer expectations. Consumers demand more choice at keener prices. They desire a mix of restaurant experiences and home dining options which is pressing the food and beverage industry to look at these emerging off-site storage and preparation facilities.
Similar trends are evolving in the supermarket industry and insiders speak of the weekly shop staples being delivered directly from warehousing facilities. Shoppers are still keen for a shopping experience and no doubt the roll out of the High Street Voucher Scheme will increase footfall on the high street in the coming weeks and months.
Prologis, the world's leading ecommerce warehousing landlord controls nearly 1 billion square foot of such real estate having identified the opportunities afforded in this sector over 20 years ago. As reported in the Financial Times, its founder is considering offering enhanced services to tenants – whether that be with new technology such as information and online facilities or more traditional plant and equipment such as forklifts. Blackstone are also refocusing on this market having acquired 7 million sq ft of Asda's warehouse network at the end of June.
Looking closer to home, local agents have reported that deals in the industrial and logistics property market were up 44% for the first 3 months of the year which is 21% above the five year quarterly average. This would back up the trend which we saw at the end of 2020 where Northern Ireland's industrial investment was nearly three times higher than the five year average. Recent examples include the sale of the 750,000 sq ft Kilroot Business Park in Carrickfergus, the Amazon distribution facility at Titanic Quarter and the unveiling of a new £16 million warehouse facility by Henderson Foodservice in Mallusk.
In an age where instant gratification is to the fore, supply chains have needed to become more efficient to keep up with consumer expectations. As a result, businesses have been keen to snap up industrial space in in the right location. It is therefore likely we'll see units on the outskirts of regional cities, which can offer cheaper rates and easier access to critical infrastructure, continue to be in demand as we enter 2022. Those fading edge of town retail hubs could be reimagined as warehousing facilities to cater for local demand. Online retailers could seize on such locations to ease the difficulties associated with "last-mile" delivery. It is not difficult to see how this can easily be adapted and translated for the local market.
Of course, we shouldn't concentrate on emerging trends to the exclusion of the long enduring business models. Warehousing continues to be in demand for all those industries who will remain reliant on space – whether that be for storage, manufacturing, bulky goods or transport logistics. In the last few months alone we have acted for businesses seeking premises for storage; businesses seeking premises for food production; and businesses seeking premises for manufacturing. It is no surprise that they have all been through the same buildings in their respective property searches.
This competition from both established and evolving sectors will ultimately drive the premium for warehouse space. We therefore anticipate that demand for industrial premises and warehousing will only grow through the end of this year and into the next as investors and tenants look to keep pace with market forces.
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