Four years ago, nobody would have predicted how much warehouse space in the UK would currently be used for food. Demand from food manufacturers and retailers increased by 58% over the past 12 months, after highly publicised shortages left shops empty at the beginning of the year. There is a record 4.3 million square feet of warehouse space currently occupied with food – or food production. Warehouse space has been used, not just for storing food, but for processing and even for growing it, with the UK’s biggest vertical farm in Harlow containing 105,000 strawberry plants – all housed in a former warehouse.
The drivers of this demand are varied:
- The effect of the pandemic on supply chains
- Brexit and the consequent breakdown in some supply chains from continental Europe
- A reaction to recent food scarcity issues and their highly publicised effects
- The Ukraine war which has badly impacted grain imports from eastern Europe
- Climate change; which has caused vegetable shortages in Africa after an intense cold spell.
Given that around 70% of the UK’s food supply, including live animals, comes from the EU, producers and suppliers are being joined by retailers – notably Aldi and Amazon – who are trying to locate new storage space close to their customer base, at a time when falls in consumer spend have been forcing other retailers to reduce their storage space.
Part of the demand for more food storage space is being created by a need for refrigeration. Popular foodstuffs like peppers, tomatoes and cucumbers, all of which have been in short supermarket supply this spring, also require refrigerated storage space so they can be released onto the market when they achieve optimum ripeness.
Refrigerated warehousing growth
A recent report suggests that the global market for refrigerated warehousing will more than double in a decade from the current market value of $36.5 billion to $96 billion by 2031. Refrigerated warehouse space isn’t just required for food productions – while food and beverage and agricultural sector products all demand refrigeration, pharmaceuticals are an increasing driver of refrigerated warehouse demand.
Another reason for the increased demand, and for the high rate of conversion of standard warehousing space into refrigerated facilities, in the rapid technological advancement in this area, notably in zero-carbon electricity, which makes refrigeration both a more attractive option and an easier one to ‘sell’ to both developers and planning authorities. Combining energy efficient technology with use of renewable energy sources is a way to achieve:
- support for the building or repurposing of refrigerated warehouse space
- rapid uptake of new build or retro-fitted warehousing
- attractive warehouse rental tariffs.
These new technologies also allow organisations to store products for longer without loss of quality or integrity – this means that products have a longer overall life and obtain a higher or premium price when they reach the market. These technologies which extend seamlessly into logistics, eg cool loading bays, also boost food safety, which makes perishables and high risk commodities like soft fruit a less chancy prospect. Cold chain logistics are also expanding rapidly and next generation climate-controlled vehicles, including autonomous vehicles in the USA, are being seen as a huge contributor to the refrigerated warehouse market.
Finally, taller refrigerated warehousing is becoming the norm. While the trend started in the USA, it’s spreading rapidly to the UK, and vertical cold storage design doesn’t just make better use of space, it’s actually more efficient as new buildings use rooftop refrigeration units send cold air downwards to cool the building with greater efficiency and lower operational costs.
Nobody involved in warehouse rental can be unaware of the demand for warehousing across the UK and this is not just a national phenomenon. Australia has seen its second highest annual rate of warehouse rental, ever. In a country that has space for new build, this is wholly good news, but for other, more congested environments, demand is outstripping supply. London, Tokyo and New York are just some of the cities that are seeing ‘industrial rebuild’ as one of their key options for new warehousing space.
What drives warehouse rebuilding?
- Little or no free land for development – eg established inner cities, island economies etc
- The need to meet local or national net zero carbon commitments
- Bonuses and tax breaks for redevelopment zones
- Consumers demanding same day delivery for online purchases
- Demand for multipurpose warehouse space to support omni-channel distribution (eg e-commerce, cold storage and returns in the same location)
- Lower running costs with new technologies (as we’ve said above with taller refrigerated warehouses for example)
- Investors finding the asset value of new warehousing to be an attractive proposition compared to other categories such as out-of-town shopping centres.
It may seem that automation should feature in that list, but many older warehouses just aren’t compatible with automated processes and where councils or other zoning priorities limit the outer appearance of a warehouse space (again, inner cities are the most common location for this kind of problem) and/or where local infrastructure doesn’t support onward use of automated processes, it limits both the use and the value of automation.
The difficulty for those currently seeking warehouse rental is that it all sounds like jam tomorrow! While we might benefit from bigger, better, more energy efficient warehousing in the future, for today the requirement is that current warehouse space is being either demolished or retrofitted – and in both cases this means that existing warehouse space is shrinking, especially in distribution centres close to large urban populations. Some ‘knock down and rebuild’ entrepreneurs are making some offsets to help warehouse users, such as offering prefabricated warehousing as a temporary structure on nearby sites, to help mitigate the effect of closing a warehouse space to rebuild it, but even where this is happening, it rarely provides the same level of security and support and leaves smaller companies struggling to find temporary warehouse rental space. Short term warehouse rental is an option, but may require a more imaginative approach to overall business management.