Towards a Segmented Forecast of Demand for Industrial and Logistics Space
Navigating growth: Analysing segmented trends in industrial and logistics space demand for future expansion.
3 minutes to read
Supporting the forecast growth of the retail, manufacturing and service segments of the market considered in this report would require an additional 111.6 million sq ft of industrial and logistics space over the next five years. These segments of the market together account for approximately half of all occupied space. Wholesalers and B2B distribution and those focused on import and export operations, general storage, or alternative uses are not considered as part of this forecast.
For the segments of the market analysed, the floorspace needed per dwelling is forecast to rise from 109 sq ft per dwelling to 111 sq ft.
Given that the growth of the remaining segments of the market, particularly the wholesale and B2B distribution elements, will be closely tied to growth in the retail, service and manufacturing sectors, this part of the market is also likely to see growth. If the requirements for the rest of the market rose at the same rate, then the industrial floorspace would need to rise by 225.7 million sq ft (6.8%) over the next five years (assuming vacancy rates remain constant) and the amount of floorspace per dwelling would need to increase to 113 sq ft.
"Industrial floorspace would need to rise by 225.7 million sq ft (6.8%) over the next five years"
Though this is a significant rate of increase, it is below the rates of growth recorded over the past ten years. Occupied space has increased 17% over the past ten years, or from 102 sq ft to 109 sq ft on a per dwelling basis (+7.5%).
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This has been possible due to a combination of new facilities being built as well as a significant amount of vacant space becoming occupied. Vacancy rates have moved in from 9.2% ten years ago to 5.2% (Q3 2023), and while there has been some outward movement over the past year, current vacancy rates remain well below the 8% of floorspace considered to be a reasonable rate of frictional vacancy by the Land for Industry and Transport SPG (2012).
With vacancy rates low relative to historical levels and below the frictional rate, the level of stock will need to increase to accommodate growth, or alternative ways to accommodate occupiers (particularly service-based or ‘clean’ industrial activities) will need to be found.
The Midlands (East and West), along with Yorkshire & Humber, together account for 38% of the UK's industrial and logistics floorspace. They are also the regions that have seen the largest rise in occupied space over the past ten years and are expected to see the largest rises in demand over the next five years. The demand in these regions will be dominated by national distribution hubs and by manufacturing.
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Scotland is also expected to see strong growth in demand from manufacturing. Occupied stock in Scotland has increased just 11% in the past ten years, compared with 17% across the UK as a whole. Scotland has not witnessed the levels of development seen in other regions, and more than three-quarters of stock in Scotland was built before 2000 (based on floorspace). If manufacturing is to expand in the region as forecast, new facilities are likely to be needed.
Continued pressure on urban facilities is expected due to demand for last-mile logistics to service the growth in online retail, the anticipated growth in service-based activities due to the forecast expansion of the service sector, and food manufacturing activities.