Developer Segro has said planning laws are impeding the sector’s ability to meet growing demand for warehouse space, following a string of local protests against the rapid expansion of facilities across the country.
David Sleath, chief executive of the warehouse specialist, said the development of storage facilities should be considered at the national level, with landlords under pressure to meet demand following the rise of online shopping.
The growth of ecommerce during the Covid-19 pandemic and demand for next-day deliveries has fuelled the expansion of vast storage facilities across the world, with multi-billion-dollar private equity groups including Blackstone and KKR seizing on the opportunity.
Since 2019, warehouse space owned by FTSE 100 constituent Segro across Europe has increased 28 per cent to 9.9mn square feet.
But this growth has met repeated protests by those who oppose having large industrial sheds near their homes, with projects on occasion being rejected by local councils, which have responsibility for approving building applications in the UK.
“There’s quite a way still to go to meet the demand to satisfy what is, ultimately, a very demanding consumer who increasingly wants same-day [delivery],” said Sleath. “Land available to meet that demand is very, very scarce and difficult to get hold of because of our tight planning laws.”
He added that “local people should have a strong say”, but planning laws need “some modernisation”.
“In order to have a really productive economy and an efficient supply chain, you need to plan things nationally, at least,” said Sleath. Although people generally argue their town does not need more warehouse space, “you’re not building it for the local population, you’re building it for the benefit of the national infrastructure”.
While ecommerce orders have dropped from their pandemic peak, Sleath said recent supply chain disruptions are pushing customers to seek more warehousing space close to consumers.
Online retailers are also not the only businesses that have been competing for space, with Segro renting out facilities to data centres and film studios.
“There’s a shortage of studios. So if you go and look at all the big name studios like Pinewood, they’re sold out,” said Sleath. “There was a particular demand for space during the pandemic as we were all at home watching a lot more content. It’s eased off a little bit, but it’s still a growing sector.”
Segro said demand for its sheds has remained strong even as the cost of living crisis forces consumers to reduce their spending. Amazon, Segro’s largest customer, announced last month that it was closing three UK warehouse sites, fuelling warnings that the warehouse bubble had burst.
Last week Segro reported a 23 per cent rise in revenues to £669mn for 2022, adding continuing demand and limited warehouse space had helped boost rents. Shares in Segro have risen 7.5 per cent since the start of the year.
