The demand for warehouse space continues to exceed supply across the UK. London, which accounts for 47% of take-up of prime industrial premises, is currently the most expensive region for warehouse rents. The Midlands, on the other hand, is much cheaper, despite capturing 47% of the total take-up. But as demand increases, so do the rental costs. Here are some facts you should know about the cost of a small warehouse.
Demand for warehouse space continues to outstrip supply
The current shortage of warehouse space in England is due in large part to the growth of online shopping. However, a shortage of warehouse space is not a problem in London. Despite the shortage, the supply of space is still far below demand. This means that warehouse space is increasingly hard to find. As such, demand for space is still outstripping supply in the city. The current situation is likely to worsen before it improves.
A recent industry report by Savills and JLL highlighted that the shortage of warehouse space in England is putting pressure on supply. According to the report, an additional 18 million square feet of industrial space are needed each year to satisfy the demand. The shortage is likely to worsen unless speculative development starts returning to pre-pandemic levels. However, the shortage of warehouse space is expected to persist until speculative development reaches pre-pandemic levels.
London is the most expensive region in terms of prime industrial rents
As the busiest retail district in the world, London continues to be one of the most expensive regions for prime industrial rents in England. However, the growth in online shopping and the rise of dark supermarkets have contributed to increasing price pressures. These factors have increased rents in the inner-city zone. According to Savills, prime rents on Oxford Street have been up nearly 50% over the last year.
The government of England and its local government have taken steps to improve housing affordability and the cost of living in the UK. However, the focus has shifted away from providing social rental housing and towards policies that promote homeownership. As a result, most policies in the United Kingdom focus on encouraging home ownership while a few are aimed at protecting tenants. In addition to a low-cost environment, London has also reduced its tax rates.
Midlands accounted for 47% of total take-up
In the second quarter of 2016, the Midlands were the most popular regions for securing warehouse rental space. In fact, the Midlands made up almost half of all the take-up across the UK. The region’s high density of distribution facilities, including the ‘Golden Triangle’ in the east, contributed to this rise. Logistics centres in the East enjoy excellent transport links and can reach 90% of the population within four hours. This has spurred a huge investment in logistics facilities in the region from manufacturers and couriers.
This continued expansion of online shopping has driven demand for warehouse space. According to Colliers, UK take-up of industrial space of over 100,000 square feet was up by 3.4% quarter-on-quarter in Q4 2020. Meanwhile, London’s assets posted a 5.1% rise. With this continued growth, the Midlands region is set to lead the way in warehouse rental growth. If you’re interested in leasing a warehouse in the Midlands, now’s the time to take advantage of these great opportunities.
Cost of renting a small warehouse
The cost of renting a small warehouse in England is more expensive than larger industrial spaces. In January 2022, the cost of prime small shed real estate in Park Royal, London, was thirty British pounds per square foot. Several factors influence the cost of rent in this region, including proximity to key population centers and road systems. Other factors that affect the cost of rent include the size of the shed and the number of employees it needs to maintain its operations.
The average cost of renting a small warehouse in England is around PS1.5 million. A warehouse of this size has an average floor area of 4,000 square feet. Prices will vary widely depending on the size of the warehouse and its location. For instance, a warehouse in the heart of central London or near an airport will cost the most, as both areas are popular with businesses. On the other hand, renting a smaller warehouse for a year will cost you PS1,000 per month.