UK property has always been a popular investment for foreign buyers and now more so than ever. The type of property in highest demand has changed slightly though due to Brexit and the Covid pandemic, from residential to commercial. Rather than snapping up bijou penthouses in city centre developments, investors are opting for something slightly larger. A lot larger in fact. Warehouses have become the next big property investment boom, especially for overseas investors, spurred on by the huge increase in e-commerce.

To avoid reneging on delivery timescales and to avoid spiralling costs, many overseas manufacturers from as far as China and the US are now focusing on finding warehouses that are nearer to their customers and stocking them ahead of time with fast moving goods. This way they can ensure shoppers get their orders more quickly. Otherwise, they risk losing the customer to other suppliers.

E-commerce and shipping costs driving investment trends

Property agents Savills are reporting experiencing a surge in warehouse demand, which has driven vacancy rates to a record low of around 5%, with demand still continuing to rise. The company has seen record take-up of warehouse space all over Europe but especially in the UK.  There are a number of factors at play creating this exceptional demand.

The boom in e-commerce and rising exports from China are two major factors. China’s cross-border e-commerce rose 31.1% last year, while demand for overseas warehouses grew by 80%, according to official data. By increasing their warehousing facilities, Chinese manufacturers, whose exports make up 70% of the UK’s e-commerce market, are able to serve their customers more efficiently.

Increasing shipping container prices are also making having local warehousing and storage facilities a more economical solution. Unprecedented demand for goods especially, from consumers at home under lockdown, is driving up shipping costs and creating delivery delays for goods coming from Asia. There are over 180 million containers in circulation within the global logistics supply chain, but shortages mean some companies are having to wait weeks for space in a container and then paying premium rates. It is impacting the whole industry.

The problem is so bad that shipping costs have skyrocketed by as much as 264% in the past 12 months for the Asia to Northern Europe route. It is a problem for everyone needing to ship goods from Asia and further exacerbated by limited air freight capacity. The pandemic related travel restrictions and quarantining rules have resulted in airlines reducing their passenger flights, so the usual freight area is not available.  Some high-value items that would normally be delivered by air, such as iPhones, are now being shipped in containers by sea instead.

Another factor is Brexit, due to increased shipping costs from the EU and vice versa. Post-Brexit trading arrangements could shift trade flows and increase demand for warehouse space among European firms. According to Whistl, 15% of UK shoppers buy from overseas retailers every day and in an attempt to reduce extra shipping costs, some European companies have already acquired space in this country. For example, Belgian logistics firm Weerts recently took more than 800,000 sq ft at Suffolk Park near Felixstowe.

The same trend is occurring in the opposite direction with consumers in mainland Europe ordering less from UK companies. This could further increase demand for warehousing from businesses in other regions, e.g. Asia and the US. Finally, UK retailers and manufacturers could also trigger greater demand for logistics space.

WMS investment

For those companies investing in a new warehouse, automating key processes using a warehouse management system (WMS) solution is an essential first step and offers many benefits.

A WMS will provide you with real time inventory tracking from the moment it’s received into the distribution network through to final dispatch to the customer. This means that processes such as cycle counting and forward pick replenishment are available, as well as allowing for better forecasting resulting in reduced inventory levels. This automation ensures increased picking accuracy, and fewer returns, resulting in on time, in full, deliveries of the right products at the right time.

Many overseas organisations will already have an existing stack of technologies in place including ERP, TMS and SCP. A best of breed WMS will be able to seamlessly integrate with these systems, ensuring that the data in your systems is live, up to date and visible throughout your entire business.

If you are considering investing in a new warehouse, contact Indigo to discover the benefits a WMS can bring.