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The cost of warehouse space

Article by Megan Gee

It’s an issue that has been snowballing in the background for a number of years. Accelerated by the pandemic, Brexit and the rise of e-commerce, the UK has a chronic shortage of warehouse space. The issue has now gotten to a critical point.

Space isn’t something that we would ever expect to run out of but in recent years the colossal distribution centres that have emerged from the likes of Amazon, Ocado and many of the major retailers, are quickly snapping up available space and land that is suited to the needs of warehousing.

Driven by the e-commerce boom – consumers expect most products to be delivered to their door today or tomorrow – anything later and your business is already behind your competitors. Therefore, having stock availability and being able to pick, pack and send it efficiently has become the new great customer service challenge – making order fulfilment key to all businesses who now rely much more on e-commerce.

As footfall has shrunk during the last few years, the reliance and need for bricks and mortar stores has reduced and like a pair of scales, on the other side, demand online has driven that race for warehouse space on an upwards trajectory.

The question for all businesses who need storage space for stock, from 3PLs and retailers to pharma businesses, food and drink manufacturers and fulfilment houses – how do we continue to meet demand and be able to grow? With the competition for warehouse space so fierce, one property consultant expects rent to rise in key regions, with warehouse supply down 17 per cent in 2020 when compared with 2019. Meaning businesses who have the capability to invest more in warehousing will come up trumps.

The race for space

The last few years have been no easy ride for businesses – it might feel a bit like it’s just one thing after another. Brexit and the pandemic have of course been the two major epicentres for business change – draining most of business leaders’ focus and resources. Yet these two challenges have only exacerbated the issue of a lack of warehouse space and made it arguably the biggest challenge facing the warehousing and logistics industry.

Before 2020, experts already predicted that the UK was running out of warehouse space. According to a report by property consultants Lambert Smith Hampton, retailer and distributor requirements for logistics warehouses would exceed the country’s available stock by 25m sq ft by 2020. This estimation was before the pandemic accelerated e-commerce by a number of years.

By the summer of 2020, it was reported that ‘take-up of industrial & logistics space (units of 100,000 sq ft +) had hit record levels in H1 2020, reaching 22.4 million sq ft (2.081 million sq m), 66% above the long-term average’. Some 43% of take-up can be attributed to online retailers, with Amazon alone accounting for up to 84% of this figure. 3PLs accounted for 15%, with many fulfilling contracts for the NHS. Another 11% were short-term lease agreements with high street retailers with excess stock to store as a result of Covid-19.

This has all come to a head as we moved into 2021. The change in consumer habits to online, which is only likely to continue, the Christmas period, Brexit and a lack of warehouse space means businesses are now having to examine their supply chain and warehousing. Leaders have to come up with solutions that will enable them to meet demand and grow their business. As businesses look to drive recovery out of the economic struggles of 2020, could automation and the robotics revolution be the answer?

How automation can save space

With land in short supply and demand expected to grow, automation is only going to become more valuable to any business that uses warehouse space.

The likes of Amazon and Ocado are already setting the pace in warehouse automation, demonstrating what is possible through large-scale warehouse robotics operations. Robotics is now coming of age against the backdrop of Covid-19 and Brexit. The technology is helping these businesses to meet surges in demand by processing goods at the volume, speed and accuracy retailers and consumers expect.

By turning to an automated warehouse system, you can move your inventory upwards by increasing rack size – and goods-to-person robots can speed up picking time and accuracy while reducing costs.

The cost to your business

With a lack of warehouse space available, businesses are going to have to be creative about how they use the space they have and what space they can acquire. The limited availability means not just singular businesses, but whole industries in the next few years are going to find it extremely difficult to grow as capacity is reached and only a certain level of inventory can be picked, packed and delivered every day.

If businesses don’t start looking at options like automation and robotics to solve space issues, it could well become a significant cost to your future growth.

Download our full report on the robot revolution to find out more

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