Retail parks may become storage for online giants

Rise of the online giants forces developers to eye traditional urban sites to satisfy logistics demand

Urban logistics space is in such short supply that developers could turn retail parks into warehouses. A report from Deutsche Bank said that shifts in consumer behaviour meant retail parks may be re-purposed for warehouses for online giants such as Amazon and delivery companies.

URBAN logistics space is in such short supply that developers could turn retail parks into warehouses, as residential schemes gobble up other available sites. Changing consumer habits and the growth of online retailing have driven huge demand for warehouse space in urban areas in the last few years. A report from Deutsche Bank said such is the demand for land that traditional industrial parks and retail parks could be re-purposed for warehouses for online giants such as Amazon and delivery companies such as DHL which take parcels to customers.

These online shops and third-party logistics companies are “vying for urban logistics space in an environment where industrial land is being lost to residential use”, the report said. Land has become too expensive for many logistics schemes because of the demand for sites for new homes.

Matthias Naumann, head of alternatives strategy at Deutsche Bank, said: “Residential development is a strong competitor to logistics, and over the last 10 or 15 years the total amount of industrial land has been in decline.”

He said that demand for “last hour” logistics sites was likely to grow, especially in more regional centres such as Bolton and Warrington, as people demand faster delivery times for their goods. “One of the major goals for operators is to serve quickly,” Mr Naumann added. Retailers will increasingly look to be close to their catchment areas, he said.

In an example of this earlier this year, Tritax acquired a decommissioned power station in Dartford and plans to turn it into a distribution centre to serve London.

Turning retail parks into warehouses could have the added benefit of taking space from high street brands such as furniture shops which are looking to reduce their store sizes. “Underutilised retail assets such as certain shopping centres, retail parks, business parks, supermarket premises, inner city office space and car parks could potentially be used for the storage and distribution of goods to proximate companies particularly as industrial space within city limits becomes increasingly constrained,” Deutsche’s report added.

Investors who might want to have industrial properties on their books could also “purchase with the intent to convert”, the report suggested, as the sector increasingly becomes a target for institutional money. According to figures from Savills which were released last month, online retailers have dramatically ramped up their presence in the UK in the last decade. In 2008 they signed up for just 1.5m sq ft of new space, while this year that number has soared to 12.2m sq ft.

But despite this, the amount of space being developed speculatively, that is without a tenant already in place, has dropped from a peak of just less than 8m sq ft in 2015 to around 3m sq ft this year. At the current rate of take-up, there is around two and a half years of supply left, Savills estimated.