A McKinsey survey in 2021 found that 61 per cent of companies had increased inventory of critical products. This has naturally been a significant driver of warehouse take up all over the world in the past two years and set to continue. Vacancy rates are however at record low levels and Savills Logistics and Industrial Real Estate census 2021 found that lack of supply and zoning for new supply were the key challenges for market participants.
“The need for additional space is so great that we are even seeing some Class A office space being torn down and converted into industrial sites in the US, says Gregg Healy, Head of Savills Industrial Services, North America. “This is now considered the best use of the space.”
With a lagging development pipeline, most markets globally look to remain undersupplied for the foreseeable future, which supports continued rental growth.
“With such a gap between supply and demand, strong rental growth can be expected across the world and occupiers are likely to tolerate this,” says de Minckwitz, “Rising rents are a concern for warehousing occupiers, however they only form a small part of their overall costs, at an average of 5% of their overheads- transport and labour are far more significant.”
Savills advises that the pressure on supply will force the industry to innovate and we will see more multi-storey warehousing in Europe, especially in the best sites near to major cities. The integration of a higher level of technology in the industry will also be essential in order to prevent future supply chain challenges.
And there will undoubtedly be more challenges on the horizon this year, with rising inflation, the escalating conflict in Ukraine and China’s zero tolerance approach to stopping the spread of Covid all likely to cause further chaos on supply chains.
For the global logistics sector there is however little sign of the perfect storm clearing, explains Mofid. “Even in the long term these headwinds could be outweighed by a reorganisation of global supply chains. A move to nearshoring production would benefit industrial markets in developed nations, while continued GDP growth and ecommerce penetration in developing nations means demand for warehousing will increase even if manufacturing declines.”
Note to editors
Impacts (https://www.savills.com/impacts/) is Savills global thought leadership publication and research programme. This year, Impacts is centred around the theme of “Reconnect’. What are peoples’ priorities post-pandemic? Where do the opportunities lie within the built environment? And what does the future look like for resilient cities? With the world opening up again, we explore how real estate is fundamental in reconnecting faces, spaces and places; helping people and businesses to connect and thrive.