Research article

Forecasting warehouse demand

For every €1bn of private manufacturing investment, this creates 18,000 sq m of new warehouse demand from the manufacturing sector


Rather than a like-for-like relationship between a manufacturer receiving private funding and demand for space, it is important to note that private manufacturing investment creates a ripple effect for new demand from associated trading partners involved in the manufacturing supply chain. Our methodology examines how much space is required in the associated supply chain, rather than how much space is required for the initial manufacturing process. In other words, how much warehouse space is required to service the manufacturing process that is being undertaken.

Over the past five years, the UK has attracted £148bn of private manufacturing investment, creating demand for 26m sq ft (2.4m sq m) of warehouse space from the sector. This indicates that for every £1bn of private manufacturing investment, this creates new demand for 175,000 sq ft of warehouse space.

Analysing Gross Fixed Capital Formation (GFCF) as a lead indicator of private manufacturing investment, we are able to forecast future warehouse demand. Capital Economics forecast a 12% fall in GFCF during 2020, followed by a rebound of 13% in 2021, and growth of 3% in 2022, indicating additional warehouse demand of 15.5m sq ft (1.4m sq m) by end 2022 (see chart).

We have adopted similar methodology to forecast European manufacturing take-up for every €1bn of manufacturing investment, this creates 18,000 sq m of new warehouse demand. During 2019, EU28 GFCF reached €3.2 trillion and Capital Economics forecast this to decrease by 15% in 2020, followed by a 17% rebound in 2021, before normalising at 2% growth in 2022. Applying this growth rate to manufacturing investment volumes, this indicates an additional 11.6 million sq m of warehouse demand from the manufacturing sector across Europe by the end of 2022 (see chart).

If, in the short term, companies adopt nearshoring policies to insulate themselves from future supply chain disruption, it is likely that European manufacturing will increase which in turn will create a ripple effect for warehouse demand. If the forecasts from Capital Economics are just 20% higher then an additional 13.9 million sq m of traditional warehouse space will be required across Europe by 2022.


 

N.B. Savills manufacturing take-up forecast makes the following assumptions;

– European manufacturing investment accounts for the same proportion of GFCF as in the UK (8.6%)

– The European manufacturing sector accounts for the same proportion of logistics take-up as in the UK (14%).

Although this varies by country, we have observed comparable or higher proportions of take-up across Central and Eastern Europe – Czech Republic (35%), Poland (14%), which would suggest that our forecasts are weighed to the downside

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