The ‘gold rush’ for London warehouses seen during the pandemic is over and occupiers are becoming more cautious, new data suggests.
During the Covid-19 crisis many retailers sought extra storage and distribution space to cope with a jump in online orders while high street stores closed for lockdowns. Supply chain disruption also prompted some businesses to seek properties closer to final delivery destinations.
But take-up of space in the sector in London reached just 810,000 square feet in the first three months of 2023, according to property consultancy Lambert Smith Hampton (LSH).
That was 45% below the five-year average, and offers “a firm indication that the “gold-rush” for London’s industrial space is over”, the company said.
Oliver du Sautoy, head of research at LSH, said: “The ongoing online revolution, coupled with the pandemic and the great home working experiment, generated a once-in-a-generation boom. Now this has subsided, we are seeing a return to normality and activity will undoubtedly stabilise as occupiers will always need access to strategic space that serves one of Europe’s largest cities.”
Director Joe Skinner added that some would-be tenants are “increasingly delaying their decision making due to fears of over committing or making the wrong decision, especially in light of the current economic climate”.
According to LSH, London’s industrial market is one of the first to experience innovation and emerging occupier trends.
Deals that were agreed in the quarter included urban farming group Harvest London committing to around 140,000 square feet of space at Prologis Park Beddington, Croydon.
LSH said in the future it seems likely that some of London’s industrial property demand will be driven by new concepts and operations.
Total UK take-up hit 60.5 million square feet in 2022, making it the second highest year on record, despite a subdued final quarter amid growing economic uncertainty. More normalised warehouse leasing conditions are forecast for this year.
