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An Exciting Decade Awaits for Industrial and Logistics

Tessa English, a director of UK research at JLL, discusses how urbanisation and sustainability will become key trends for the sector over the next decade.

To think about the future of the UK’s industrial and logistics market against a backdrop of several changes that are taking place in the market, there are two themes that stand out as having the potential to change the types of industrial buildings that will be occupied and sought out.

Urbanisation is a global trend that has directly influenced demand in the industrial market over the years and driven the need for city and urban logistics facilities. In 2000, 79% of the UK’s population lived in urban areas and the UN estimates that today, in 2020, this has increased to 84% and that by 2030, around 86% of the population will live in urban areas. This structural shift, with more people living in built-up areas, will continue to create further demand for industrial facilities to service these areas.

In the UK, London has stood out in terms of its demand and supply drivers and has seen strong interest from investors and developers.  With diminishing land supply and an increasing population, there has been a growing need to intensify land and this has led to the exploration of multi-storey and multi-level industrial buildings in the city. Over the next 12 to 18 months, we expect to see work start on the first of these new types of intensified industrial buildings in London, and by 2030 we would expect to see a number of these new developments built in London.

Urbanisation will also drive demand for warehousing space in other large cities across the UK, the expectation being that there will be a surge in demand for ‘urban infill’ in cities such as Manchester (pictured) and Birmingham over the next 10 years.

Sustainability is also becoming a more important issue both in the UK and globally. In logistics, transport is a much larger contributor to greenhouse gas emissions from supply chains than industrial buildings, but the contribution from warehouses should not be ignored. Vehicle movements and vehicle emissions in cities are going to become more restricted across the UK through government policy and, as a result, industrial and logistics operators will need to work to these regulations while delivering to and servicing areas. 

Over time, this could lead to a change in demand for industrial space and how it is used, including the use of more electric vehicles and the demand for power and charging points in buildings for these vehicles. Moreover, there will be a growing need to develop more sustainable buildings – not only will occupiers want to be operating out of these units, but investors and developers will want these more sustainable buildings in their portfolios.

The next 10 years for the industrial market has the potential to be extremely exciting, with new types of industrial product coming forward in London and sustainability playing a pivotal role in demand for warehouses from both operators and owners.

Adapted from an article first published in Property Week on 26 September 2019.

 

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