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Shortages of warehouse space challenging businesses

Warehouse space is at a premium across the UK, as increased demand and limited labour supply push up prices.

Warehouse space is in short supply across the UK, challenging businesses needing to manage stock and inventory.

Businesses in South and Eastern regions are worst affected by shortages of warehouse space, research has found. And the wider warehousing sector has been particularly impacted by labour shortages.

All of this is pushing up prices for warehouse space, with some locations quadrupling in cost through 2022.

This adds to the pressures being faced by businesses, contending with wider supply chain challenges, rising inflation, and the changes created by Brexit.

Warehousing has boomed since early 2020. The sector was already thriving through 2019 as businesses stockpiled products ahead of the Brexit transition period. The rise in e-commerce sales, spurred on by lockdowns and retail closures at the height of the pandemic, saw 37 million sq ft of space earmarked for warehouse development in 2021 alone.

Third party logistics (3PL) firms and online retailers increased their warehouse occupancy by 614% in 2020-21, according to Savills. Manufacturers have also been scaling up or ‘trading up’ their warehouse facilities.

However, supply is struggling to keep up with demand for warehouse space for storage or distribution of goods. CBRE found a vacancy rate of just 1.5% by the end of 2021 – an all-time low for the warehousing sector.

Research by Orderwise, which provides warehouse management software, found that some areas are almost at capacity for available warehouse space. This tallied with findings within the packaging sector, that saw 18% of businesses cite storage capacity as a challenge.

In a survey by MacFarlane Packaging in early 2022, one-in-five respondents said they didn’t have enough room to store their products or volumes of packaging required for their operations.

Orderwise reviewed commercial property rental data from the UK’s biggest cities and towns, via Rightmove, to compare the availability of space against the number of businesses in each area.

The data found that Slough, Cambridge and Huddersfield have the least amount of space available for businesses to rent, currently. By comparison, Blackpool boasted the highest square footage of space available to rent currently – with more than 2m sq ft of storage space available to the town’s 3,900 registered businesses.

Sourcing temporary warehouse space and covering costs for transportation to move goods to other areas, could push up operational costs for businesses, already contending with rising energy and labour costs.

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