The rise and popularity in sheds
The UK is in the midst of a record-breaking boom in the construction of warehouses, on major motorways and ports up and down the country, these ‘sheds’ have become a common sight. But what has caused this increase in popularity? Here, Hannah Al-Shaghana takes a closer look at what has caused the record-breaking boom and questions if the popularity will come to an end.
You have no doubt noticed the rise and popularity of warehouses (often referred to as “Sheds”) located nearby major motorways and ports up and down the country. Why the increase in popularity you might ask?
The UK is in the midst of a record-breaking boom in the construction of sheds. Their popularity has been driven by two notable factors:
- To support the growth of online shopping during the pandemic and post Brexit.
- As a result of both Russia’s invasion of the Ukraine and the growing rift between China and the West, coupled with higher fuel costs, businesses are motivated to stock goods closer to their customers.
Unsurprisingly, Amazon is a major player in the warehouse boom. Data from Savills showed that the online retailer had signed 18 letting deals since the start of the year compared with 19 for the whole of 2020. John Lewis, also made a recent announcement that it is to take a lease of 1,000,000 sq. ft in Milton Keens from Tesco. This will become the chains second biggest distribution centre after Magna Park. These mega sheds will help the retailer keep up with online purchases which have risen to 60% of overall sales since the pandemic. All these sales need to be stored and shipped from somewhere to meet this demand.
Interesting data about Sheds
Colliers have said that take up for large units (more than 100,000 sq. ft) grew to a total of 11.3m sq. ft. in the first quarter of 2022. This represents an 11% rise on the five-year average for the quarter and a 1.9% monthly increase.
Canadian real estate investor Oxford Properties has just teamed up with Logistics Capital Partners to develop a 734-acre site near Birmingham into a £1bn logistics hub with plans for giant sheds of up to 1,000,000 sq. ft and heights of 30 metres (98 ft).
The Office for National Statistics too have collected some interesting data analysis on the rise of Sheds. Online shopping as a percentage of all retail sales peaked at nearly 38% in January 2021, having stood at 8% at the start of 2011 and 19% in February 2020. This has contributed to a sharp rise in new warehouse construction projects. Transport and storage business premises are increasingly concentrated in the middle of the country in the area known as the “Golden Logistics Triangle”. In 2021, there were 11 local authority districts in the UK where transport and storage was the dominant industry. These included Rugby in Warwickshire, South Holland in Lincolnshire, Peterborough and Doncaster. By comparison, in 2011 transport and storage was not the main industry in any part of the UK.
Could this popularity come to an end?
Whilst the pandemic and Brexit put industrial sheds at centre-stage of the commercial real estate world, this sector now faces a growing list of concerns that threatens to reverse the rush of shed interest, namely:
- The e-commerce boom is showing signs of slowing down as the global economy is cooling.
- There are more planning challenges and push back from local opposition groups in relation to massive shed developments. Not everyone is excited about the prospect of looking at a mega shed from their front window. Stockport Council threw out a proposal in March to expand Bredbury Industrial Estate into the green belt with locals arguing that the giant sheds would ruin the Thame Valley. Likewise, residents in Warrington challenged an 18-metre-high distribution centre based on the fact that it was an eyesore and a monstrosity and clearly these challenges will continue to increase. Local communities might want the convenience of having their shopping delivered quickly but they struggle with the idea that the big sheds required to make that happen might be placed in their eye line and there are planning battles across the country.
- The rapidly rising interest rates is also a concerning factor. The Bank of England has already raised rates multiple times since the start of this year. That, together with the increase in energy costs, creates turmoil.
- Inflation in the cost of labour and building materials is another burden on developer investors which pushes the expense of erecting a shed up considerably.
In April, Amazon issued a profit warning that wiped billions from the value of listed warehouse owners around the world. It is difficult to overstate Amazon’s influence of the sector both as a customer for space and a barometer for online retail sentiment.
Undoubtedly, the way in which we shop, as consumers, has influenced the way in which e-commerce and retailers have had to evolve. The high street will never be the same again; that’s a fact. Online is here to stay which means Sheds will continue to shape the UK landscape. The real estate market is due a correction to enable demand to meet supply. Only time will tell as to when this correction will take place and when Sheds will be more affordable to build and to occupy.
By Hannah Al-Shaghana