Addleshaw Goddard – e-commerce growth needs more warehouse space

Law firm Addleshaw Goddard has published new research suggesting that the UK needs more than 18 million square feet of warehouse space to meet the soaring demand of the UK’s e-commerce sector. Companies needing this space include online retail, parcel delivery and logistics companies.

The new report by Addleshaw Goddard is called “How soon is now? The future of logistics”. It argues that the rise of e-commerce and increasing growth in parcel delivery is putting extra pressure on supply chains and starting to cut into the 3PL sector’s ‘notoriously thin’ profit margins.

The report also shows that pressures are coming from a labour skills gap. The road haulage sector for example is facing a shortage of 60,000 drivers and an ageing workforce – Brexit could make this far worse. In addition, congestion on the road and rail system is causing delays to deliveries that can result in operators incurring late delivery fees.

The Addleshaw Goddard report suggested that big data and cloud based software platforms could ease the pain in supply chains by saving warehouse costs and speeding up delivery times. Fashion retailers could especially benefit from this.

“Aggressive acquisition of warehouses by the likes of Amazon has eaten into property supply in the UK, with vacancy rates nationwide at a low of less than 4%,” said Addleshaw Goddard. “With occupiers also increasingly demanding bigger sheds for their national distribution hubs, urgent measures are required to unlock new industrial land.”

Jonathan Powling, partner at Addleshaw Goddard, said: “A lack of new development and an overhang of inactivity since the recession have caused growing supply-demand imbalance. This is pushing up rents and making industrial far more attractive to institutional investors.

“E-commerce growth and an increased global flow of goods are big drivers of change, but if we fail to deliver new employment space, then the stark reality is that some retailers will not be able to expand their online operations and others will be forced to significantly raise delivery charges to meet the increased costs of warehousing. This will ultimately affect consumer choice and value.”

Contributors to the report included Tim Robinson, chief executive at Doddle, who offered this scenario for the future: “The vast amount of items handled by carriers and retailers means they will still need the ability to consolidate. We’ll see tech-enabled, high volume, high-throughput national distribution centres supported by hyperlocal distribution facilities that allow for orders to specific postcode groups to be consolidated, be it to parcel shop networks, homes, or offices. That will allow carriers to pay the costs of triple-handling out of system, while also consolidating locally and getting the benefits of consolidation at a regional level.”

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