High demand for warehouses among online retailers

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The face of retailing has shifted during the last few years due to the large growth in e-commerce sales. This has created a large demand for rented warehouse buildings, noted BridgingAndCommercial.co.uk in November 2017.

In the 1980s, there was a shift for retailers to have large stores at out-of-town retail parks. Now, retailers are competing online. In 2007, online sales were 3% of all retail sales and in 2016 they were 15%. Online data company eMarketer forecasts that by 2020, online sales will account for 23% of all retail sales.

Many retailers see their stores as adverts for products available online. Customers visit stores, but order goods online.

This move to online retailing presents many opportunities for investors who purchase property within easy reach of the major UK road networks. Many large companies do not own warehouses, preferring to rent them on long-term leases. Rental yields of around 7% can be achieved for warehouses in prime locations.

Some large companies are looking at adapting the Amazon model with a mix of large warehouses and smaller ones near city centres that distribute high-demand goods within hours of ordering.

The Royal Institute of Chartered Surveyors has reported that in many areas there is a high demand for warehouse properties and an undersupply. The November 2017 increase in the Bank of England base interest rate from 0.25% to 0.5% has made commercial mortgages slightly more expensive, but interest rates remain low on commercial mortgages that can be used to purchase warehouse property.

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