Supermarkets are estimated to be looking for a total of around 1m sq ft of additional warehousing space, as people across the country panic buy goods in anticipation of a nationwide lockdown.
Knight Frank head of logistics and industrial agency Charles Binks expects that more than 1m sq ft of new requirements could be released by supermarkets looking for temporary space, to keep shelves stocked.
“It could be anything from companies looking for 50,000 sq ft to help with home deliveries and upwards,” said Binks.
“I know one company which has been looking at the 50,000-150,000 sq ft bracket; others have been looking at 300,000 sq ft-400,000 sq ft facilities.”
As people continue to stock up on essential supplies from toilet roll to pasta, supermarkets are under pressure to keep up with the demand, according to Tritax fund manager James Watson.
“People do seem to be hoarding – it’s happening,” said Watson, adding that while the issue has not happened in China or Italy, two of the worst affected areas, “the Brits are going crazy”.
Ben Green, director of Atrato Capital, the investment advisor to Supermarket Income REIT, attributed this sudden urge to stockpile to a shift in consumer behaviour.
Green said: “Over the last decade, people have moved to convenience shopping rather than a big trolley shop – overall the country is holding less stock in its houses. People now are making sure they have two weeks’ worth of food.”
Demand may be as high as trading times around Christmas, but the logistics of keeping shops stocked is becoming a challenge.
“The supermarkets are considerably up on trading, but only have a certain amount of bandwidth in supply chains,” said Watson.
While there is enough space on the market – 35m sq ft to be precise – lying vacant and available to lease, Savills’ head of logistics and industrial research Kevin Mofid said the issue could lie in how willing landlords will be in agreeing more short term leases.
“The average lease length last year was 18 years, but I would imagine that most requirements emerging as part of the crisis response are much more short term – less than a year or up to five years,” said Mofid.
“The landlord/developer community will have to take a view as to how they accommodate those requirements based upon current pandemic situation.”
According to Binks, landlords are proactively reaching out to retailers and are ready to sign shorter leases than usual.
“It’s been noticeable that the number of landlords that have contacted us saying that if food retailers need this space in these exceptional circumstances, then we will be flexible on what we can provide on lease terms,” said Binks.
Green noted that while the need for space to store essential items may be short term, the situation could produce a shift in consumer behaviour in the long term in a post-coronavirus world.
Consumers may become more wary of resorting to using just-in-time delivery, instead keeping a well stocked pantry in case of a similar situation striking again.
This could feasibly result in more people choosing to shop online for their groceries. However, Green reckoned this is a misconception.
“Online grocery shopping only accounts for 7% of grocery sales in the UK,” said Green.
“Even if it was to move to 10%, that’s almost a 50% increase in online sales, which is 50% more vans, 50% more delivery people… that’s just not going to happen.”
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