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The Wonder of Warehouses

Posted February 7, 2023 at 3:50 pm
Alexander Gunz
Heptagon Capital

It was glamour all the way* for your author last week as he spent a morning in the suburbs of west London, visiting warehouses. These big boxes – the largest of which we saw spanned more than two football pitches in size – are integral to the functioning of the global economy. It’s not just e-commerce which is spurring demand for warehouse space but also the increasing trend towards all businesses building better inventory to mitigate supply chain challenges.

Our host for the trip told us that warehouse vacancy rates in the London area are at their lowest ever, with barely a percentage point of spare capacity currently available for rent on the market. This is evidently great news for the warehouse owners, but it is also spurring a rush to build new sites. The challenge here is lack of availability of suitable plots, particularly given that demand is strongest for new sites most optimally positioned for ‘last mile’ deliveries. Savvy buyers are acquiring strategic sites and converting them into warehouses as well as accelerating new development of previously owned land.

The speed at which new boxes are going up certainly impressed your author. Many of these have been pre-let even prior to completion, another indicator of the robustness of demand. Beyond simply providing a shell in which to house goods, it was also noticeable that each new site is kitted out with sustainability in mind from the outset (while older sites are being similarly upgraded). What this means is not only LED lighting in the warehouse, but also electric vehicle charging points outside, rooftop solar panels, water recycling schemes and plant-filled surroundings, often in the form of living walls.

With the average asset life of a warehouse being in the region of 20 years and with tenant rent reviews typically occurring annually, we were told by our host that it was “worth going the extra mile” in terms of warehouse design from the outset.  Warehouses, it would be fair to say, are no longer just a means to an end. Much work is being done by the major players in the field to engage with local schools and colleges. The key message: industrial logistics can be cool. Much of what occurs inside a warehouse is now driven by data science. Expect more automation and even better design in the future.

* On the subject of glamour, The Future Trends Blog will be taking a break next week as your author will be in the Alps skiing. The Blog will return towards the end of February.

Originally Posted February 7, 2023 – The wonder of warehouses

​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​The above does not constitute investment advice and is the sole opinion of the author at the time of publication. Past performance is no guide to future performance and the value of investments and income from them can fall as well as rise. 

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