Small units vs big boxes: Supply of smaller Grade A units is not meeting burgeoning demand

Author:
Alastair King Head of Development
020 7657 1882
Read time: 4 mins
Category: Ideas

Big-box logistics deals make for big headlines, but what is the truth behind the UK’s burgeoning industrial and warehouse sector?

The commercial property market is currently facing a healthy supply of large-scale warehousing and logistics product, with speculative units of 100,000 sq ft plus popping up across the UK, but there is an undersupply of units suitable for small and medium-sized enterprises (SMEs). Despite their contribution to the economy and employment, SMEs are often overlooked when it comes to the supply of new quality units.

The rise and rise of SMEs

At the start of 2019 there were 5.82 million small businesses, classified as having up to 49 employees, in the UK, research from the Federation of Small Business revealed. In total, SMEs employ 16.6 million people (60 per cent of the entire UK workforce) whilst their combined turnover equates to an estimated £2.2 trillion (52 per cent of the total turnover by businesses).

In retail, the idea of the traditional SME has changed. The online retail trend has shifted the market for smaller businesses. There are a growing number of retail SMEs who only operate online, thanks to the rise of eBay, PayPal and Not On The High Street and, of course, Amazon. Online purchases already make up 18 per cent of the retail market and by 2028, it is expected that online purchases will account for 53 per cent of all retail sales, so this move to e-retail shows no sign of slowing.

The model of entrepreneurs transitioning from the proverbial kitchen table to opening a shop on the local high street is increasingly becoming defunct. They are now capitalising on the opportunities presented by ecommerce and moving straight into small industrial and urban logistic units on business parks. Whilst retail has always contributed a high proportion of SMEs, this trend means that their retail strategy has fundamentally changed.

Supply unable to meet demand

There is a distinct shortage in the availability of good quality small unit warehousing in the right locations to cater for this growth in SMEs.

Current emphasis is on developing large-scale warehouses and national distribution centres to support significant operations, rather than to serve the SME community. These ‘big boxes’ also tended to take priority in terms of the focus of investors, the press and policymakers.

The lack of recognition of SMEs’ contribution to both the economy and employment, and the focus of UK developers on the big box market, mean there is a significant undersupply of warehousing or storage units for small and microbusinesses throughout the UK. This has been heightened due to the willingness of local authorities (LAs) to release former employment sites suited to smaller units for residential use.

The support of Local Authorities

Local Authorities are beginning to react to these issues, and many have identified the lack of opportunities for SMEs in terms of property provision, as something which must to be addressed. There is now a greater understanding of the benefits of accommodating SMEs in the local area to replace jobs lost on the high street and cater for a move towards shopping online, more prolific deliveries and the thriving SME sector. As a result, a number of LAs have been revising planning policy and begun to protect employment sites from being lost to other uses.

Local authorities are also introducing new legislation to support SMEs. Liverpool City Council, for example, has made changes to its grant structure to offer a financial helping hand to the region’s smaller businesses, allowing them to be more competitive in the marketplace.

Championing industrial units for SMEs

Global economic and market trends are dictating an increased demand for smaller warehousing units. An obsession with the development of big boxes and the pressure on land from residential uses has led to an undersupply of industrial units suitable for SMEs. Through offering high-quality smaller units in strategic locations, SMEs can thrive and operate from a base that’s best for business, but to achieve this, developers, local authorities and national planning policy must come together

Chancerygate specialises in small unit developments nationwide, with a high proportion of end users coming from the SME sector.  

To find out more about how we can help with your SME warehousing or logistics requirements call Alastair King on DL: 020 7657 1882 , M: 07748 324966 or E: aking@chancerygate.com.

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