Birmingham is a small to mid-box warehousing ‘hotspot’ but under supply is holding it back

Our recent report into the small to mid-box warehousing market, conducted in partnership with Savills, has shown that Birmingham is one of the top locations in the UK identified as a ‘regional hotspot’ for investment in sub-100k sq. ft. industrial and logistics (I&L) property.

In recent years, there has been significant focus on the industrial and logistics property space, with much of it centered around demand for big-box warehousing of 1m sq. ft. and above. But a bigger story has been hiding in plain sight and that is the continued resilience and growth of the small to mid-box sector (sub 100k sq. ft) – and importantly, where regional opportunities exist.

In carrying out this research, huge unmet demands in the small to mid-box space have also been uncovered and the economic impacts are far reaching. Our findings are based on an analysis of socioeconomic factors, local infrastructure and leasing activity over the past five years, revealing that the under supply of land to the sub-100k sq. ft. space has cost the regional economy in lost opportunities for jobs and wealth creation.

Our report – BIG Things in SMALL Boxes – reveals that the total amount of floorspace allocated to the small to mid-box market in Birmingham is 133m sq. ft. Rents for small to mid-box space in the city grew strongly in the decade to 2021 – at a rate of 58%.

This strong rental growth in Birmingham reflects the high demand we are seeing for small to mid-box space and clearly reflects the lack of supply in the sub-100k sq. ft. space to meet the needs of businesses in the area and beyond.

At Potter Space, we are calling for local planners to recognise the economic opportunity that exists here in Birmingham and allocate more land for the development of sub-100K sq. ft. property. This will help to attract inward investment and create jobs for local people.

The importance of the small to mid-box I&L property market to both the regional and national economy should not be underestimated. This segment of the I&L market accounts for 95% of all I&L property nationally, and more than half – 56% – of its total floorspace. Occupiers of small and mid-size boxes can include businesses of all sizes – from the largest multinationals, through to small businesses. However, many of them are small and medium-sized businesses – the backbone of the UK economy.

From a national perspective, our report reveals that the current lack of supply of sub 100K sq. ft. space is responsible for the English economy missing out on an estimated £480m GVA (Gross Value Added) pa, as well as 8,600 direct and 7,300 indirect jobs pa.

The demand for small and mid-box property remains strong, despite increased economic uncertainty, and is expected to grow, according to freight mode predictions. LGV traffic is predicted to increase between 25% and 108% by 2050, rail traffic could increase by 74% by 2043/44, global air freight could increase by 121% by 2039 and port tonnage, 39% by 2050.

Jason Rockett, managing director of Potter Space.

In light of these figures, we welcome the Government’s focus on growth as outlined in the recent ‘mini budget’. We are heartened to see an emphasis on streamlining planning laws and processes, and hope that there will be commitment to doing this across the spectrum of property and infrastructure development. There are many stakeholders involved in this and freeing up more development land requires innovative thinking from local authorities, a better focus from central government on industrial and logistics property, and for developers themselves to continue to engage positively in the process.

The acceleration of new road and rail projects is particularly encouraging, being fundamental to the growth of the industrial and logistics sector. The subsequent benefit in jobs and wealth creation for local economies can not be understated.

It is clear from our report that under supply is a major problem, especially in regional hotspots like Birmingham, but there is good news. Developers are ready and willing to invest in the development of more small to mid-box space to do what we can to help meet demand and support the growth of the local economy. Without more land allocation for small to mid-box space, this growth potential can’t be realised and in the current climate, that’s a great shame.

To download our report BIG things in SMALL boxes, visit the Potter Space website here.

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