Small and mighty: analysing the impact of the West Midlands’ sub-100k industrial and logistics property market
Jason Rockett, managing director of industrial and logistics property company, Potter Space, shares his view on the small to mid-box (sub-100k sq. ft.) property market in light of new research.
The millions of businesses which operate out of small to mid-box industrial & logistics (I&L) warehousing space make up the backbone of the economy. Home to the logistics “Golden Triangle”, the Midlands is a particularly key area for development within the I&L sector. However, new research conducted by Potter Space, in collaboration with Savills, shows that the sector is facing a major challenge when it comes to the availability of new development space.
The acute lack of supply for smaller premises below 100k sq. ft. – known as the small to mid-box segment of the market – has led to a phenomenon referred to as ‘suppressed demand’. This is when businesses have the appetite or demand for growth, however the units, or land to develop more units on, just isn’t available, and is stifling economic growth.
The Government is beginning to recognise the importance of the sector, and the recent freight and logistics and the planning system call for evidence has been seen as an important step forward. However, there are still huge steps to be made by local authorities when considering the impact on the local and national economy to raise the importance of industrial and logistics property alongside the historic focus on housing numbers.
Our research has revealed that small to mid-box warehouses have been facing immense pressure as demand for space from businesses continues to outstrip the supply of available land. In fact, the BIG things in SMALL boxes 2023 report, it identifies that demand for space had been suppressed by around 38 per cent in England. This equates to an average loss of £480 million in potential Gross Value Added (GVA) per year. While historically, the Government has been focused on the housing market, it’s important that there’s more consideration into where the growing population will work.
With local authorities neglecting to work close enough with developers of all sizes, there is often a loss of potential demand in certain areas which in turn can have severe socio-economic impacts, especially where areas of suppressed demand far outweigh the national average of 38%. Not only does the lack of stock affect the availability of space for businesses, but it also means that the investment in job creation and opportunities for growth are moved elsewhere. The report has highlighted the West Midlands, specifically Birmingham and Warwickshire, as a key area where addressing suppressed demand (which is currently at 57 per cent in Birmingham alone) could have a significant economic impact.
However, despite barriers to growth and opportunity, the small to mid-box has remained resilient in the face of a period of economic instability, resulting in steep inflation and increasing interest rates.
The report has illustrated that the demand for small to mid-box premises is likely to grow in the coming years, with demand predicted to reach anywhere between 16 million and 22 million sq. ft. per year between 2025 and 2026.
The small to mid-box (sub-100k sq. ft.) market is an essential cog in the England’s economic infrastructure, with a diverse range of small to medium enterprises along with large household names – relying on the strategic locations of smaller facilities to support regional demands. However, to support the growing demand and unlock greater opportunities, it’s important for local authorities to allocate planning permission to a wide range of developers.
To read the full report, click here.