For the first time since 2008, the UK is experiencing more business deaths, than business births. That’s according to Mark Powney, Director of Economics at Savills. He blames this in part to the lack of affordable logistics and industrial land which is accessible to SMEs.
“If you’re an SME in the logistics sector with growth ambitions, you may struggle to find larger spaces for expansion across England. In many cases, suitable spaces for business growth simply aren’t available.”
This isn’t happening in Europe or the U.S. Those regions, says Mark, are more effective at supporting young businesses, helping them expand into larger companies that boost their economies.
“We [the UK] have a lot more business failures. A lack of access to affordable property at the right location is a big part of that,” he adds.
Speaking on a panel last week about Small to Mid-Box Industrial & Logistics Trends, alongside Jason Rockett, Managing Director of Potter Space, and Clare Bottle, CEO of UKWA, it was clear that the SME sector offers the greatest growth potential – and frankly the most excitement – for the UK’s economy. It isn’t a spirit the UK should want to dampen down.
Jason says that there are opportunities for these business if we “unlock the supply issues.” His team specialise in the small to mid-box market, owning and operating properties under 100,000 sq ft.
And Clare can vouch for the buzz of the businesses which occupy these spaces, following her ‘Around The Warehouses in 80 Days’ tour which concluded in October, and included some Potter sites.
The panel were clearly frustrated that businesses which need small to mid-box logistics and industrial space (which includes big business, not just SMEs) could not be accommodated.
“94,000 jobs have been left on the table—an enormous missed opportunity. The reality is that this is the fastest-growing commercial sector in England, having outpaced the wider economy more than twofold over the past decade. Average pay is £3,000 higher, and much of the job growth is in higher-skilled roles, driven by automation and new technology, which also provide career paths,” explains Mark.
A major problem is that the UK has a planning system which is focused on housing. Jason says he feels encouraged by some of the noises the UK’s new Labour government is making around changes to the planning framework. “ The more housing we have, the more important it is to have the infrastructure too, in the right place.”
And of course, a lack of supply drives rents up. “Industrial logistics rents,” says Mark, “have grown significantly faster than residential rents. So we acknowledge that we have an affordability crisis for residential property, but it’s even worse for industrial…”
Meanwhile, business rates are attacking these businesses from another angle. Clare argues that they are overly punitive of logistics and warehouse development, and wants to see a review of the business rates system.
And what about existing stock? Mark thinks that over 85% of the smaller industrial and logistics buildings will need to be refurbished to meet the upcoming energy efficiency standards. This is a big job and the timeframe is tight. The deadlines of 2027 (Grade C for commercial buildings) and 2030 (Grade B for commercial buildings) are not even set in stone yet, which creates uncertainty for property owners and investors in terms of planning and investment decisions.
Between planning system changes, and landlords gearing up for refurbishment, I imagine these exciting young businesses can – for now – just look dewy-eyed at all the empty units we see on our high streets, wondering how they could be used. It will be interesting to see how creative the occupiers become without logistics properties that fit their needs.
Author: Kirsty Adams
Source: Ti Insight
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