How Covid-19 has changed UK real estate
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London — On a building site about 32km east of London, workers are busy putting up the largest warehouse in Europe. Just leased to Amazon.com, it cannot go up fast enough.
When it is done next summer, the four-story “mega-box” will encompass about 0.7-million square metres, the size of 40 US football fields. Developer Tritax Big Box Reit had plenty of interest from retailers in the site on the River Thames, but when Amazon came knocking, the rest were pushed aside.
A development on this scale during the UK’s first recession since 2009 highlights how the growth of e-commerce has helped make warehouses one of the hottest assets in real estate. Demand for these properties hit a record in the second quarter as online shopping spiked during lockdown. The value of the rent they are bringing in is surging at more than twice the rate of offices.
“The pandemic has accelerated the shift in consumer habits to online, which means online retailers’ demand for warehouse space in the UK is increasing at unprecedented levels,” said Jonathan Compton, senior director for UK industrial and logistics intelligence at broker CBRE Group. “This sector is undoubtedly a key area of growth for real estate investment.”
The UK has led the e-commerce boom in Europe, and warehouse builders and operators have reaped the benefit. Landlord Segro has seen its shares soar over the past five years; it is now worth about £11.5bn, making it the country’s most valuable listed property firm. The market has also attracted global giants including Blackstone Group and Prologis, which runs a logistics park next door to the Tritax site in Dartford.
By contrast, the rise of online shopping has battered traditional retailers and their landlords, most dramatically in the case of Intu Properties. The owner of nine of the UK’s top 20 shopping centres collapsed into administration in June after failing to reach a deal with its creditors. Other firms are also struggling, such as Hammerson, which is raising money to help it through the pandemic.
Covid-19 threw this trend into overdrive. Internet sales accounted for 20% of all retail purchases in February, before the UK government shut down much of the economy to slow the outbreak, according to Office for National Statistics data. In June, the number was 31.8%, with average weekly sales of £2.5bn.
Driven by this internet shopping spree, the demand for warehouses climbed to a ...
When it is done next summer, the four-story “mega-box” will encompass about 0.7-million square metres, the size of 40 US football fields. Developer Tritax Big Box Reit had plenty of interest from retailers in the site on the River Thames, but when Amazon came knocking, the rest were pushed aside.
A development on this scale during the UK’s first recession since 2009 highlights how the growth of e-commerce has helped make warehouses one of the hottest assets in real estate. Demand for these properties hit a record in the second quarter as online shopping spiked during lockdown. The value of the rent they are bringing in is surging at more than twice the rate of offices.
“The pandemic has accelerated the shift in consumer habits to online, which means online retailers’ demand for warehouse space in the UK is increasing at unprecedented levels,” said Jonathan Compton, senior director for UK industrial and logistics intelligence at broker CBRE Group. “This sector is undoubtedly a key area of growth for real estate investment.”
The UK has led the e-commerce boom in Europe, and warehouse builders and operators have reaped the benefit. Landlord Segro has seen its shares soar over the past five years; it is now worth about £11.5bn, making it the country’s most valuable listed property firm. The market has also attracted global giants including Blackstone Group and Prologis, which runs a logistics park next door to the Tritax site in Dartford.
By contrast, the rise of online shopping has battered traditional retailers and their landlords, most dramatically in the case of Intu Properties. The owner of nine of the UK’s top 20 shopping centres collapsed into administration in June after failing to reach a deal with its creditors. Other firms are also struggling, such as Hammerson, which is raising money to help it through the pandemic.
Covid-19 threw this trend into overdrive. Internet sales accounted for 20% of all retail purchases in February, before the UK government shut down much of the economy to slow the outbreak, according to Office for National Statistics data. In June, the number was 31.8%, with average weekly sales of £2.5bn.
Driven by this internet shopping spree, the demand for warehouses climbed to a ...
