The Covid-19 outbreak will drive over 5m sq ft of industrial and logistics requirements, according to Lambert Smith Hampton’s (LSH’s) latest industrial and logistics report.

Warehouse demand has surged due to Covid-19

Source: Shutterstock/ Maxim Blinkov

The report said that the virus had led to a surge in demand in the sector from internet retailers and major supermarkets. The report also observed that supply would become constrained as the virus continued to delay construction on speculative units across the country.

The news comes as Savills reports 3m sq ft of new requirements from supermarkets, online retailers and 3PLs looking for space from 16 March to 24 March.

“A spike in supply levels may now be of some concern to active developers, with some areas offering choice not seen for a decade,” said James Polson, head of industrial logistics at LSH. “But the passing of the crisis should be met with a significant release of pent-up demand later in the year. The shock to the economy will also curtail rental growth expectations for 2020, but growth will be restored when normal service resumes, reflecting the underlying positive dynamics in the market.”

He added: “We expect valuable lessons will be learnt on the back of this crisis. Occupiers that had been heavily dependent on third-party providers to their own detriment may opt to take back control of this increasingly strategic part of the overall business. In other cases, some retailers will strive to further prioritise their online fulfilment capability to mitigate future risks of relying on in-store sales.”

Alex Carr, head of industrial investment at LSH, said: “While industrial returns in 2020 will fall short of our initial forecasts on the back of this crisis, it is nonetheless set to outperform the UK’s other key property sectors once again. In some respects, the crisis has highlighted the vital importance of this sector in keeping the country going, confirming logistics’ position as the defensive asset class of choice.”

Last Friday, Property Week reported that Tesco had retaken possession of a vacant 620,000 sq ft warehouse in Milton Keynes to deal with a surge in demand caused by the Covid-19 lockdown.