Demand for larger warehouses is strong as companies cut distribution costs

Most industrial agents report a divide between the market for industrial and warehouse property.

Demand for factory space is relatively subdued as manufacturers struggle with the relative strength of the pound against the euro, cheap foreign imports and a growing burden of red tape. But the appetite for distribution properties remains strong as customers pursue economies of scale.

But both kinds of property are, as many agents say "just big sheds", so industrial companies are seeing no great weakening except in locations unsuitable for warehouses, which arguably are not perfectly sited for manufacturers either.

Traditionally, 250,000 to 300,000 sq ft was a good size for a distribution centre. But many larger clients looking for properties now want twice that floor space. For example, Gap's national distribution centre at Central Park in Rugby is 650,000 sq ft, with scope to go up to 1.2m sq ft.

Larger units are able to improve business’ efficiency by providing economies of scale.

Rail linkage, or the scope for it, is increasingly an important factor for big distribution centres. The centres pump out volumes of products large enough to breach the high pay-back threshold for rail freight although amongst agents, opinion is divided, for some it is the future, while others view the rail option as an insurance policy in case roads become too highly taxed or just too congested, when trains could become a more competitive mode of transporting products.

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