The effects of COVID-19 on retail warehouses

The COVID-19 pandemic has had a long-term effect on how retail warehouses operate.

According to Matthew Norris of Real Estates Securities, before the Covid-19 pandemic, there was an existing trend of customers ordering more online. During the lockdown, when non-essential shops were closed, this trend accelerated.

Warehouses serving online customers require 2.5 times more storage space compared to warehouses that send orders to retail shops, as there needs to be more space for packing and shipping orders. Building consultancy firm CBRE estimates that for every extra £1 billion of online sales, there needs to be an extra 868,000 square foot of space.

There is high demand for new warehouses. Therefore, every warehouse equipment manufacturer that supplies racks, trolleys, packing tables and other equipment will be increasing production.

Another long-term effect of increased online sales during the lockdown is a rise in what are called ‘urban warehouses’, which are located near or in major cities. These arose due to people being impatient to receive their orders quickly and deliver high-demand goods, often within hours of orders being placed.

Matthew Norris says that warehouse rents are likely to remain high, which benefits investors in warehouse property but is a challenge for retailers.

Behavioural scientists say that ingrained shopping habits change slowly, but four months of lockdown has been enough time to change the shopping habits of many consumers. Online sales have risen to 30.7% of total retail sales, and this percentage is expected to continue to rise.

Posted by Mark
3rd August 2020
Retail & Warehousing

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