Re-shoring of manufacturing driving up industrial space rents

Demand for highly sought-after industrial space in the UK has reached its greatest level in five years due to manufacturers mitigating challenges overseas by re-shoring their activities back to Britain.

According to figures compiled by BNP Paribas Real Estate, take-up of large industrial space by manufacturing occupiers increased by 53 per cent in the first half of 2022 compared to a year earlier – the strongest demand since a post-EU referendum uplift in 2017.

The renewed demand for space is being driven by a burgeoning array of challenges which are threatening the vitality of offshore manufacturing, explained Vanessa Hale, Head of Research and Insights at the firm:

“Reshoring is bringing ‘Made in Britain’ back to our products. There are a number of driving factors behind this including inflation, Brexit, the pandemic, the Ukraine war and the blockage of the Suez canal, which have massively impacted supply chains and overheads.”

The re-shoring trend is also being sustained by businesses looking to reduce the carbon footprint of their supply chains, with recent research suggesting that almost half of UK SMEs have switched to a domestic supplier for sustainability reasons.

Vanessa Hale added that re-shoring would ultimately result in higher rental prices for manufacturers:

“As [manufacturing] occupiers fight harder for space, the activity will continue to put pressure on chronically short supply levels. Acute supply-demand imbalances are likely to continue, especially as elevated construction costs start to weigh on future development pipelines. In turn, this will fuel further rental growth.”

At the start of 2022, real estate firm Colliers warned that the UK was experiencing its lowest level of available warehouse space ever recorded.