Chronic lack of industrial space puts the brakes on business growth

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Francois Badenhorst
Deputy editor
BusinessZone and UK Business Forums
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The weaker post-Brexit pound has done a lot to reinvigorate British made goods - but a lack of industrial space threatens to strangle the boom.

The availability of industrial space in the UK has fallen by 62% since 2009, according to data from the property agent Colliers International. The West Midlands, in particular, has seen the greatest decrease: availability of industrial property has shrunk by 72% since ‘09.

In 2009, the UK had enough property to sustain 3.6 years’ worth of demand at current take up levels. By 2017, the UK only has enough industrial property to sustain current demand for 1.3 years. And supply looks likely to keep falling. Internet retailers and wholesalers remain hungry as ever for space, and now the demand from British manufacturers has risen by eight percent “following a surge in demand for British goods,” say Colliers.

The rampant repurposing of industrial land for other uses (mainly residential property) is putting further strain on supply. The Greater London Authority, for example, informed the FT earlier this year that “the Capital is releasing about 100 hectares of industrial land for other uses each year, a rate almost three times greater than the 37-hectare annual target set out in 2010.”

We couldn’t grow without funding and we couldn’t get funding without a space to grow in.

And despite the reduction in availability and supply, UK wide there is just 17m sq ft of industrial space under construction, according to Colliers’ data.

The situation in the Capital is particularly chronic, as limited availability is coalescing with London’s already sky high prices. According to Aly Johnson, founder of the since closed business Fools and Queens, the lack of available space directly contributed to the business’s failure.

“In a nutshell, we started out making puddings in our kitchens, as most food startups do. It became apparent we would need more space so rented a kitchen underneath a pub in Brixton, which we quickly outgrew,” she tells BusinessZone. “We then started trying to find a manufacturer for our puds but to no avail, so realised we would have to keep production in house and in a larger space.

“But the price of what was on the market was ridiculous and anything remotely affordable was snapped up before it even came to the market. Even the companies who set up ‘kitchens’ to help alleviate this problem charge a fortune.

“It’s nigh on impossible for a small startup, like we were, to grow organically. We eventually found an interim solution in my business partner’s parents-in-law who own a large house in Surrey. They had converted the back of their house into a separate annex and weren’t renting it out so we used that kitchen, but it wasn’t a long term solution.”

Fools and Queens growth ambitions were stifled as the company became trapped. “In order to achieve the levels of growth we needed to justify our next kitchen move (from Surrey into our own large manufacturing unit) we needed a large cash injection. And by this point we were looking in Stoke-on-Trent due to cost and space - London just wasn't a viable option for us at any point.

The only thing standing between us and expansion is finding a property.

“We were literally in a catch 22. We couldn’t grow without funding and we couldn’t get funding without a space to grow in. In the end we would have run out of cash trying to grow organically, so we had to call it a day. So many factors were against us, lack of (affordable) industrial property was one of them.”

Outside of the Capital, the situation hasn’t been much easier. Danny Walker is the co-founder of Psychopomp, an acclaimed gin micro-distillery based in Bristol. His situation isn’t as existentially threatening as Fools and Queens’ -- but he and his business partner have been looking for a new property since 2016.  

“We took about a year to find our first premises,” says Walker. “We’ve been in our space for a year and a half. Just over a year ago, we started looking for an industrial unit, a warehouse, to grow our business.

“We looked passively, myself and my business partner, when we had time we’d search the internet. Whenever we stumbled across somewhere we like, it was already gone. We couldn’t get any traction. We got to a point where we started looking aggressively, which meant looking everyday, getting on agent’s lists, asking for advice -- but again, literally nothing.”

Psychopomp signed with a property agent over a month ago but still hasn’t had any luck. Asked whether he’d look further afield than Bristol, Walker swiftly counters that Psychopomp is a Bristol business. “We want to stay in Bristol. I’d rather fold the business and make jam for a living than move Psychopomp to somewhere like Swindon or Reading.”

Finding their dream property in Bristol is the key step in expanding Psychopomp, says Walker. “We are in a position that we could grow now, we could’ve started growing 12 months ago. We have a business that does well and we have capacity to expand.

“The only thing standing between us and expansion is finding a property. There are no other deciding factors keeping our business the size that it is. It’s a size we’re happy with, and pleased with, but there’s no doubt our business is the size that it is because we don’t have a property to expand into yet.”

 

About Francois

About Francois

Francois is the deputy editor of BusinessZone and UK Business Forums.

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18th Aug 2017 10:54

In the last 10 years, literally thousands of houses have been built in the 'village' where I live, with thousands more with approved planning permission.
Yet, in that time, not one single new premises for people to work has been built, or even encouraged by the local council, and none are planned.
The result? the 'Village' is now very much a town (fair enough), but with village-like infrastructure and employment opportunities.
More importantly, it is now effectively a dormitory: empty during the working day, jammed solid with traffic in rush hour and at weekends, with the local schools, GP surgeries (etc) simply unable to cope with the ever increasing influx of new residents, and the impact on the community that all of that creates.
Surely, our planning system needs to be brought into the 21st century, where the term 'sustainable development' actually makes it mandatory for offices (etc) to be built simultaneously (the county in which I live is desperately short of small offices for hundreds of growing micro businesses), as well as the improvements in local services which, whilst planned, do take place but lag some years behind?

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27th Aug 2017 07:53

Everyone is running out of land to do business on. Short of moving to some really out-of-the-way spot, companies are going to have to figure out how they're going to manage the increasing business demands for space for storage, manufacturing and all of that! I'm sure that they'll be able to figure things out in time - build upwards or something. After all, isn't that what zoning areas are for? So that we can better manage the use of all of our lands for these specific purposes!

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