Wednesday 7 December 2016 2:34 pm

Amazon-mageddon: Prices set to rise online due to lack of warehouse space

Rock-bottom prices for online products may end if the UK doesn't build a shedload more warehouses.

The rapid expansion of online retailers is expected to lead to a shortage of warehouse space, which would push up rents, and ultimately the price of goods.

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It is thought e-commerce will account for 20 per cent of UK retail by 2020. To meet this demand, researchers have predicted that the UK needs over 18m square feet (sq ft) of new warehouse space a year, but over the next 12 months, only 3.5m sq ft will be built.

In a report on the future of logistics, law firm Addleshaw Goddard has said distribution centres in cities – also called "last mile" warehouses – are the most in-demand. These locations are often the most expensive, and are used by the big brands that promise consumers product deliveries within hours of ordering.

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The report suggests the government should engage with the private sector to find more land for industrial development and councils should be forced to set aside land for warehouses. 

Kevin Mofid, director of UK commercial research at Savills, said: "In the long term, consumers could be set to see prices rise from online retailers. Record high levels of occupier take-up, record low levels of warehouse supply and a falling development pipeline are all creating a perfect storm in keeping vacancy rates low, which in turn will see rents rise."