Back in April, we asked if the warehouse real estate market was in a bubble. It increasingly looks as though the answer was 'yes' – but bubbles do not always burst. Sometimes they merely deflate. In the case of this bubble, the same month saw Amazon, which accounted for a quarter of all newly leased space in 2020 and 2021, issue a profit warning and admit it had over-expanded.
Where are we now? Tritax Big Box’s (BBOX) results for the half year to 30 June reveal a lot. Profits are up compared with the same period last year and, while a large chunk of that is a portfolio valuation uplift, the landlord has also increased its rent roll by about 16 per cent. Clearly, Tritax has shown that it can grow its rental income without stonking Amazon demand. No wonder. According to data from Savills, the amount of newly leased warehouse space hit an all-time high for the first half of this year even as Amazon stopped its mega expansion trail.
This all sounds like great news. However, real estate is a slow business which means the real question is not how much tenant demand there is right now but how much demand will there be this time next year. The month-on-month fall in online shopping as a percentage of overall retail sales since November last year, as interest rate rise and the threat of a recession looms, all point in one direction.
