The British warehouse real estate market has had an unprecedented decade – in good ways and bad. Between 2014 and 2022, excitement about the sector pushed the real estate investment trusts (Reits) that own them to dizzying valuations, the amount of warehouse space leased in the market broke records, and the amount of money invested in the asset class also hit new highs. And despite the billions pouring into building and buying sheds, there still was not enough space, with vacancy rates hitting an all-time low in 2021.
Retail-related businesses scrambling for warehouse space to service soaring demand for online shopping (a trend supercharged by Covid lockdowns) drove this frenzy. Chief among them was Amazon, which accounted for a quarter of the shed space leased in 2020 and 2021. So when the US tech giant said in May 2022 that it had overexpanded and would retrench, Reits' share prices sank.
Then, the 'mini' Budget happened. In October of that year, MSCI data recorded the worst month ever for commercial real estate valuation slumps due to the sudden spike in interest rates. And, because of how pumped their values were, warehouses were the asset class that suffered the most.