e-commerce properties rising in value

E-Commerce Sheds Generating High Returns on Investment

Jim Riley    23rd November 2015


Take a look around during any journey up and down the M1 or across the M62 and you'll see them. Sheds. Big sheds. Unglamorous and perhaps even ugly. But, they provide an essential part of e-commerce in the UK and their value is rising!

I was drawn to the headline above in the FT which reported on a significant increase in the price of space at warehouses ("sheds") across Europe.
The article explains that investors in sheds (e.g. property developers) are earning returns on investment over 20% as the relentless growth and spread of e-commerce drives up values for the facilities needed to distribute goods ordered online.
Many of the UK's leading e-commerce businesses have already moved quickly to secure shed space and facilities when there was more widely available supply.
You may have noticed the impressive John Lewis shed complex at Magna Park (junction 14 on the M1). The video below illustrates just have significant a shed of this type can be!



Property consultants Deloitte recently published an intriguingly titled report on e-commerce warehouses - "the Shed of the Future".


In the forward to their report they provided two super pieces of analysis that students could use to help explain why logistics are increasingly a source of competitive advantage (or disadvantage) for businesses that want to succeed with e-commerce.


Firstly - why distribution logistics are increasingly important:


"E-commerce and other digital technologies have provided consumers with a multitude of ways to select, buy, and receive goods, and have simultaneously fuelled an expectation for this all to take place in ever-shortening time-scales. Offering the convenience and service that is now taken for granted has become an increasingly complex process for retailers, however, and has elevated the importance of distribution networks within their businesses."


Secondly - what are the implications for distribution?


"The impact on the real estate that makes up these networks is particularly significant. Today, retailers are being forced to think differently about the location, size, specification, and even operation of warehouses. How will they optimise delivery efficiencies within strict time constraints? Are traditional ‘mega sheds’ still the only viable option for national distribution networks? What is the result of bringing more labour-intensive processes into the warehouse? "


This article from the FT suggests that the availability (supply) of suitable e-commerce sheds may be tightening in the UK.


This might be bad news for retailers and others who have not yet secured the right distribution facilities in the right locations at the right price.

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