ISTANBUL, TURKEY – OCTOBER 22: A Getir employee using a mobile device prepares an online grocery … [+]
The wave of 15-minute grocery delivery start-ups is driving up demand for commercial real estate for dark stores.
That’s according to real estate giant Knight Frank. Its research found that every £1 billion of online retail sales in the UK requires about 320,00 sq ft of urban logistics space, intensifying expected demand over the next five years.
The demand for quicker and more efficient deliveries is fueling a need for space for storage and distribution of goods closer and closer to where customers are, Claire Williams, industrial research lead at Knight Frank, said.
“We see more than 80% of take-up so far this year has been dominated by distribution firms and retailers. That’s not just last mile, that’s across the big boxes as well.”
Companies like Turkey’s Getir and UK start-ups Weezy and Zapp have scooped up warehouse space across cities like London for their dark stores, which are located in densely populated areas in order to carry out deliveries in 15 minutes.
The real estate firm said that vacancy rates in Greater London for units under 100,000 sq ft is 3.1%. This swelling demand for more warehousing space to operate dark stores is naturally leading to higher rents in cities.
“They’re really driving rental growth particularly in very urban areas in inner city locations. Their business model and delivering to customers within 10 or 15 minutes means they’ve got to be in those locations that are close to their customer base in order to meet those time frames,” Williams said. “There’s no option for them to go outside of that location and competition in those markets is driving strong growth.”
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This also means that more and more grocery delivery start-ups may seek alternatives or supplementary facilities in addition to running their own dark stores.
Gorillas, one of the bigger names in the new wave of grocery delivery outfits, recently inked a deal with Tesco to use its supermarkets for deliveries. This, Williams explained, allows Gorillas “to take advantage of Tesco’s retail footprint rather than having to start from scratch.”
These trends are “more advanced” in London but are being replicated in other large urban centers in the UK as well as commuter belt towns with “young affluent educated populations that have good disposable income and are demanding these goods with a fast turnaround time.”
“It’s certainly a trend that we’re seeing in other major European cities.”
Food and grocery delivery – and e-commerce more generally – boomed after the onset of the Covid-19 pandemic, aided by the closures of physical retailers and cities’ high streets.
“In some locations we’ve seen these on-demand grocery stores taking redundant retail units and using them as dark stores, particularly in very urban areas where there’s just no industrial space,” Williams added. “Perhaps as the high street reopens, there’ll be more competition for those spaces but I don’t think the demand for home grocery deliveries with a fast turnaround time is going to go away.”
