Here at Boxpod, we have often talked about how e-business is changing the face of the high street as well as the business world. Although inevitable in the world that we live in, e-businesses such as Amazon, the need for distribution centres, and the rise of drop-shipping business models have spiked demand for warehouse space in the UK.
Amazon is one of, if not the world’s most successful e-businesses, so it is only to be expected that they will be increasing the number of distribution centres that they require. This is why the news that they will be shutting three of their warehouses in the UK is somewhat surprising.
Closure of Amazon Warehouses
Amazon has recently announced that they will be closing three warehouses in the UK –Doncaster, Gourock, and Hemel Hempstead. The reasons given for the closure of these warehouses by the company are given as the fact that they are modernising their working practises and moving towards the use of robotics in other warehouses.
Amazon is also proposing closing 7 delivery centres in the UK, including centres in Birmingham, Horley, Huntingdon, and Newcastle.
As is often the case with commercial property and the success of businesses on a local level, this is having a massive impact on local communities. Here at Boxpod, however, we are going to look at the reasons why Amazon is closing these warehouses and distribution centres, as well as what this says about the future of e-business and commercial property.
Modernisation
The main reason that is given by Amazon for the closure of their commercial property facilities is modernisation. This is mainly due to the fact that robotics, automation, and artificial intelligence are now more commonplace and accessible, offering cost-cutting options for businesses – providing that they have the money to invest in them.
Amazon is investing in a smaller number of super-warehouses that are fully fitted with state-of-the-art technology to enable this.
The technology that is going to be used in these warehouses and distribution centres is likely to become increasingly mainstream within the next few years. Although this is likely to filter down to businesses of all sizes and possibly lead to more closures of smaller warehouses, the necessity for local distribution centres is always likely to be there as businesses look to deliver under ever tighter timeframes.
This means that it is unlikely that we are going to be seeing a drop in demand for warehouse space in the UK within the next few years due to modernisation.
The Economy
It is no secret that the UK economy is taking a bit of a hit at the moment. The reasons for this, range from the cost of the Coronavirus pandemic to the war in Ukraine and the general cost of living crisis.
Regardless of the reason for this, it does mean that generally speaking, people are spending less – especially on luxury items – items that are often sold by Amazon. This is another possible reason why they are looking to shut some of their warehouses, as a cost-cutting measure.
In terms of commercial property, the turn-down in the economy does not spell out disaster. For any business to function, they need to have a commercial property, even if it is looking for a smaller property.
As businesses look to tighten their expenditure, the trend seems to be that instead of reducing demand, they will perhaps be looking for smaller properties, and finding them through lower cost means – such as using businesses like us here at Boxpod!
Changes in Behaviour Post-Pandemic
The COVID-19 pandemic bought about massive changes in the way that people shop and use the high street. From the boom in Zoom to the rise in e-business, everything seemed to be carried out online for a time!
Now that we are free of lockdowns and in the post-pandemic period, perhaps contrary to what we expected, the consumer’s behaviour is changing again. Many people predicted that we would not return to the world of personal, face-to-face contact, getting out onto the high street, and being amongst other people.
This has, however, proven to be wrong. It seems that the public is relishing the chance to be around people, looking to enjoy the shopping experience (‘experience’ being the operative word), and wanting to get out and about.
This means that the hangover from the online shopping boom that Amazon experienced at the time is waning. By no means are they not enjoying success, just that, like everything, the boost may be coming to an end for them. Not to worry though – Amazon is extending into other areas, such as their own bricks and mortar shops to make up for this!
For commercial property, this means that we are likely to see an increase in demand for bricks and mortar commercial properties such as retail units – especially for businesses that are looking to create a retail experience for their customers as consumers look to get out and about once again.
Worker Shortages
The final reason that we think that Amazon is looking to shut some of its distribution centres and warehouses in the UK is due to worker shortages. The shortage of HGV drivers in the UK is well-documented, and forklift truck drivers are also well sought-after.
These two groups of workers are integral to the Amazon business model, and the fact that they are becoming increasingly scarce could mean that they are needing to reform how they do things. One of the answers might be to employ new technology – such as robotics or drone delivery – and another might be centralising their distribution more.
These shortages could potentially be a problem for any business that uses a similar business model. However, wages will likely need to increase and, therefore, prices rise as opposed to a decline in the demand for commercial properties.
Final Thoughts
It is likely that a combination of these factors has resulted in Amazon’s decision to shut some of its existing warehouses and distribution centres. This does not mean, however, that there is a disaster coming along the line for commercial property. There is the chance that demand may change, and here at Boxpod, we believe that we are well-positioned to help businesses to get excellent commercial property, in the best place, at great prices.
If you are looking for a warehouse space or other commercial property, why not take a look through the properties that we offer and see if we have the perfect place for you?
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