Why a sheds refit drive is needed to keep the motor running

Rishi Sunak recently announced that the UK has overtaken France to be the eighth largest auto manufacturing sector in the world. Data from Make UK estimates that in 2021, auto manufacturing output was £218bn in the UK compared to £210bn in France, with more recent figures suggesting that it grew to £224bn last year.

Around the same time, BMW Group said they planned to invest in excess of £600m in MINI factories in Oxford and Swindon, protecting thousands of jobs. This follows other notable announcements such as Tata Group’s £4bn gigafactory and Stellantis’ £100m investment in Ellesmere Port.

This is all, of course, welcome news for both the economy and the industrial sector on which its growth relies, but with supply of new units tight and impacted by falling construction starts, how do we keep the motor running?

Strong demand from car makers 

In the second quarter of this year, the manufacturing sector overtook logistics demand to account for 36% of all big box space leased. In 2022, the manufacturing sector only accounted for 15%. While demand from other sectors for big box industrial and logistics units weakened in the second quarter, renewals of existing Jaguar Land Rover and BAE Systems leases amounted to more than 1m sq ft, and Rolls Royce took 145,000 sq ft at St Modwen’s Derby, delivering a strong quarter for manufacturing. Furthermore, Tesla has reported significant interest in a new 338,000 sq ft unit in Milton Keynes.

As the automotive sector thrives, it will come up against a diverse range of occupiers vying for industrial space. Logistics has dominated big box take-up in recent years, with operators such as Amazon, Evri, DHL and Iron Mountain taking millions of square feet. In the third quarter of this year, non-automotive manufacturers like Caterpillar, Modpods and LWC Drinks took more than 500,000 sq ft combined. Diversity in big box occupiers means that car manufacturers and their suppliers will face serious competition for top units.

To give you an idea of the scale we are dealing with, The Society of Motor Manufacturers and Traders (SMMT) reports that there are 25 car manufacturers currently in the UK, served by 2,500 component manufacturers in the country. That is a significant demand pool in its own right, without factoring in continued on-shoring as ‘Made in Britain’ moves closer to a reality. It is not just about cutting down supply time; producing cars in the UK allows for stronger quality control too.

Car part suppliers

While big box spaces have dominated the headlines in car manufacturing, suppliers will look to take stock of up to 100,000 sq ft. These existing spaces mostly need retrofitting to meet occupier demands on operational efficiency. As part of these refurbishments, landlords should consider the requirements of the automotive supply sector, predominantly access to power, as there is potential for rental growth as the sector revs up.

Expect more activity over the coming months. The announcements from JLR and BMW have given much clarity to suppliers on production, particularly for electric vehicle parts. Having held back on expansion, it is now full speed ahead. Despite Rishi Sunak’s rowing back on the government’s green agenda, that’s even true for electric vehicles. Indeed, the sector’s whole future promises to be electric.