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Savills plc

11/23/2021 | Press release | Distributed by Public on 11/24/2021 05:54

EV production in the UK will generate up to 50m sq ft of demand for industrial & logistics space

The large-scale factories that produce lithium ion batteries, primarily for EVs, on a gigantic scale are significant in size. A prime example is Tesla's manufacturing plant in Nevada totalling 1.9 million sq ft (176,515 sq m). The UK has only just recently announced its first gigafactory in Blyth, Northumberland, however it will need to secure multiple new factories in order to ensure automotive production remains in this country.

Savills notes that it is not only gigafactories that will be needed, but additional warehouse space to satisfy demand from key suppliers/distributors. This could require up to 2500 acres (1,011 hectares) of land, equivalent to an area three times the City of London.

It is also important to highlight that not all available land would be suitable for a gigafactory. Space constraints aside, sites will also need a considerable amount of energy, up to 150MVA, a skilled workforce and most crucially affordable land.

Kevin Mofid, head of industrial & logistics research at Savills, comments: "With land values for prime industrial and logistics development sites rising by 32% in the past year, affordable land remains hard to come by. For this reason, the regions most likely to see gigafactories locate are those markets where the public sector partners can help by delivering space for regeneration purposes. This primarily points to former areas of heavy industry where significant tracts of brownfield land are available, which already have large power supplies. This is why areas like the North East and South Wales seem very attractive to battery producers."

These markets, however, do not currently have large amounts of space available to provide units for suppliers to gigafactories. Savills research shows that if a gigafactory in South Wales was to be built, the total amount of warehouse stock would need to increase by as much as 40% to accommodate demand.

The impact of gigafactories has already been seen in North America from both Tesla's Nevada facility and the one currently under construction in Austin, Texas. Savills report highlights that in these markets the demand for traditional warehouse space, for suppliers of the gigafactory, has risen sharply. This has led to a dramatic fall in vacancy rates and an increase in rents in these locations. In fact, since 2015 the vacancy rate has fallen from 10.4% to 4.4% and average rents have risen from £2.92 to £4.96 per sq ft (£31 to £53 per sq m), an increase of 70% over six years.

Richard Sullivan, head of industrial & logistics at Savills, adds: "Whilst there are significant obstacles to be overcome to see the scale of gigafactory development the UK requires, there will be a clear ripple effect into the wider industrial and logistics market as and when schemes come forward. Developers and landowners should be considering their options now, as any future gigafactory development presents an opportunity in these key locations where demand is set to rise dramatically as battery production ramps up."