Pandemic online shopping boom sparks surge in demand for warehouse storage and distribution space

Pandemic-propelled e-commerce boom sparks a surge in demand for storage and distribution space

Coronavirus has led to a surge in online shopping and in a recent city news article it was reported that property firm CBRE estimates an additional 300m square foot of warehouse space will be needed in Europe by 2025.

Fears by insurer Zurich that pandemic-led e-commerce boom could spark rise in warehouse blazes

Our insurer partner Zurich has warned of a potential rise in warehouse blazes. The number of warehouses gutted by fire increased by 42% in the year 2019/20, according to Zurich’s analysis of the latest available Home Office data covering all 44 fire authorities in England.

Zurich has cautioned “outdated” rules on sprinklers could fuel an increase in warehouse blazes, harming businesses and the economy. It has led to renewed calls for automatic sprinkler protection to be made compulsory in all new warehouses over 2,000 square metres, roughly a third of the size of a football pitch. Government guidance currently only recommends sprinklers in warehouses of more than 20,000 square metres. This leaves Britain lagging behind other European countries where sprinklers are required in sites as small as 1,000 square metres in the Netherlands and 800 square metres in Norway.

Fire crews in England attend an average of 336 warehouse fires every year – nearly one a day. More than one in 10 blazes (14%) results in the destruction of an entire warehouse building. In the last decade, fires are recorded to have caused 99 fatalities or casualties.  Shockingly, of the 3,400 warehouse blazes attended by fire crew since 2010, half (49%) did not have alarms and just 6% had sprinklers.

Although the long-term trend has seen the number of warehouse fires fall, the cost of insurance claims has increased across the market. Zurich claims data shows the average cost of large warehouse fires is £5.9million. Losses have been driven by the demand for same and next-day deliveries which has sprouted an increase in smaller ‘last-mile’ warehouses located closer to, or in, urban centres. These are typically older buildings that pose higher fire risks.

The growth in online retail has also sparked a trend towards taller and larger ‘big box’ warehouses, with more tightly packed goods. Automation, including the use of robots – has further ratcheted up the risk and costs of warehouse fires.

 When was the last time you reviewed your commercial property insurance?

Now is a good time to review your commercial insurance arrangements and please also be reminded to review your contingency and business continuity plans.

We have had great success in helping commercial property owners, and in particular those with warehouse premises get better insurance cover and premiums. We’re not a call centre and don’t rely on what a computer is telling us. Whilst we use a high level of technology within our business we haven’t forgotten that bespoke insurance needs knowledge and experience.

For a full review of your commercial property or business insurance please contact us in confidence on 0330 058 0260

Sources: Zurich, City AM.