The average clear height of UK warehouses (over 20,000 sq ft) has risen by over 50% from 7.6 metres to 11.5 metres over the past 20 years, according to Knight Frank’s latest industrial Future Grazing report.

The rise is partially driven by the growth of ecommerce and the need for managing larger inventories with greater efficiency and is being enabled by improvements in warehouse automation.

The push toward taller warehouses is due in large part to occupiers’ need to minimise costs while maximising operational efficiency. As land and labour costs continue to rise and automation becomes more affordable, the economic case for building upwards rather than outwards strengthens.

Automation is the great enabler when it comes to making use of greater clear heights. Technology such as Automated Storage and Retrieval Systems (AS/RS), Autonomous Mobile Robots (AMRs), and Automated Guided Vehicles (AGVs) make ultra-high-bay storage feasible, unlocking efficiencies that manual operations cannot achieve. These systems can reduce aisle widths, increase storage density, and boost speed and accuracy, all of which are critical for ecommerce fulfilment.

Labour costs have risen and continue to rise, driven by an increased national minimum wage and employer national insurance contributions. The salary and tax costs of employing a 21-year-old on minimum wage (working 35 hours a week) has increased 61% over the past five years, supporting the case for adopting automation systems within warehouses and, by extension, embracing taller structures.

Rising land costs, particularly in urban locations, also make vertical expansion more cost-effective than horizontal sprawl. Competing pressures for land in London and other cities have eroded the supply of industrial land and planners have sought to maintain current floorspace through the intensification of sites; either through reducing yard space or increasing the number of floors.

Ecommerce trends

The shift to online retail has changed how goods are stored and processed, with warehouses used for order fulfilment and not just bulk pallet storage. This necessitates more efficient, high-density, high-velocity storage solutions. Taller structures enable significantly greater pallet capacity by accommodating multiple levels of racking within the same footprint. This is especially critical for ecommerce operations’ diverse product ranges and fluctuating inventory levels.

Mintel forecast online retail sales to rise from £125bn in 2024 to around £151bn by 2030. According to Knight Frank analysis, this translates to an additional 35m sq ft of UK warehousing requirements. However, operators are increasingly opting for taller buildings, and this could alter the relationship between online spend and floorspace, reducing projections for future floorspace demand as operators make more efficient use of vertical space.

The report states: ‘If we account for a ~25% increase in clear heights (excluding last mile units) by 2030, the amount of additional floorspace needed would reduce to around 28m sq ft. As well as supporting more efficient storage and fulfilment models for ecommerce operators, an increase in average building heights has the potential, therefore, to meaningfully decrease the amount of land needed for future growth in the sector.’

Implications for landlords

The shift toward more vertical development has significant implications industrial landlords and investors as well as occupiers.

Analysing built stock constructed prior to the end of 2024 (so as to exclude newly built speculative developments from skewing the findings), Knight Frank found that units over 400,000 sq ft that have a maximum clear height of 40 ft (12.2m) have a vacancy rate of 6.6%, double the rate for buildings of that size with clear heights in excess of 40 ft (3.3%).

As well as enjoying lower average vacancy rates, properties with high clear ceiling heights can also command a higher rent and therefore increased capital values. Knight Frank analysis shows that each additional foot of clear height adds approximately £0.08 per sq ft on average to rent. However, the relationship is not linear. Increasing clear height from 30 ft to 40 ft would generate a c.£1.04 psf rental uplift, while increasing from 40 ft to 50 ft clear height would see a smaller uplift of c.£0.51 psf and an increase from 20 ft to 30 ft would support an uplift of c.£1.58 psf, according to the report.

Taller, well-specified buildings also offer strategic advantages that go beyond immediate income returns. Increased clear height supports automation, higher throughput and operational flexibility, which can strengthen tenant covenants and reduce obsolescence risk.

Johnny Hawkins, partner at Knight Frank, commented: “Height is increasingly a defining feature of logistics facilities, playing a key role in driving value and performance. For investors, taller buildings can improve income resilience, support long-term value growth and reduce obsolescence risk. Those who integrate vertical thinking into their investment, development, and operational decision-making will be best placed to mitigate cost increases and land availability challenges, as well as capitalising on the opportunities presented by a warehouse market that trends increasingly skyward.”