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the amazon effect.

Amazon distribution network fuelling job creation and house sales

According to analysis by Birmingham-based Paragon Bank, UK towns that host Amazon distribution centres have experienced consistent growth between 2016-18, with house prices climbing on average 11%. The boom in e-commerce is creating markets for the private rented sector as each distribution centre creates approximately 1,300 permanent and temporary jobs. Amazon's network currently embraces 17 fulfillment centres in the UK, with a further four in Hinkley, Gateshead, Dartford and Swindon to follow later this year. By 2022, the entire UK Amazon workforce is expected to top 55,000, with 10,000 jobs created this year alone.

Positive impact

Paragon's analysis showed the positive impact the UK's 'super sheds' can have across the local economy where they deliver local jobs and create new businesses. Not only do average house prices increase but the number of local businesses also increases, again by 11%. The impact is more pronounced on new build sales, which increased on average by 16% in the 10 areas analysed. Private landlords also added 2% more rental homes to cater for demand.

Dunstable emerged as the winner, having experienced growth equivalent to 23% year on year after its distribution centre opened in 2016. The North saw the smallest relative increase, as its distribution network is more mature than the southern fulfilment centres.

The area also saw the greatest growth in business start-ups with 16,300 new businesses in the year after the centre opened, compared to 12,440 the year before, a 31% increase. In terms of job creation, Ellistown and Runcorn both enjoyed an 8% increase.

The 10 centres analysed included Altrincham, Banbury, Birmingham, Daventry, Dunfermline, Dunstable, Ellistown, New Rossington, Runcorn and Tilbury.

Increased demand

A report by Savills commissioned by the UK Warehouse Association showed a 32% increase in the number of warehouse units since 2015. Square footage across the UK currently stands at 556m sq ft, with an additional 60m sq ft required by 2025 to satisfy the rising demand for e-commerce. With online sales forecast to rise £67bn over the next five years, that figure could rise as high as 92m sq ft.

With e-commerce predicted to grow 14% in 2021 alone, separate analysis by Knight Frank showed that for every £1bn generated in online sales, an additional 1.36bn sq ft of warehouse space will be required.

The Amazon effect

Traditionally used to describe the negative effect Amazon's logistical superiority can have on other online and offline businesses, Amazon's relentless growth shows no signs of stopping. Seventy per cent of British consumers say the internet giant is the first online retailer they go to, with 59% describing themselves as loyal customers. And Amazon repays their loyalty by investing heavily in the UK, creating nearly £45bn in value-added GDP since 2010.

Paragon's research is concrete proof that Amazon is also impacting at local level, stimulating the demand for housing and creating a myriad of buy-to-let opportunities for investors. According to Richard Rowntree, Paragon Bank Managing Director of Mortgages, the impact of Amazon's fulfilment centres on local property prices is clear, with landlords looking for investment opportunities around new warehouse developments.

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