Insurers flag heightened risk of warehouse fires following pandemic-fuelled ecommerce boom

Retailers are scrambling to secure warehouse space after shoppers moved online amid the pandemic, with demand for sites over 100,000 square feet up some 64% on last year, according to figures from real estate and investment firm Jones Lang LaSalle.

The boom has insurers concerned, with Zurich worried that the surge in demand for storage and distribution space could spark a rise in warehouse blazes. The number of warehouses gutted by fire increased by 42% in the year 2019/20, according to the insurers’ own analysis of Home Office data covering all 44 fire authorities in England.

Charles Bush, Zurich’s head of property and energy claims, said: “Warehouses underpin the huge and growing e-commerce sector. Against the tens of millions of pounds Britons spend online every day, current sprinkler standards look increasingly inadequate. As well as posing a threat to life, warehouse blazes devastate businesses, send shockwaves down supply chains, and lead to the loss of jobs and productivity. While we’re committed to helping firms of all sizes manage their warehouse risks, and recover after a fire, the government must look to address this issue too. A failure to make new warehouses more resilient to fire risks damaging Britain’s growing e-commerce economy, and the many jobs and businesses that depend on it.”

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. Of the 3,400 warehouse blazes attended by fire crew since 2010, half (49%) did not have alarms and just 6% had sprinklers.

Losses have been driven by the demand for same and next-day deliveries which has led to an increase in smaller ‘last-mile’ warehouses located closer to, or in, urban centres.

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

Jonathan Dyson, NFCC lead for Automatic Fire Suppression Systems, National Fire Chiefs Council, said: “Sprinklers are an effective part of an overall fire safety solution and can be used efficiently to improve fire safety in a range of new and existing buildings. Due to the size, scale and use of warehouses and the potential risks these pose to firefighters responding we believe suppression coverage should be fully reviewed.

“Sprinklers are the most effective way to ensure that fires are suppressed or even extinguished before the fire service can arrive. They save lives and reduce injuries, protect firefighters who attend incidents and reduce the amount of damage to both property and the environment from fire.”

Bush added: “As warehouses grow in size and density, firms face more severe losses. The destruction of one warehouse is now the equivalent of several. Consumer demand for faster deliveries also means there is little margin for delay in processing times. When a disaster strikes, business losses start to mount immediately. By containing blazes, sprinklers reduce the damage fires inflict, helping businesses to recover sooner.”

UK 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 1,000m sq in the Netherlands and 800m sq in Norway.

Thresholds for installing sprinklers in other countries:
• Norway – 800m2
• Netherlands – 1,000m2
• Austria – 1,800m2
• Spain - 2000m2
• France – 3,000m2
• Belgium – 5,000m2

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 £5.9m.

Image courtesy Zurich Insurance

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