As food retailers, on-line retailers and 3PLs battle it out to provide the perfect ‘last mile’ experience Liza Helps reports on the seemingly unstoppable demand for urban logistics.
More people are living in urban areas, leading to increasing demand for logistics facilities to serve the needs of these growing urban hubs, according to Charlie Howard of Logicor. “The reconfiguration of the supply chain and the shifting retail formats from brick and mortar to a more sophisticated omni-channel supply chain format is also a big factor.”
The result is a battle royal being played out across major towns, cities and conurbations in the UK as retailers both traditional and on-line fight to secure the perfect ‘last mile’ experience for consumers.
It’s all about getting the right facility in the right place. In the last few months alone, Amazon has secured 1.2 million sq ft of space, and is looking for more as it announced the launch of its Amazon Pantry service offering customers more than 4,000 grocery products from beer to pet food for same day delivery. Ocado has upped its expansion plans for more distribution hubs on the urban fringe, as are retailers such as John Lewis, which took 50,500 sq ft at Muse Developments’ 110-acre Logic Leeds scheme in West Yorkshire earlier this year.
Recognising shopping habits are changing and with omni-channel giving shoppers more choices than ever before; the retailer is strengthening its distribution network to ensure it continues to deliver a coordinated and convenient shopping experience to its customers.
John Lewis also took a 50,000 sq ft unit at IM Properties Solihull Business Park scheme near Birmingham for the same purpose and is believed to have several other outstanding requirements.
According to recent research by Savills upward of 10 million sq ft is required year-on-year to cater for the e-commerce boom in the UK. Kevin Mofid of Savills says: “We are seeing a huge demand for this type of building close to people to service the omni-channel function – the trouble is there aren’t many about.”
Andrew Gulliford of developer/investor SEGRO says: “There are two clear themes in terms of demand drivers that are leading the charge on the creation of urban logistics the first one is the growth of the e-commerce/e-retail world and home delivery and then the second one is very much the urbanisation of the retail format; the convenience store requiring smaller deliveries of quite high end luxury and fresh produce more frequently through the day.”
Acknowledging this, Barry Allen of Savills says: “The urban distribution function which is a requirement of market and a growing requirement, requires good well located sites but the research we have been doing about loss of industrial land in urban areas particularly in south east and London, primarily residential is pointing up the competition for brownfield urban land.”
David Binks of Cushman & Wakefield says: “The difficulty with logistics in urban areas is that often there is a push to higher value usage such as residential.”
Jon Sleeman of JLL agrees. “Land is being lost to residential with landlords regarding industrial and warehousing at the bottom of the value chain.”
The problem is particularly acute in the south east and London. Richard Evans of JLL notes: “We know of at least one urban logistics occupier desperate to find a site in London and cannot secure one.”
Developers are looking at possible strategies to solve the problem. The majority are busily acquiring and securing planning for sites on the urban fringes and within the towns and cities themselves.
SEGRO has bought several sites in and around London specifically with urban logistics in mind. It has recently acquired 10-acres in Enfield, north London. The company has historically focussed on Park Royal in West London and Heathrow, but in recent months, SEGRO has successfully sought out strategically located land and standing assets in the north and east of the city from where it will be able to offer the light industrial and urban logistic space so crucial to the needs of occupiers such as parcel delivery companies, third party logistics operators and online retailers.
It has also secured 20 acres in Purfleet, East London from Savills IM. The site could accommodate up to 400,000 sq ft of space.
Prologis has also entered the fray with the announcement that it will be speculatively building its first small-unit scheme in the UK at its Prologis Dawley Road scheme in Hayes, West London.
The scheme will offer a total of 120,420 sq ft in six buildings ranging in size from 2,870 sq ft to 52,540 sq ft. The scheme is expected to complete in April 2016. Prologis Dawley Road is located three miles from Heathrow Airport and offers access to the M4 and the M25 motorways as well as routes to Central London.
Chancerygate, Kier (with its Logistics City brand) and GOYA are also progressing schemes targeting the urban logistic sector with schemes in Portsmouth, Poyle, Hemel Hempstead, Tyne & Wear, Thurrock, Reading, Andover and many around London.
With so much demand for warehouse space and competing demands for alternative land uses, occupiers will have to look at using facilities more intensively.
The majority of parcel delivery centres are business in the mornings and evenings and fallow through the day. Companies such as DPD and DHL are looking at how to provide Click & Collect for customers from those same facilities and even setting themselves up as consolidation centres for retailers in shopping centres such as Westfield in Stratford East London.
Several pundits point to the development of the multi-storey facility. Mr Gulliford says: “The only way to get density is to go upwards; that is happening in Paris and Germany and it is going to happen again in the UK.”
Mr Mofid agrees. “Certainly in the south there needs to be another look at the greater intensification of land: should we be looking at multi-storey or maybe even going down?”
SEGRO’s two storey X2 building near Heathrow is the UK’s only multi-storey industrial facility. At present there is just one unit available known as Unit 8, which extends to 33,916 sq ft and features 6m eaves, two up-and-over electronically operated loading doors as well as having 13 per cent office content. It is available through joint letting agents Aspect Property Consultants, Colliers International and JLL.