Thursday 21st Feb 2019 - Logistics Manager Magazine

A hotbed of development

South Yorkshire is attracting increasing numbers of logistics companies, thanks to the availability of labour and lower wage rates, according to Mike Haigh, industrial and distribution property partner at Knight Frank. He believes that demographic considerations now play a major role in distribution companies’ property decisions.

Haigh comments: “It is no longer a case of location, location, location when retailers or their logistics companies are looking for sites for their big sheds. They are increasingly concerned about labour supply, flexibility and costs and slightly less about proximity to major routes.”

According to Haigh, distribution companies rely on plentiful supplies of cost-effective labour: “Typically most distributors are operating at the edge of their margins with as much as 40%-50% of turnover being accounted for in wages. Having to pay a higher hourly rate can therefore have a real effect on the bottom line, and this problem is compounded by the shift towards big sheds operating a three-shift pattern, working 24 hours a day, which requires even more workers.”

He continues: “This is the reason why property enquiries from distribution firms are no longer just about the premises, but about the demographics of the area, and as agents we now do a lot of work on labour availability and costs and also wages paid by potentially competing jobs and industries in the vicinity of our sites. In some areas, such as the Golden Triangle around Lutterworth near Rugby where the logistics industry has clustered in locations such as Magna Park, the available labour supply for the industry is well nigh exhausted with occupiers having to rely on poaching staff from one another. This can lead to an ever increasing upwards wages spiral, which some distribution companies want to break out of.”

Haigh believes many logistics companies are now going where they can find the right sort of labour. Recent research undertaken by Knight Frank, based on government statistics, has shown that areas like South Yorkshire are prime locations where the demographic indicators score highly for distribution companies.

Lower weekly wages sourced from the Government’s New Earning Survey, are one factor taken into account. For example in Doncaster at an average of £432 per week for a full time manual worker, wages are lower than in Leeds where the average is £477.

“At this level these statistics are rather crude and we refine them further. We then add them to employment rates and labour availability, taking into account any special circumstances, such as industries shutting down and a large labour supply becoming available.”

This demographic factor pointed Gladman Developments to Waystone’s Barlborough Links at the M1’s J30 in South Yorkshire. Here, a speculative 46,500sq m distribution warehouse is close to completion with Gladman talking to several interested tenants.

Haigh says: “You could not find a more central location in the UK on the M1, than Barlborough Links. It is close to the M18, A1(M) and A38 and surrounded on all sides by former mining communities, providing a good pool of reliable, loyal and available workforce which is used to working a three shift pattern. Gladman has successfully developed large distribution warehouses in areas of the country previously unrecognised as distribution locations – such as Skelmersdale – but it is by no means the only developer to look to the demographic needs of its occupiers, as recent deals in Yorkshire suggest.”

The moves by B&Q to take a 74,400sq m national distribution centre at Doncaster, and Next following it to South Yorkshire, made the whole market sit up and take notice.

Helioslough is to develop the 90-acre SIRFT site; the 84-acre Brookfields site in Rotherham is to be developed by St Pauls Developments; and Gazeley has acquired a 48-acre site near J34 of the M1 where it plans more than 93,000sq m of space – all deals with a demographics angle.

According to Haigh, the drive for logistics companies to move their large distribution centres to Yorkshire is compounded by new restrictions on commercial drivers’ working hours, which came into force as part of the Working Time Directive from March 23, 2005.

“Drivers will be unable to travel as far in one day and one week as at present, so in order to continue to be able to reach the majority of the country’s consumers within four hours drive time, logistics companies will need to shift their national distribution centres from the Golden Triangle up the M1 to Yorkshire. The magical combination of demographics and the Working Time Directive is certainly bringing dividends for Yorkshire,” he concludes.