London – a logistics hotspot?

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The results of the second phase of research into the effect of the Road Transport Directive (RTD) indicate a significant impact on the industrial and logistics market in the South-east. By limiting lorry driver hours to an average 48 per week, and making it almost impossible to cover the breadth of the country in a single shift, the directive has created a major distribution hotspot around the nation’s capital.

A hotspot is characterised by a high demand for warehouses in near to urban areas. With more than a quarter of respondents identifying London as the prevailing hotspot in the UK, well ahead of northern England and the Midlands, concerns are growing that there will be increased pressure on already scarce land resources across the region.

This is compounded by the fact that high property values together with strict planning guidelines and demand for residential properties could significantly limit warehouse development. Add to this equation the worrying scenario that drivers will have to battle with increased congestion, and it is possible that the capital could be left without sufficient distribution resources to service its businesses and customers.

Furthermore, with London’s successful bid to host the 2012 Olympics, even more land ripe for development is being earmarked to support the necessary infrastructure required for such an event. Planning for residential developments on brownfield sites is being encouraged and much of the land surrounding east London that perhaps could have been used for warehousing should the bid have been unsuccessful, will now have other commercial uses.

NAI Fuller Peiser believes that logistics and distribution companies need to take strategic advice before redeveloping their existing warehouses or moving to other locations, particularly as 40% of companies feel that the RTD is affecting the need to increase the proportion of yard space and over a third feel it will have the same impact on commercial vehicle parking facilities.

With the already heightening pressure on the area’s land resources, long-term strategic decisions need to be made, taking the UK’s changing commercial geography into consideration. Those businesses that will be successful in minimising the impact of the RTD will be the ones that have taken a long term view about their property requirements rather than putting it off until the problem seriously impacts on their profitability.

In the retail sector, which is experiencing downturn in some areas, the effect may not be felt until they reach their peak periods – for example Christmas. Companies affected by this should still be analysing what needs to change in terms of their warehousing requirements prior to this period or the downturn could be magnified by a lack of stock getting to the stores in time for the festive rush if delivery drivers have used up all their allocated hours.

It is worrying that even at this late stage, four months after the directive was implemented, only 3% of the companies that responded to the research have actually reviewed their property requirements. This sparks fears that many are sitting on a property timebomb and failing to find solutions to diffuse the problem, despite being aware of the possible implications.

It is likely that once companies finally review their warehouse requirements, there will be impassioned battles as organisations demanding distribution sites are forced to go head-to-head with housebuilders and others in the fight for planning friendly land. With the shortage of such land available in the south-east, this could mean prices for warehouses sky-rocketing as demand exceeds supply.

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