Location is the key to beating congestion

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The choice of location is one of the keys in the battle to beat congestion, according to Gerald Eve’s latest Prime Logistics report.

As road congestion becomes an increasingly negative factor in the efficiency and cost of transporting goods around Britain, new research shows that choice of location is a key way in which logistics occupiers have sought to avoid the most congested areas of Britain.

The North and North East are increasingly benefiting from high-profile relocations by operators switching their import points from southern to northern England. Retailers like B&Q, Ikea, Asda and Tesco have all taken warehouse space in locations such as Doncaster, Hull, Teesport and Goole, giving them access to ports through which they can bring goods into the country without having to transport them across heavily congested areas in the South East and Midlands.

“The ultimate driver is to limit costs by avoiding heavily congested parts of the country,” says Sally Bruer, head of industrial research at Gerald Eve. “Occupiers locating in newly emerging markets can not only achieve operational efficiencies but may also benefit from lower rents and land values, lower wages and even government assistance. Areas of the North, North West and North East have the added advantages of significant availability of development land and a willingness of planning authorities to grant permission for such schemes.”

Such locational choices also reflect a shift in distribution strategies from a central national distribution model to a more regional model. This is having a knock-on effect on shed requirements, which are undoubtedly getting bigger. The traditional view that a regional distribution centre (RDC) tends to be 100,000-250,000 sq ft is changing, with some RDCs now being accommodated within larger warehouses of over 400,000 sq ft.

Demand for larger regional warehouses has also led to more space being taken up in newly emerged or emerging areas like South Yorkshire, Cambridgeshire and the northern West Midlands (particularly Staffordshire). Take-up of sheds in these areas is largely being driven by relocations, with inward investment accounting for almost half of all warehouses of over 100,000 sq ft taken up in South Yorkshire in 2006/2007.

Road congestion has also encouraged a number of retailers and manufacturers to switch to rail, which has the added benefit of boosting sustainability credentials. Asda, Tesco and Superdrug are among those to move goods around the country by rail, while Marks & Spencer and Danone use the Channel Tunnel to transport products to the UK from mainland Europe.

On the back of this growing interest in rail, developers are providing rail-connected warehouse schemes around the country, including a number of developments at major rail freight interchanges. ProLogis has taken this a stage further this year by winning permission on appeal for a new intermodal terminal and 2.1m sq ft distribution park at Howbury Park in Bexley, south east London, potentially paving the way for similar schemes.

The report also highlights the likely impact on property in ‘frontier locations’ bordering congestion charging zones in cities like Manchester, Cambridge and Bristol, where road charging might be introduced. The extra cost of travelling inside the charging zone may lead to greater demand for industrial property – and potentially higher rental or capital values – outside.

Sally Bruer said: “Britain’s heavily congested roads have forced the distribution industry to explore ways of combating the problem of increasing and less predictable journey times and costs.

“It has risen to the challenge by adapting its supply chain strategies and finding better locations, resulting in bigger regional sheds in less congested areas, often close to ports and with rail access,” she added.

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