Securing last mile logistics space in the urban environment, and in particular London is fraught on many levels But necessity is the mother invention, and there are some very inventive options brewing. Liza Helps reports…
It is a riddle, wrapped in a mystery, inside an enigma – once Winston Churchill’s description of Russia, but now could easily describe urban last mile logistics in the UK and London in particular. Over the past decade affordable local delivery depots from which to operate last mile parcel deliveries has become increasingly difficult to find due to rising land prices and competing land use in London and other cities in the UK. These increases forced many freight transport operators to relocate their central urban depots to cheaper peripheral areas, which has led to the suburbanisation of warehousing.
However the marked change in shopping habits with the rise in ecommerce has put paid to this movement, and to satisfy consumer demand with timely deliveries, urban depots are back and this time they are critical.
Marcus de Minckwitz of Savills says: “There’s no doubt about it – we are a generation of rather impatient shoppers. The age of Amazon Prime and on-demand-everything has rendered us unlikely to order anything online that takes more than two days to be delivered.”
Indeed it is noted says Len Rosso of Colliers that: “there has been a structural change in last mile deliveries with companies vying to deliver within the hour or two hours to secure market share and satisfy consumers.”
According to the Office for National Statistics, internet sales now make up over 20 per cent of all retail sales in the UK and research by CBRE points to online retail in the UK representing over one third of total retail sales by 2040.
For companies, and in particular retailers, the last mile to the end user is make or break. According to a survey by UK law firm TLT of 100 leading retailers speed of delivery is a deciding factor for consumers when making a buying decision. Perran Jarvis of TLT solicitors says: “Consumers want delivery that is fast, free and flexible, and this can make the difference between making a sale or an abandoned shopping cart.”
For the current 63 per cent surveyed offering next day delivery or faster, competition is set to increase with 83 per cent saying they will offer this in the future.
It is not surprising therefore to see that retailers are investing more in their supply chain. The TLT survey notes that 74 per cent of retailers say expectations around rapid delivery are driving investment in logistics.
Ben White of Knight Frank says: “The last mile of a parcel’s journey from the warehouse to the consumer is the most expensive (by more than 50 per cent) and time-consuming part of the shipping process.”
If just facilitating those promises is not hard enough the issue of emissions from the vehicles carrying out the deliveries especially last mile is now a political hot potato across urban landscapes.
A typical supply chain set up sees goods delivered to the suburban warehouse usually by HGV and then the last mile is carried out by LGVs. There was a 48 per cent increase in the number of LGVs licensed between 200 – 2015, and a 47 per cent increase in vehicle kilometres travelled by LGVs annually over the same period according to Department of Transport data.
Until recently the majority of these vehicles have been diesel and it is harmful particulates and deteriorating air quality due to these as well as health and safety of the urban population that has led many city authorities to severely penalise and, in some cases ban such vehicles from city centres and beyond. In April this year London Mayor Sadiq Khan introduced the Ultra Low Emission Zone while other city authorities around the UK are set to do the same.
With urban populations growing the conundrum of last mile logistics looks complicated indeed: land issues, emission issues, competition issues.
So what is the way forward? Almost all believe that getting as physically close to the end user as possible is the first step but with land availability issues a radical new way of thinking is required.
Len Rosso of Colliers says: “Companies are going to have to adjust how they do last mile and work out of a different type of space which they would not normally have considered in the past.”
And, says Jon Sleeman of JLL: “The pressure on land and the issue of emissions, particularly in London, is leading to the beginning of new types of [logistics]buildings and land use intensification.”
However, says Tessa English of JLL: “There is no one answer that fits all.”
Currently she says there are 26 urban logistics schemes being considered just in London but not all of these will come forward.
Sleeman notes: “The first choice for a developer is to build a standard facility and the first choice for an occupier is to take a standard facility and it is only when that option does not exist – particularly in London – that alternatives are being considered.”
Jonathan Atherton of Savills says: “We expect to see retailers and distributors becoming more adventurous in their choice of space, for example office basements, under-use car parks and off pitch or unwanted retail units.”
That sort of thing is already happening in London. Rosso says: “We have been approached by clients to look at repurposing existing office buildings and car parks.”
Indeed a former car park in central London has become parcel delivery company DPD’s first all-electric distribution centre or micro-hub. From this 5,000 sq ft facility, 2,000 parcels a day will be delivered by all-electric vehicles exclusively to the capital’s SW1 postcode area. The site also includes a pick-up shop allowing customers to collect and return parcels. The company expects to open seven more micro all-electric units across the city. A second London depot, in Shoreditch, has already been secured.
London is already seeing multi-purpose buildings with schemes such as Caxton Works where industrial is on the ground floor with residential above. However says Sleeman many retailers distributor and indeed investors need proof of concept before accepting any one alternative as a standard way of doing things. With that in mind, says English: “The [owners]are offering rents at a lower price [than market levels]for three years to attract initial interest.”
The 13 commercial units available are being offered at an initial discounted rent of £6 per sq ft for the first three years. It is understood two units are let and nine are believed to be under offer.
This article first appeared in Logistics Manager, June 2019.