The pressure on urban logistics is only going to get greater but can we provide the space that is needed? Liza Helps investigates.
A huge increase in urban logistics property space is required in the next few years to meet the exponential growth of e-commerce and the resultant need for last mile delivery in cities, according to a new research report from Cushman & Wakefield.
The Urban Logistics report which cover key centres across Europe, notes: “In terms of population and buying power, London is the largest and most mature e-commerce market in Europe with a current urban logistics space requirement of 870,000 sq m (more than 9 m sq ft). This total is expected to exceed 1.2 million sq m (12.91 million sq ft) in 2021, an increase of 42 per cent.”
Two main reasons stand behind the increasing importance and complexity of urban logistics: the continued growth of the UK’s urban population and the fact consumers are becoming more demanding with their requirements in both parcel deliveries and leisure facilities, increasing the supply needs of the latter.
Lisa Graham of Cushman & Wakefield, says: “As more of us do our shopping online, it will be crucial for online retailers and parcel companies to use urban logistics space to meet rising customers’ expectations in terms of speed and reliability of delivery, while at the same time reducing costs to justify higher rents.”
JLL’s Jon Sleeman agrees. “E- commerce has had a significant impact [on urban space required]but meeting consumers’ expectations regarding delivery – next day, same day and even within the hour delivery – has the most direct impact on property location.”
Graham says: “Getting those delivery times is most acute in London that is why you need to add the extra link within the city itself rather than trying to deliver from outside as is possible in most other urban locations in the UK.”
“That poses a big problem,” says Len Ross of Colliers. “Where is the land going to come from?”
And it is not just a problem for London – a recent report by planning consultancy Lichfields found that only 27 per cent of local authorities in the UK had logistics sector specific planning policies for ‘last mile’ logistics despite the fact that urban logistics facilities are expected to expand by 40 per cent over the next four years.
Ross Lillico of Lichfields says: “Many councils say designated general employment sites, and a degree of policy flexibility, are sufficient to cater for the needs of last mile logistics operators, but the study found that the proportion of authorities who felt they were well positioned to cater for last mile logistics requirements – at 55 per cent – is currently below the proportion that have experienced growth in demand from the sector – at 65 per cent.
The Lichfields survey notes that the pace of change in the sector is currently running ahead of the planning system, with 58 per cent of authorities viewing a lack of an up-to-date local plan as a key barrier to meeting last mile needs.
“It is clear that more needs to be done to plan effectively to support the continued growth of last mile operators.”
Traditional locations for logistics – alongside motorways and on urban boundaries – will not be enough to cover cities’ demands for last mile deliveries and reverse logistics. So more logistics facilities will be needed close to city centres.
What makes it all the more difficult says Sleeman, “is that we live in a market-led, not a plan led economy and there are plenty of competing interests for land in urban areas, which have far higher values attached.”
In London, after a lot of pressure from commercial developers, the New London Plan offers overall support to increase or retain industrial floor space capacity giving planners a framework within which to work.
Rosso points out: “This is all well and good but after two or three years [of allowing commercial land to be repurposed for residential development]there is not much left.”
This puts increasing pressure on green belt sites. “However,” says Rosso, “the greenbelt is a political issue, so despite the need for a wholesale rethink about how we address this [and other planning problems], it is unlikely to happen.”
That being the case property developer, investors and consultants agree that the only way is ‘to think outside the box’. Gordon Reynolds of Cushman & Wakefield says: “Developers and investors are looking at repurposing former retail warehouse sites.”
Indeed it has been reported that Amazon was looking at some of the 42 Homebase stores due for closure. Several former Toys’R’Us sites are also being eyed up as potential urban logistics sites.
Reynolds says: “Investment yield is keener for logistics than it is for retail warehousing at the moment making repurposing feasible but certainly not widespread. It would have to be done on a case-by-case basis.”
All agree that there will be a marked increase in the intensification of land uses to make the most of all logistics spaces inside cities.
Developer Gazeley is pushing through with its six-acre multi-storey scheme in Silvertown. The development to be know as G-Park Docklands will total 426,000 sq ft across three-storeys.
The building will be used as a ‘last mile’ logistics hub for London and surrounding areas, targeting e-commerce, distribution and logistics customers.
This is the first three-storey warehouse in the UK and will use platforms to allow HGVs and other vehicles to access each level. Each storey will comprise 140,000 sq ft of space with 26 dock doors and 4 access doors on each level. The site will contain 350 car parking spaces and around 75,000 sq ft of ancillary office space. Gazeley expects the development to be completed by the end of 2019, subject to planning permission.
Over in Hayes, SEGRO has started the construction of its mixed commercial/ residential use site on the 30-acre former Nestlé factory.
SEGRO and Barratt London have designed a mixed-use scheme that will deliver 230,000 sq ft of sustainable, high quality employment space alongside 1,381 new homes.
The scheme achieved planning permission in December 2017. Demolition has begun on the site, with SEGRO expecting to complete the industrial scheme by May 2020. The first phase of Barratt London’s residential units will be available for occupation in Summer 2020.
This article first appeared in Logistics Manager, December 2018