Rightly, and somewhat belatedly, the government may be focusing its attention on upping housing supply, but it mustn’t do so to the exclusion of other sectors. And that’s a risk, according to speakers at the EG Industrial and Logistics Summit 2016: ministers need to realign their planning focus from housing, housing and housing to include more logistics, the panel agreed.
It was a warning that followed a period that has seen the sheds sector – and yes, delegates insisted they wanted their sector to be known as sheds in a vote on the day – become something of a real estate darling. Its place at the heart of the online shopping revolution and consistent delivery of returns has seen to that.
Nevertheless Melanie Leech, chief executive of the British Property Federation, warned: “You cannot have housing without the infrastructure that goes around it, and logistics needs to be at the heart of difficult decisions around land.”
Liam Ronan, associate director at Quatro, concurred: “Housing trumps industrial land and jobs, and so it seems the message coming out of the government is, ‘Let’s build homes, rather than create jobs’.”
To counter this policy shift, the logistics sector needs to make its voice heard, and showcase its importance as a sector, particularly with regards to the employment opportunities it offers.
Phil Sutton, director at Kier Property, said: “The push on housing and lack of homes is taking over all conversations with the government, and we as a group need to shout more loudly. Build all the houses you want but people still need jobs, and there are a lot of good jobs coming out of the sector, which we need to be loud about.”
Leech added: “There is a growing understanding of the importance of the sector in terms of integrated planning, but there is more we need to do. It is our job to shout about what we bring and what we do. It is a great employer as a sector and there is a lot we can showcase.”
Of course the chances of success are very much increased if the demand and supply imbalance and a robust occupational market offer a positive outlook for the industrial market.
And Jonathan Powling, joint head of real estate logistics at Addleshaw Goddard, told delegates he was optimistic. “The fundamentals of e-commerce and growth will continue to drive investment into the industrial sector,” he said.
Paul Crosbie, investment manager at M&G Real Estate, added that his house remained positive about the industrial sector.
He said: “The economy is set to continue to grow at a lower rate of growth and, on top of that, the supply-constrained market is leading to some exciting levels of rental growth.”
The main constraint for the market on the horizon is the lack of stock and the competition with other developers to release land for commercial industrial uses. However, the overall outlook remains positive and, despite economic and political uncertainty, the sector is set to continue to attract investment.
James Williams, director of UK investment at Savills, said: “Logistics has been established as a world-class asset, and is attracting international investment. I think there are a few speed bumps out there and as the noise around Brexit increases, there will be some shocks regarding pricing, but fundamentally the UK is still an attractive place to invest, and if people are going to invest in the UK, they are increasingly going to look to the logistics sector.”
What’s clearly needed is for that positive sentiment towards industrial and logistics to extend to government.
Changing needs
Buildings need to evolve against the backdrop of the rise in technology in order to be fit for occupiers’ needs in the industrial sector, delegates were told today.
The rise in automation in parcel delivery companies means production in logistics is getting much faster, and buildings need more loading floors.
Traditionally, buildings have one loading floor for every 10,000 sq ft in the west London area, but this is no longer the norm and needs to change.
Bridget Outtrim, director of Savills’ London industrial team, said: “Technology affects buildings in all sorts of different ways but for the parcel delivery companies, the rise in automation means that things are speeding up.
“The faster things are done in the building, the faster they come out, and this is challenging the shape of the industrial norm of rectangular buildings.”
John Clements, European development director at Verdion, said: “There is a lot more that developers could do for tenants. It is not a case of saying, ‘Here is a box, go and sort yourself out.’ We are always trying to consider this and demonstrate the different options rather than just leaving it to them.
“There has been a lot of evolution in building standards but at the spec building iPort [in Doncaster], we have been able to do that. It has cost us a bit more money, but in the long term, the savings will be notable.”
Other changes will be needed too as consumer expectations and sustainability requirements shift.
Sustainable last-mile delivery methods will rely on a change in consumer behaviour, according to Nigel Symonds, business development manager for Camden. He says competition between retailers to achieve faster delivery times is pushing last-mile delivery in London to breaking point.
Consolidation centres will play a key part in the future of London’s logistics, but consumers will have to rely less on instant gratification for these to be sustainable.
He said: “We need to slow down deliveries. Why do we really need things within the next hour? It is about behaviour change, which we are all responsible for. So establishing consolidation centres, despite the challenges, is one of the key ways to reduce congestion.”
Twitter wall
@wcec_group US presidential election high on the agenda – interested to see how trade in the UK and logistics may be affected
@RealEstate_AG E-commerce growth & lack of land vs increasing demand are key factors driving growth says investment panel @AGinsight
@RealEstate_AG Fundamentals driving yield compression & investor appetite will remain following political US events says Jonathan Powling
@turleyplanning Calls from the Logistics #EGSummit for a national policy strategy for industrial and logistics. Unrealistic in light of devolution?
@AmberRoltEG Five years ago Domino’s pizza was the only business to offer same-day delivery in London
@AmberRoltEG When Amazon first came to UK people wondered whether it would work
@LouiseCart Efficiency, internet connectivity and supporting the war for talent and wellbeing are all key issues for industrial occupiers
@EGiAndrewToy Developers can do more for potential tenants, such as facilities, LED lighting, etc. Connectivity key for attracting young talent
@VerdionLogistic Thales: We want flexibility, quality, network enabled space
@AmberRoltEG There will be at least 400 deliveries a day at 22 Bishopsgate and 1,000 trucks a day
@KwadepotterAG UK needs land strategy for #industrials #logistics government needs to recognise importance
@EGiAndrewToy Is ‘sheds’ a derogatory term for the industrial market? No, according to a show of hands!
@EGiAndrewToy @AlibabaGroup making tentative steps into U.K. market, will they take on @amazon?
@EGiAndrewToy Industry looking positive post-Brexit, 2016 set to outstrip record 2014
