Damian Wild: Is e-tailing an evolution ?or a revolution for the industrial and logistics sector?
Andy Gulliford: E-tailing is certainly adding to general demand: it puts industrial and logistics in a very good place at the moment. We’re certainly seeing demand from retailers for those large-scale sheds and some of that is fuelled by internet retailing demand.
But where we’re really seeing growth is in our units around urban conurbations. Parcel delivery centres are a very obvious product of the growth of the internet. I would say we’ve done so far this year about 400,000 sq ft to parcel delivery companies, which is kind of a new demand.
Richard Sullivan: Undoubtedly [in] the last two years, we’ve seen confidence in the [consumer’s] use of the internet, confidence in secure payment and I think just a changing attitude. So, the revolution, to call it is that, the changing attitudes of the consumer [who is] saying, ‘yes, I’m prepared and confident now to [shop] by internet rather than by store.’
That [confidence] has introduced ?some interesting challenges on the supply chain side and… the overall outlook is that we will see significant growth potentially in that form of retailing.
Ian Henderson: The timing [of the growth] is interesting because it’s coming at a time when the stock is reducing and the demand is going up. Also there’s a crystallization in the locations.
You can see how it’s turning rapidly. ?I have spoken to a few landlords and their comments are that they knew [the growth of e-tailing] was coming, they just didn’t realise it would happen so quickly.
David Penniston: We’ve seen this [e-tailing] progressing for quite some years. But I would definitely concur that the rate of changes seems to have been within the past two [years] and because the internet has more secure payment [facilities]. People are feeling confident.
In terms of how it’s playing out in our own business, we have customers who want to store stuff to do business, such as eBay traders, people who start off in their spare bedroom or in the garage. We haven’t got specific statistics on them but we have got quite a lot of eBay traders moving up into self-storage units because as their business starts to take off they need bigger space.
We also have people like Next Directories. On certain days of the week their agents turn up with stock from Next then local agents pick up the items and deliver it to local houses. The difficulty at the moment is predicting quite where that’s going to develop.
Bill Page: E-commerce is a structural change that benefits this sector so if you’re very simplistic you can say this is a risk to high street retail but an opportunity for logistics. In terms of the evolution/revolution, it’s probably quite useful to separate e-commerce as an industry to the property response to it.
It’s quite strange to consider that Amazon was first incorporated in 1994 – almost 20 years ago. But as mentioned, the property response to [e-commerce] has only started.
As we have talked about already around this table it’s been in the past two or three years that the response has really started to accelerate. And if you look at the way agencies and developers are set up, particularly the larger guys, you’ve got specialists in retail and you’ve got specialists in industrial, but you don’t have an e-commerce specialist. Essentially it’s the first time these two disciplines have really emerged. So getting an understanding across the disciplines is going to be increasingly important, I think.
From the investor’s point of view [e-tailing] is an opportunity to get a strong retail covenant at an industrial yield as well, so it’s a good solution.
Legal & General is looking towards the 3PL sector as potentially interesting covenant particularly the privatisation of the Royal Mail: think that could potentially be very interesting for the market [see Royal Mail feature, p24].
Damian Wild: How does e-tailing affect getting the right sites and buildings for distribution? Will there be more urbanisation?
Andy Gulliford: It could well be that the thrust of e-commerce in terms of where it needs to be geographically and the product it needs to have to respond to its activities… could turn sort of hub locations and longer leases quite easily.
The example of that would be this urbanisation of logistics. If you just take London as an example, getting hold of sites and development opportunities when you’re competing with residential and leisure and goodness knows what; they are really in short supply.
So we’ve found that parcel delivery centres have limited choice in terms of what they can actually go for. That means, to some extent, that they’re probably going to make a good choice, make a large-scale investment and therefore want to be there for some considerable time.
For the specialised parcel delivery centres what we are doing is readying sites, getting the blueprint sorted out and marketing that site with blueprint, even potentially going for consent because we’re seeing quite a generic form appearing.
Damian Wild: Are we overplaying the importance of retailing and e-commerce? Are there other drivers in the market generally which are having a more profound effect?
Andy Gulliford: I don’t think we are overestimating the importance of e-commerce because I think it’s really coming through, although I don’t think you should ignore something like convenience shopping and the move ?to urbanisation, people living a ?different way.
Sainsbury’s is doing that, the Co-Op is big on it at the moment and Morrison’s has got a hell of a roll-out planned, so I think that’s a real growth area.
Damian Wild: And what will the market look like in five years’ time?
Ian Henderson: The market is changing anyway because of the lack of stock, so it is difficult to judge where we will be in five years’ time. I think it will just crystallise.
But it’s interesting because the questions for the future are, who will lead the market? Is it going to be a 3PL, is it going to be a landlord, is it going to be the retailer or is it going to be a mix ?of all three?
