Long overdue and very, very welcome, Heathrow Airport’s £180m plan to double its freight capacity by 2030 has received nothing but applause.
Carriers complain that freight can take eight hours – or longer – to make its way through the transit sheds. With freight volumes expected to reach 3m tonnes per year in the next 25 years, handling times will grow untenable unless action is taken now. Without it, the airport cannot cope, and the UK’s capacity to export high-value goods will be impaired.
The problem is, how to do it?
Improved technology and process engineering can help shave a few hours off handling time and thus increase freight capacity. But the airport’s aim of doubling capacity from today’s cargo total of 1.5m tonnes pa will sooner or later involve additional freight floorspace. And this is where it starts to get tricky. There is not much space to build and the locations within or close to airside are vanishingly small.
The 1m sq ft Horseshoe building – officially the Heathrow Cargo Centre, owned through the joint SEGRO-Aviva Investors Airport Property Partnership – is sure to be part of the solution, whatever that turns out to be. It is currently the only freight facility with direct airside access.
Alan Holland, London director at SEGRO, says: “We are working with Heathrow on supporting its freight expansion plans, and the Horseshoe is fundamental to how Heathrow doubles its capacity. Things are progressing, but this is a slow burn because many of the occupier leases at the Horseshoe have another five or 10 years to run.”
Decanting existing occupiers to allow rebuilding and refurbishment is a real problem, although Holland insists it is no worse than redeveloping a functioning shopping centre. Some thought, some planning, a long lead-in and – fingers crossed – it will be possible.
A more serious problem is presented by usable close-to-airside land suitable for extension or new facilities. About 35 acres is owned by SEGRO and about 10 acres by the airport. Holland says: “We do not own all of the land, nor does the airport, so any solution will have to involving swapping or consolidation.”
SEGRO and the airport are talking to the Civil Aviation Authority about how to optimise freight floorspace. That could involve multi-storey buildings, or clever decking arrangements, although Holland does not sound enthused by the idea. Talks with the CAA are more likely to focus on automation and process-flow – the dull but very necessary functioning routines of what is, in effect, no more than a mighty transit shed.
Observers beyond the perimeter fence wonder if serious expansion plans are deliverable on the severely constrained Heathrow site. Len Rosso, head of industrial and logistics at Colliers International, says: “The Horseshoe is 50 years old and not really fit for purpose. Even so, it does well and is popular because there is nowhere else to go.
“If they can double capacity, that will be positive, but the site is constrained, and I would be interested to see how much more efficient they can make it, if that is the main route to growing capacity. It is going to need an increase in floorspace – and more aircraft – to increase capacity very much; otherwise improvements in cargo handling mean you simply process the same volume, only faster.”
Alternative locations are few and mostly small – although Goodman’s 150-acre site under the flightpath could be interesting – and the supply of speculative floorspace is low. The best guess is that about 1.3m sq ft of grade-A industrial supply is available in the Heathrow market – less than a year’s supply.
Melinda Cross, director at JLL, says the market is getting tighter still. “The freight-forwarders are all looking for more floorspace south and west of the airport, perhaps 1m sq ft in total, and their requirements are growing in size. We are seeing searches for 50,000-100,000 sq ft, which is big for Heathrow.”
There are a handful of new speculative schemes – a shortlist headed by SEGRO’s 35,000 sq ft Portal and 150,000 sq ft Skyline, and Blackrock/Graftongate’s 300,000 sq ft Heathrow Logistics Park. Most observers expect them to let quickly, despite guiding rents reaching £16-£17 per sq ft in some cases.
Savills director Bonnie Minshull is among those who believe multi-deck buildings are the only long-term answer around Heathrow. “Occupiers are not using the height of buildings – they are just in-and-out sheds – so there are no clever racking systems,” she says.
Multi-decking would allow more buildings with airside access, and Minshull says that airside access is the top of occupiers’ lists. Rumour has it that a letting at SEGRO’s Portal collapsed because it is not quite airside and trucks still need to pass through security.
Seth Love-Jones, partner at Tuffin Ferraby Taylor, says some developers are already looking at multi-decks and mezzanines, but all decisions are on hold until the government approves or rejects plans for a third runway at Heathrow.
“Nobody is making any decisions until then,” he says. “It would be premature to plan ahead of that announcement.”
For now, everybody knows what they would like to see at Heathrow, but nobody knows how to get there.
Matt Clarke, partner at Vail Williams, describes his dream Heathrow building as “purpose-built, 30-80,000 sq ft, with a generous yard occupying about half the site, targeted at airlines and suppliers” and he too wants developers to consider multi-deck buildings of a kind familiar at overseas airports. But he cannot see it happening soon.
Heathrow has always had big ambitions. But getting its freight expansion plans into the air may require a lot more thought.
Full to capacity?
Air freight volumes in the UK have been around 2.3m tonnes pa since 2003. Heathrow is therefore trying to expand the market, not just its share (about 1.4-1.5m tonnes pa since 2010).
But Heathrow is operating at nearly full capacity, and without more flights, it is hard to carry more freight. A third runway would resolve the problem, but that could take 20 years to complete. In the meantime, increased belly freight – carried in the holds of passenger aircraft – is providing room for growth.
Wider fuselages on aircraft such as the A380 provide more space for cargo – the diameter is 5-6m, compared with 3-4m on typical planes. Combined with reduced passenger luggage allowances, this means added freight capacity.
Halved and doubled
Heathrow’s ambitious cargo plans would double freight capacity from 1.5m tonnes to 3m tonnes. They include cutting freight transit times from eight hours to four, a new 100-vehicle HGV park, and a special pharmaceutical storage area to handle temperature-sensitive medicines. The strategy will take 15 years to implement.
The airport’s chief executive, John Holland-Kaye, says: “Cargo is essential for UK plc and Heathrow is its global connector, with 26% of all UK goods by value going through the airport. This investment plan will significantly improve our cargo facilities and support UK businesses, connecting exporters to the world and helping the government reach its £1tn export target by 2020.”
