The British Property Federation has set up a new committee to look after the interests of the industrial and logistics sectors. Piers Wehner spoke to its chair, SEGRO Thames Valley business director Gareth Osborn
“I wouldn’t say that there is a crisis,” says SEGRO’s Gareth Osborn.
He is arguing that the reason for setting up what in effect will be the first lobby group to speak on behalf of the industrial and logistics sectors is nothing to do with crisis management.
Looking at the statistics, one might be tempted to disagree. SEGRO’s own research shows that there is less than 14m sq ft of good-quality logistics space available in the UK. In other words, after eight months – perhaps nine – we will have run out.
There is more in the pipeline, of course. And speculative development is making a comeback. But, according to research from CBRE, supply is falling by around 20% each year. In some areas the supply dip is even more pronounced: in Yorkshire, levels are 30% down on last year.
Add to this the fact that demand for space has not just grown, but changed – with occupiers seeking increasingly bespoke buildings, in particular locations. There may well be 364m sq ft of warehouse space in the UK, but much of that is not fit for purpose or is simply in the wrong place.
So why has this committee, this lobby group, been established?
“It’s not because there is a crisis,” reiterates Osborn. “But there certainly is a real need.”
Osborn is best known as SEGRO’s Thames Valley business director – the big boss of Slough’s Big Boxes – but now he has another role. He is chair of the BPF’s industrial committee, which will seek to push the concerns of the sector up the government’s agenda.
“The other sectors have their voices,” he explains. The various councils for offices or shopping centres, the federations for housebuilders, agents, retailers and occupiers all spring to mind. He is right, of course. It is hard to think of a sector or even a sub-sector that doesn’t have a specific body flying the flag. Except, of course, sheds. “We don’t feel that industrial and logistics has an effective voice, and we need one.”
For Osborn and the new committee, the main concerns are still those hoary old chestnuts of infrastructure and planning.
“Planning policy over the past few years hasn’t recognised industrial has much as it did other sectors or concerns,” he points out. “It just hasn’t been very high the government’s agenda. The focus has been on financial services.”
Or residential. Or retail.
“Mary Portas and the like have been grabbing headlines and attention. Industrial and logistics hasn’t been given due consideration.”
Which is odd, as its importance to the economy does seem to be recognised by this particularly money-minded government. Vast capital improvements are being pledged by the government to improve rail infrastructure – not least HS2 – partly in order to benefit this sector. The other Osborne, phonetically at least – chancellor George – seems to spend much of his working week touring warehouses.
And rightly so. The Big Box sector is growing at an impressive rate as retail evolves. The pick’n’pack warehouses, the distribution hubs (the likes of Amazon, ASOS and Argos) are all adding to a growing need for more, bigger and better sheds. Online sales account for 10-13% of total retail sales at present, but their share is set to increase to 20-25% by 2020. Research by Prologis suggests that, for every £800m of online sales, there has been demand for 775,000 sq ft of warehouse space in the UK over the past five years. Or, put another way, for every £1,000 spent an extra square foot is needed.
The problem is not that those in government are not receptive to the importance of the sector to the economy, says Osborn. “It’s more that they are being pulled from pillar to post by all the competing agendas.”
And this committee is a way to pull them bit closer to your pillar (or post)? “Well, yes.”
The committee is still very much in its infancy. It has had one meeting – on 29 July, in Leeds – and another is planned for 11 November, in London.
Even though it is still at an early stage, the committee is developing some serious muscle. Attendees at the first meeting included Prologis, Gazeley, Goodmans, Rosehill, Grafton Gate and, of course, SEGRO, as well as planners and agents. The November meeting will be a much bigger deal. As Osborn says: “There are a lot of people showing an interest in being part of this.”
Part of what they will be doing at next month’s meeting is pulling together all of the views and experience of each of the committee’s members.
“We are still working on a consensus for our agenda,” Osborn says, drifting, for the first time, into the “Birt-speak” favoured by committee chairs.
“Obviously we will have a slightly different agenda from Prologis, from Goodmans or from Gazeley,” he says. “Not conflicting or opposed, but different. We need to make sure that when we go in we are presenting an industry view, not a SEGRO view, or a Prologis view.”
Once that has been achieved, Osborn wants the group to produce some research to back its position. “Proper research,” he emphasises. “Not just whingeing.”
What then? “We need to sit down and talk with the decision-makers.”
Osborn is cagey when it comes to saying exactly with whom they are trying to set up meetings. “The BPF name opens doors,” he says, gnomically. “It means we can go straight in at a reasonably senior level.”
The first task for Osborn and his merry band is to raise the profile of the sector and make sure the government is under no illusions that it is anything less than vital to the economy.
Next will come the “big issues”.
“Infrastructure and planning are the main issues, naturally,” says Osborne.
Strategic rail freight is a prime example. “There is a commendable investment and commitment from the government,” Osborn acknowledges. “We all want to take freight vehicles off the road. But how? There are some wonderful [planned]improvements to the rail networks, but they have nowhere to land.”
On the planning side the issue is twofold. “Getting planning for logistics, getting planning for industrial – it’s not easy.”
Well, it is easier for some than others. At Slough Osborn has simplified planning zones to help him out. “It certainly makes things easier,” he admits. “But look at vitally important schemes – vital for the entire UK economy as a whole. Look at projects such as DIRFT (the Daventry International Rail Freight Terminal). How long has that taken?” (Phase 1 of DIRFT was built during the 1990s. The development is now in phase 2.)
On the vital issue of Big Box retail, “We need to have a voice.”
But there is a flipside. As well as the difficulties getting things through the planning process, the system itself has been re-tooled recently to actually fight against big sheds.
With the national focus focused on fixing the housing market, policies such as the relaxing of rules on the conversion of industrial land to residential have been given the green light. It’s great for housebuilders (apart from the contamination issues) but lousy for the likes of SEGRO.
“We need to protect that industrial land from resi conversion,” says Osborn (see below).
It is a flavour of what the committee will take to its “senior-level” government meeting.
“But we are not going in to just have a grumble,” stresses Osborne. “That wouldn’t get us anywhere and we know that. We need to have some solutions to offer, not just a list of concerns.”
Making the case to government is the new committee’s raison d’être, and Osborn is confident they can do it. “Each of us has done this on a project-specific level time and again. We’ve just never done it for the sector as a whole,” he says. “You can see a lightbulb moment when they see what we are getting at. It can be very satisfying!”
Osborn may be reluctant to accept there is a crisis looming for the logistics sector.
But others do seem to be realising that, if a crisis is coming, this might be the way to avert it.
“Previously we had people coming to us asking who can speak for them on the issues that concern them.
“Now we are saying, ‘Well, it’s us’.”
The role of the BPF Industrial Committee
• To promote the sector as an industry that is a positive force for the economy, for retailers, distributors and those in transport and employment, and which therefore makes a significant positive contribution to society as a whole.
• To represent and support “Big Box” interests on a range of policy issues, including planning, CIL, s106, empty rates, and sustainability.
• To engage and work with parliamentary and governmental institutions, civil servants and a range of other influencers in pursuit of the sector’s interests.
• To facilitate proactive contact with the media on issues relating to the sector, promoting a positive profile.
• To secure evidence that supports the sector’s policy agenda, and to commission research in pursuit of the committee’s other objectives.
The resi threat
The committee may not have decided exactly what it will be putting in front of ministers and mandarins just yet. But there is one issue Osborn is keen to discuss: the presumption in favour of converting industrial buildings and land to residential.
“There has already been a huge loss of employment and industrial land in the past 10 years,” he says. “The existing planning regime should protect that land, but instead it is being undermined and overruled.”
The government made quite a deal of hay out of its proposals to “liberate” industrial land in order to allow more housing development. But with such an aching need for distribution space, this is not a very sustainable answer.
“The underuse of a flat above a shop is one thing. That to me is a good way of bringing obsolete stock back to the market,” says Osborn. “But with e-tailing there is less obsolescence of industrial land. That requirement is higher than it has ever been.
“We need to protect industrial land, not convert it. The existing planning regime should deal with it, but it is being short-circuited as a fix for the housing market.”
