Demand during the past 24 months for industrial space has been thrusted into a new orbit with all the stars aligning to move the Industrial & Logistics sector into the “go to” asset class within commercial property.
This demand has come from the storm brought about by both Brexit and the COVID-19 pandemic: companies have been looking to re-shore their operations following the UK’s move to become independent from Europe, and the huge shift generated by consumers change of shopping habits during lockdowns towards e-commerce, forcing online retailers to step up to meet the demands on their supply chains.
The majority of this take up demand has been satisfied in new, Grade A stock, which is fit for purpose and offers larger space than older building, particularly with better eaves heights of 12m plus, more energy efficient and sustainability built and able to accommodate automation processes and robotics.
Warehouse supply challenges
One of the biggest challenges for warehouse occupiers and developers is finding a location that can handle the power demands of the site. With the growth of semi-automated storage or fulfilment centres the availability of larger power supplies is critical, and can be time intensive to secure from statutory providers if network upgrades are needed.
Also floor tolerances are crucial to some warehouse occupiers, flatness is essential for those who are wanting a future proof operation which can utilise robotics handling systems which are becoming very common place.
Scale is also another big issue if you are big occupier seeking multiple buildings or campus style operations in excess of 500,000 sq ft and upwards. The complicated, expensive and slow planning process is a real deal breaker to some occupiers and early engagement is critical if there is deadline on occupation.
An allocated industrial site is not a slam dunk point score for any developer, as there’s still plenty of pre-app work required such as surveys and local engagement, which can quickly burn through a development programme of two years and there’s always concerns about newts, bats or badgers that can elongate that timeline! Fortunately developers and agents are well versed in these issues so have the expertise and knowledge to manage and advise on all these activities to inform an occupier’s delivery programme.
Warehouse occupier needs
As well as practical considerations such as fit out costs and capital expenditure for items such as sprinklers and enhanced floor loading, welfare and staff facilities are now a huge requirement for logistics operators. Many are now requiring their building to incorporate staff gyms and wellness or meditation centres, because it’s recognised now that a happier workforce is more likely to be productive and the skills and experience retained. Which is highly unlikely if all you’re offering is a grubby kitchen with a single kettle and a microwave!
While many of the demands are often wrapped in physical needs, there are also talent concerns as well. Occupiers also need a location which has a good pool of available workforce labour who can operate their facility, which is evolving to include skills of software engineers to operate these complex warehouses.
The demands of the past 24 months has resulted in a lot of lessons being learned, and developers and occupiers are now better versed in their expectations for industrial sites than ever before. Many of the demands, and future proofing needs can be met with careful planning, as well as realistic timelines and budgets being available.
Colliers is hosting its quarterly webinar on the Industrial & Logistics market on Wednesday 13 October at 11am to discuss supply chain disruption, construction challenges, revaluations and rental challenges. To register to attend the event click here.
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About the author
Simon Norton is a director in our Industrial & Logistics team, who has more than 25 years’ experience in agency work within the Midlands area. He’s advised clients such as Jaguar Land Rover, Rolls-Royce plc, Faurecia and GLP.
To contact Simon, please email: Simon.Norton@colliers.com
