Attitudes to warehousing have undergone a volte face, from grime to glamour. Today logistics fulfilment has much more of a starring role in real estate portfolios as warehouses - large and small, introduce new design, new technology and new amenities in response to evolving dynamics in the marketplace.
While the immediate post COVID space explosion has calmed down due to land availability and consequential increases in land price, there is still an appetite for investment and speculative developments focusing on Industrial & Logistics both in mega sheds or micro units on the urban fringes.
Growth is being fuelled by a variety of factors, including conflict, cost and consumer expectations. Geopolitical instability and increased shipping costs, encourages strategies to improve supply chain resilience. "Just in case" has superceded "just in time" as businesses look to expand both domestic manufacturing and storage. Inflation has dropped more quickly than expected and a consumer led recovery from the brief recession is fuelling anticipated increases in digital and physical shopping. Customers want immediate gratification which for on-line means same day or overnight delivery. A number of urban anchor department stores, have been repurposed into hubs to fulfil last mile, town-centre delivery to address consumer demand for immediate gratification.
The sector is seeing a flight to quality – in common with office and life science occupiers for example. Warehouses need to address the required sustainability and placemaking criteria of occupiers and funds. Efforts to meet carbon regulations and for new schemes to have a renewable and independent energy supply are also on the agenda of local stakeholders.
Technology is another factor changing the shape of warehousing. The sector is a showcase for robotics and investment in technology, particularly for high volume products subject to competitive and aggressive delivery times. With space at a premium this facilitates vertical as well as horizontal storage without the health and safety and insurance implication of your warehouse employees needing to work at height. Commentators are still talking about introducing multi-tier warehouses in the UK – in particular for top grade space and this seems feasible if the infrastructure and planners are on board. There has not been the take up for multilevel as we have seen in Europe and Asia.
New investment is looking to new locations. A new government body, the Office of Road and Rail, aims to grow the rail freight market, in part driven by net zero targets. Oxford & LCP's West Midlands Interchange near Birmingham, Segro's Logistics Park at Northampton and Tritax's proposed development at Hinkley are all examples of logistics parks built around rail freight hubs.
Increased M&A activity is a sign of a dynamic market, as it seeks to provide more scale and more stock. Already in 2024 LXi has merged with Londonmetrics, Tritax Big Box has acquired UKCM and Blackstone is combining St Modwen and Industries REIT. More transactions and new investors are likely as the sector continues to expand.
DACB's Real Estate team is advising developers, investors and asset managers in the sector in a seamless way recognising the variety of specialisms required to deliver on our clients expectations. Our advice is provided in context of our interest in the sector focused on maximising the value of the investment and providing for the sustainable use of the asset. We are active in every part of the logistics chain from port to production, regional hubs to last mile facilities. Our service is cradle to grave - planning, land acquisition, development, construction, financing, leasing, energy supply – and ongoing asset management and repurposing. The shift in consumer behaviour and the changes in regulation create exciting opportunities but also imply new legal risks. Our team advises clients on all sides of the transactional equation providing counterparty perspective and a reasoned approach. In the face of rapid change future proofing the sector means being flexible, open to new ways of working and embracing the value that new technology can add to our everyday lives.
Find out more about our Industrial and Logistics expertise.
