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The Challenge of Logistics

Suzi Carter, a Chartered Surveyor with 25 years’ experience in the commercial and residential property sectors, comments

Industry experts consider that e-commerce now accounts for more than one quarter of all retail sales in the UK, and this number is expected to reach close to one-third of all sales by 2024.

An increasingly sophisticated consumer is now expecting same day or overnight deliveries, cheap delivery pricing, a world-class user experience and a seamless returns procedure. Amazon, aspiring to their company vision of being the ‘earth's most customer-centric company’ is setting the bar high for this and is ploughing millions into ensuring they lead the field.

What this means, and has meant for several years, is that logistics is big business. And big business needs big properties – both in size and number.

Indeed, changing customer habits have had a well-documented effect on the bricks and mortar retail industry with many retailers pre-Covid being slow to adjust to the "new world". Retailers must now adapt quickly and adopt a joined up "clicks and mortar" strategy, which could mean using their store networks to service their last mile logistics and integrating their operations to make a best-in-class customer experience. This, in itself, is having an effect on the real estate industry as store sizes and requirements will need to be flexed to satisfy the individual requirements of different retailers.

The thirst for logistics space has, of course, exponentially increased prices for the real estate that can satisfy these requirements. And of course, logistics space does not only include the national and regional distribution sheds we see on our motorways and major A-roads. It also includes the "last mile” aspect of logistics – the individual journeys to deliver packages to customer’s homes - which has proven the most challenging (and expensive) for many operations.

There is an increasingly large demand from e-commerce and third-party logistics companies for warehouse and distribution space in urban areas. In towns and cities where there is little of this space it has pushing rents up significantly and it is estimated that between 30% and 50% of all new industrial developments are now tied to e-commerce fulfilment. The demand for new build facilities now and in the future, according to Savills, amounts to 70-75m sq ft per year and continues to exceed the available supply.   

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