Industrial & Logistics Development Sees Off Brexit
As the retail environment continues to evolve and adjust to the disruptive influence of digital technologies, Development Manager job prospects are likely to improve. Here, after discussing with our Development Team, we look at why big-box development is so exciting to work in.
Retailers Adapt to Evolving Markets
Retailer strategy is shifting. With internet sales and home delivery hurtling toward mainstream, retailers are focusing on ‘big-box’ warehousing with good transport connectivity. Indeed, ecommerce is booming. Internet sales are growing ten times faster than in-store sales.
For employers, including Development clients retailers, centralised distribution – employing largescale warehouses and distribution centres located near to the UK’s major motorways and road network – is a sensible strategy. This allows goods to be stored, shopped and shipped at breakneck speed for consumers who expect nothing less. In the UK, well-located warehouses enable products to be transported to almost the whole country within five hours.
Tech Evolution + Retail Revolution
It is not simply the ability to shop online that is revolutionising the retail environment. New technology enables retailers to run seamless operations in real time, with automated functions accepting orders and batching goods for shipping. This technology allows rapid client servicing & drives growth. The one factor that holds back that growth is scale of storage – hence high demand for big-box warehouses.
Can Developers Satisfy Big-Box Warehousing Demand ?
There has been a significant increase in demand for big-box warehousing during the last 24 months. Companies like Royal Mail and Amazon are leading the way:
- Royal Mail moved into a 350,000-square-foot delivery centre in Warrington last year
- Amazon’s recent distribution centre additions include a huge warehouse in Bristol and its 550,000-square-foot fulfilment centre at the London Distribution Park in Tilbury
According to JLL, in mid-2018 there was a vacancy rate of only 7% in big-box warehousing. Rents are rising accordingly. Demand for big-box space is rocketing, while supply has been falling. As consumers continue to move their shopping habits online, the demand for well-located, super-sized warehousing is likely to grow further and faster.
The market is firmly weighted in favour of developers and investors, and this is prompting developers to build more speculatively – and this is good news for development manager jobs (link).
Speculative Development Risk Decreasing
The needs of retailers and distributors can be very specific, and so largescale warehousing has traditionally been commissioned. However, new build methods allow greater customisation post-build, and this is enabling developers to build distribution parks with greater certainty of them being tenanted.
With demand increasing, short supply, rents rising, and new build methods enabling greater flexibility to deliver to occupants’ needs, the risk of speculative building is decreasing. Thus, the market is witnessing a surge in such development.
Big-Box Development Hotspots
There is plenty of big-box development currently underway, and more is likely. Here is a taste of what is happening right now, and where:
· St Modwen Park, Tamworth
This 35-acre site is St Modwen’s largest speculative build. Work on the site began last year. It will deliver more than 300,000 square feet of industrial and logistics facilities, and is set to become a major employment side in the Midlands with completion due at the end of 2019. St Modwen has a committed pipeline of more than 1.5 million square feet in the UK industrial and logistics sector.
· SEGRO Logistics Park, Derby
If you have driven along the M1 in the last couple of years, you cannot have failed to notice the gigantic, 700-acre SEGRO Logistics Park being developed at the East Midlands Gateway near East Midlands Airport. This development includes:
- Works to improve access to the M1
- A rail terminal to connect to the freight line at Castle Donnington
- A 50-acre Strategic Rail Freight Interchange
- Container storage
- HGV parking
This park is in an ideal location for enhanced distribution capabilities. With Derby, Leicester and Nottingham all close, there will be good employee availability. Thousands of jobs are likely to be created here: there is planning consent for 6 million square feet of logistics accommodation.
· North West + Midlands = Big Box Stars
According to research by Colliers International, around 2 million square feet of industrial and logistics space will be delivered across the North West in 2019. Projects include the Bericote/Hillwoods development at Haydock, which will provide more than 500,000 square feet and be completed around June 2019. In 2020, around 210,000 square feet shared between six units is set to complete.
The only region that more big-box development is taking place is in the East Midlands (with more than 4 million square feet to be provided in 2019).
It is unlikely that consumers will suddenly reverse their evolving shopping habits, in fact they're more likely to evolve further. So e-commerce is going to grow – fueling the need for more quality warehousing and distribution space to service demand.
The Midlands is ideally situated for access to distribution networks, so it is likely that we may see more emphasis on large scale industrial and logistics developments here, but there is also a need for such space across the rest of the UK. Jobs in Birmingham & the Midlands will grow too.
The ongoing imbalance between supply and demand is set to continue, and is unlikely to reduce until we reach stability of growth of e-commerce and in-store sales. The size of developments is increasing to accommodate the demands of occupiers as online retail increases in popularity.
While there has been a slowdown in big-box development in the first quarter of 2019, this is probably a blip rather than a trend reversal. It seems probable that 20 to 25 million square feet of big-box development will be delivered in 2019. Don’t be surprised to see this level of delivery ratchet up as we progress into the 2020s.
Consequently, the opportunities for development managers in this sector is likely to increase. Developers will need talented development managers to undertake site appraisals, create developments briefs, and manage teams, contractors and project managers. There could be some very exciting roles becoming available in the coming months.
Whether you are a Development Manager searching for your next challenge, or an employer seeking the best candidate, for a confidential conversation contact our specialist Development Recruitment Team today.