Logistics and warehousing are experiencing a profound change in the way they operate. Brexit, new technologies, and millenials are shifting the way the industry needs to operate. At the Warehousing and Logistics Conference, organised by RICS in London, experts shared what will drive change and what will cause headaches.
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‘The political environment has stabilised but there are a lot of other uncertainties,’ Jeffrey Matsu, Senior Economist at RICS says referring to Brexit. The bad scenarios feared as a result of Brexit did not materialised and consumer spending is still high which drives GDP growth. Matsu believes the UK is performing fairly well compared to other large economies as G7’s economic growth is slowing. On Brexit the economist says that it is perceived as more or less a UK centric event and globally there are other reasons for worry, like the US – China trade deal, and the coronavirus in China which could impact commodity prices.
Unleash the investment
Investment rates in the UK have been low since Brexit and the reason behind that is the prolonged uncertainty. The experts however think there might be an unleashing of investment once more clarity is brought. Matsu says the industry is seeking direction and the lack of one has meant that the UK is not where it should have been. Business have invested a lot in new employees but some experts worry that no training has been provided which could lead to a shortage of skilled labour.
Shift in warehousing
The way warehouses are being used is changing and more properties are being transformed to house different tenants with different needs. Share-users leases are a challenging task, but can bring a lot of benefits,’ says Ian Henderson, Group Property Director at Wincanton. He adds that bringing customers together is what makes such leases work. Most customers would be willing to be together but companies need to find a way for this to work well for everyone, while having a good logistics service. The advantage of such arrangements is that rental companies are more resilient as they allow for diversification by having multiple tenants.
Supply Chain Control Towers: Visibility On Another Level
Another trend is for warehouse usage to move to lighter, cleaner storage and distribution. According to Danielle Sheppard, Investment Director at Barwood Capital, this is extremely visible in London and the South East. She believes that UK’s regions are turning into a good spot to invest, and as the UK government has promised more money for the North those who invest there will potentially gain more. Sheppard points at rent rises that are lower than inflation so there is space for expansion before a tipping point is reached. ‘In the regions the sector is massively undervalued,’ Sheppard explains.
The labour market is creating a headache for the logistics industry. Companies are nervous because of the lack of people and problems like driver shortages are becoming more of an issue. ‘There are 3.5 million employees in logistics, but it is difficult to replace retiring staff,’ says Rob Hall, International Partner – Lead EMEA Logistics and Industrial at Cushman & Wakefield. Logistics will need to transform the way it looks at workers well being because soon 40% of employees will be millenials who will demand better environments.Tim Crighton, Partner – Logistics and Retail EMEA, Cushman & Wakefield, refers to it as the ‘reputation challenge’ of warehouses.
Into the future
Autonomous vehicles, drones, shared spaces – these are some of the things that will shape the logistics and warehousing industry in the new decade and beyond. E-commerce will be a major driver for growth and according to some estimates by 2030 nearly 65 million sq ft more will be needed to cover the expected demand for online retailers. At the same time e-commerce is fueling great demand for speculative development.
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