Successful urban logistics: The five great divides
More than ever, retailers are now heavily influenced by the changing nature of consumer demand. The highest online demand typically occurs in major urban locations, particularly (but not exclusively) in Greater London. There are also significant online demand hotspots in the more affluent locations in the South East
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The pursuit of appropriate urban logistics space has never been greater. It is as much the complexity of multi-channel retailing and the rapidly changing dictates of the consumer that are fuelling market change in industrial, as it is simply market growth of online retailing.
The historic ‘big box’ industrial model is still largely geared towards a pre-digital store-based age – infrequent, bulk-based to a pre-defined network of stores. ‘Big boxes’ are not designed to fulfil single-item orders to a location dictated by the consumer, within as short a timeframe as possible.
Few are fit-for-purpose as order fulfilment centres, but they are far from redundant or obsolescent – on the contrary, they are still the lynchpin of retailers’ supply chains. But increasingly they need the support of more strategically-located ‘last mile’ spokes.
The urban logistics ‘gold rush’
The industrial market has already moved considerably in response to these changing market dynamics, both in terms of demand and pricing. Prime stock is valued at 4.00%, although even keener pricing than this has been achieved in certain locations e.g. Havelock Terrace in Battersea with a NIY of 3.20%.
The ‘gold rush’ is still very much playing out, driven in part by a paucity of suitable industrial stock in appropriate ‘last mile’ locations. The attention has inevitably turned to other property uses that can be repurposed as industrial space.
We have identified the ‘Five Great Divides’ of successful urban logistics. These are:
- Consumer Demand
- Supply (Imbalance)
- Labour
- Infrastructure
- Technology
All of these are significant factors in appraising the validity and viability of a potential urban logistics site. Ideally, a ‘last mile’ logistics site will cross all five of these Great Divides and effectively tick all the boxes.
In reality, very few will and compromises will have to be made. There are many great sites out there, but few are absolutely perfect. The data and methodologies we apply in rating sites against these Five Great Divides is detailed in our report Future Gazing: Logistics – The Last Mile
Industrial is only at the early stages of adopting a B2C mindset, but it is evolving fast. Retailers, for better or worse, have always been at the mercy of consumer whims. The nature of consumer markets is that nothing stands still for long and the goalposts are constantly shifting.
Against this backdrop of change, increasing complexity, fulfilment fluidity and general flexibility, the demand for appropriate urban logistics space can only accelerate, rather than recede.
The continuing rise of online retailing. A huge challenge for physical retail (and pure play for that matter), a huge opportunity for industrial as an enabler and solutions provider.