Comment

Logistics out of lockdown: a route to recovery

The COVID-19 pandemic is significantly changing our way of life. As lockdown measures begin to ease and interest in the logistics market strengthens, we will start to see a ‘new normal’ for UK logistics. What key factors will affect this and what role can the sector play in economic recovery?

We have seen radical short-term behavioural change including increased home working, reductions in travel and significant growth in online retail. These changes are expected to endure, at least in the short-term.

Online retail has grown rapidly and is predicted to grow further still. It is telling that Amazon is reported to account for almost a quarter of industrial take-up in 2020 to date (over 3m sq ft)[1]. Significant increases in online grocery sales are well reported and the behavioural habits formed during lockdown will further cement the online trend.

The extent of economic difficulty we face has been the subject of much speculation, but the longevity and depth of recession remains unclear. There will inevitably be a focus upon economic recovery, including job creation and a host of initiatives to get the population back to work.

The growth of UK logistics is limited by a shortage of land supply and limited stock. The sector was well placed for growth before lockdown and this remains the case but companies benefitting from our increased appetite for internet shopping, as well as those local and regional occupiers with unmet latent demand before COVID-19, all need space to grow. There has been an increased demand for warehousing storage including from healthcare, construction, food and retail stock-piling. Brexit still looms large and could mean delays to supply chains (a greater emphasis on “just in case” rather than “just in time”), re-shoring of manufacturing and potential labour supply constraints, albeit in the context of heightened unemployment, there should be an increased labour pool to draw upon.

Land supply restrictions are fundamental to the sector’s ability to contribute towards economic recovery. Changes arising from the pandemic, such as different working patterns to accommodate increased home working, may result in reduced traffic, meaning previously dismissed sites may become feasible and more attractive to the market.

We are already seeing the re-purposing of retail parks to logistics, including logistics outbidding residential developers in London. These trends are likely to increase throughout urban areas due to the need for “last mile” facilities.

In terms of occupational requirements, we can expect demand for greater space to allow for social distancing. The role of automation and working towards net zero carbon is fast evolving and occupiers may look to work on the basis of “managed campuses”, preferring co-located smaller units managed as a whole, rather than a single large footprint to offer better containment for employees and reduce exposure to outbreaks of the virus.

Economic recovery

Securing economic recovery must be the focus for our planning system. We need to remove barriers and seize the opportunity presented by UK logistics.

"Planning for the Future"[2] was published by the Government a few days before lockdown. Despite its title, the focus continues to be on housing with a distinct lack of policies which recognise the importance of industrial and logistics. A few days later the Government amended permitted development rights to ensure food and essentials could be distributed efficiently during lockdown[3], and wrote to local authorities and haulage associations to confirm the essential status of the sector. The crisis has underlined that logistics comprises essential infrastructure and this must be better reflected through national planning policy, guidance and regional recovery plans.

We were concerned to see several applications for large scale logistics developments “Called In” in the North West despite local support. This will delay the delivery of much needed local job growth and economic output. This is especially important in a local context with delayed local plans and out-of-date Green Belt boundaries, which mean that urban areas cannot effectively meet development needs in the short term. 

Logistics has huge potential to contribute to our recovery. Our research as part of “Delivering the Goods in 2020”[4] revealed that the sector saw a 23% increase in job creation since 2013, compared to the UK average of 10%. The long held perception that logistics jobs are low paid and low skilled is also challenged, with median pay nearly £7,000 higher than for other sectors.

There are key trends and messages from the current situation which need close attention:

• Job creation opportunities will be critical to aid recovery and UK Logistics is well placed to deliver these.
• Planning policy and decisions must recognise logistics as essential infrastructure and should facilitate clean growth and job creation.
• Occupier requirements are fast evolving and likely to change further still during the “new normal”. This is likely to include longer storage times and larger space requirements; slower overseas supply chains; more space for workers; increased automation; and, addressing previously unmet demand. Planning considerations must be sufficiently agile to respond to market requirements.
• Labour market concerns remain and will continue to be uncertain with Brexit, but a growth in logistics could provide a valuable lifeline for those families facing job loss as a result of the pandemic.

Clearly the UK is facing a challenging period. We should grasp this opportunity to realise the potential of the logistics sector and free up land and planning decisions to put UK Plc in the best possible position for recovery. There remain headwinds, but UK logistics is well placed to grow its contribution.

15 June 2020

[1] https://www.propertyweek.com/news/amazon-accounts-for-23-of-shed-take-up-in-the-industrial-sector/5108251.article

[2] https://www.gov.uk/government/publications/planning-for-the-future

[3] https://www.parliament.uk/business/publications/written-questions-answers-statements/written-statement/Commons/2020-03-13/HCWS159/

[4] https://tritaxsymmetry.com/wp-content/uploads/2020/02/GDS0535-BPF-Delivering-Goods-in-2020_FINAL.pdf