It’s time to consider the specification of the last property link in the supply chain
Back in the 1980s, the legendary duo of Godfrey Bradman and Stuart Lipton challenged the accepted orthodoxy surrounding office development.
At that time, to attract major office occupiers, the norm was to develop fully-fitted out space. But when planning the development of the Broadgate scheme next to London’s Liverpool Street station, Lipton and Bradman threw out the rule book and pioneered the ‘shell-and-core’ approach which left fitting-out to the needs, taste and resource of the incoming occupants.
During the booming City of London office market which followed ‘Big Bang’ financial deregulation, it was an approach which had no discernible negative affect on rents. Indeed, tenants welcomed the resulting flexibility this change enabled and Broadgate became a watershed scheme in the history of UK office development.
Looking at today’s logistics sector there are certainly some parallels. We have a sector which is certainly booming, with occupier take-up exceeding 42m sq ft in 2021 and a void rate of just 1.6% in Q4 2021 (source: CBRE). Online retailing burgeoned during the pandemic and although those exceptional levels of internet shopping have fallen back somewhat as we reconnect with the real world, the long-term trend is upward. The proportion of total UK retail sales that take place online is now around 28% - one of the highest levels in the world.
This situation poses some questions about the configuration and specification of the buildings which facilitate the movement of goods from producer to consumer. For example, in the Big Box world, the requirement for properties to accommodate a 75Kn floor load has become pretty much sacrosanct. However, as the fulfilment process becomes more delineated with an increased dispersal of inventory along the length of the supply chain, different links in the chain will be carrying out different functions and it’s interesting to reflect on what specification will be appropriate for each.
Nowhere will this be more pertinent than in regard to the urban environment of Last Mile fulfilment. Logistics analytics can now predict and track very accurately the long-term flow of inventory through the supply chain and determine what is needed where. There is no requirement for bulk, long-term storage at this final part of chain. The mode of delivery – vans, bikes etc - is pivotal whilst eaves height, yards and floor loadings are not. These Last Mile logistics facilities are all about throughput not storage.
As ever in today’s capital and occupational markets, sustainability/ESG is central to this theme. In the journey towards net zero carbon emissions in urban areas, one of the challenges is to repurpose existing buildings rather than go down the carbon-intensive demolish-and-rebuild route. In this context, it will make sense to look at what specification the buildings that are transitioning to fulfilment will require and how that might facilitate repurposing existing space. This is particularly pertinent in the Last Mile sector where specification can be more flexible without a strict need for high floor loadings or 20-metre eaves heights.
As the balance between physical and digital retailing continues to shift, this will change what the future holds for the use of many properties. We’re already seeing this being played out in the supermarket sector as occupiers seek to optimise their physical footprint, blurring the operational lines between traditional front and back of house. And in the online-orientated domain, Amazon and Ocado have already repurposed retail warehousing for logistics roles whilst the ‘quick commerce’ operators - such as Getir, Gorillas and GoPuff - seem to be able to make pretty much any ground floor urban real estate work for them provided it is in the right location.
As the urban logistics sector evolves it will increasingly encompass the existing built environment. Accordingly, the way in which we configure facilities and how much their specification can flex will come increasingly into focus. As the 1980s was a time of structural change for the development of City offices, today is also a watershed moment for Last Mile fulfilment.