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e-commerce having profound effect on retail supply chains
Manchester Tuesday 7 May 2013 - Dan Burn, Director -Industrial & Logistics at Jones Lang LaSalle - The growth of e-commerce is having a profound effect on retail supply chains, with changes in the way goods are delivered to consumers placing new demands on industrial property. It’s an evolving market but one in which Greater Manchester is well positioned to benefit from.
The region has been one of the UK’s better performing industrial markets over the past few years, but the lack of supply is now biting. Jones Lang LaSalle’s latest research shows that take-up in the North West in 2002 totalled circa 10.1m sq ft – a 28% drop on 2011, brought on by dearth of quality existing units and a lack of funding for speculative development.
That’s not to say there aren’t encouraging signs. Lancashire County Developments is currently constructing two 166,000 sq ft units in Leyland to replace buildings destroyed by fire, and Brakes’ commitment to a new 200,000 sq ft distribution unit at Warrington’s Omega demonstrates the kind of large “Build to Suit” requirements which are out there.
But if there’s a growth market to watch, it has to be e-commerce. With online retail expected to exceed 10% of all sales in Europe by 2016, e-tailing is creating new demands for warehouse space.
We estimate that European retailers will need up to 25 million square metres of additional logistics space over the next five years. That’s a huge requirement and it will be met by those sites which can offer the most deliverable new-build solutions. The good news for Greater Manchester is that we have nationally significant sites -such as Omega, Heywood Distribution Park, Logistics North (the former Cutacre Colliery) - of the scale suited to this kind of development.
The distribution sector has always been land-hungry, but the continued growth of online retail is fundamentally changing the size and shape of requirements. Many retailers are re-organising their existing infrastructure and are having to work out the best logistics model to service the growth of multi-channel retailing. Nationally there will be raised demands for mega sites of up to 100,000 sq m for e-fulfilment centres in order to operate faster and more efficiently to meet the frequent and volume of online orders and returns.
Parcel distributors have been busy re-organising their network as a result. Last year, Yodel acquired 100,000 sq ft in Middleton, Parcelforce are currently constructing a new sortation centre in Chorley and most recently, Miller Developments announced that they will construct a new 156,000 sq ft distribution unit for Hermes Parcelnet at Omega.
In food retail, we will also see the arrival of “dark stores” in the North West. Essentially, these are shopper-free supermarkets used exclusively by staff handling virtual shopping for online customers. These units are typically close to major population centres in order to facilitate deliveries to homes and collection points. Whilst often highly mechanised, they are also labour intensive because items are still picked manually, meaning such schemes also hold the prospect of new employment opportunities, making them an ever more appealing target market for the North West to pursue.
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