Increasing Demand for Last Mile Logistics
E-commerce in the UK has evolved at such a remarkable pace and now covers a multitude of industry sectors and products. As early pioneers of technology and retail, the UK has become the largest e-commerce market in Europe, and the third largest in the world. However, as fast as the market has grown, consumer expectations have also escalated. Demands on speed, delivery times and delivery locations have increasingly become a challenge for retailers, not least of all as the customer base is not just the home shopper, it is also businesses. The complexity increases when the volume of the two are combined and the logistics of that last mile to the doorstep becomes longer and costlier. We believe that the need for well-located logistics centres within easy reach of major cities and towns will significantly increase in 2020, prompting not just developers and retailers to act, but also the business consumer.
Many an office building can at times become like a mini depot for deliveries, especially at peak periods such as Christmas. Workers are increasingly using the office location as a delivery address and for some multi-tenanted buildings this can be quite overwhelming. Larger businesses in their own buildings with delivery areas can also be inundated. Taking the City of London office market as an example, the largest central London office market was home to 23,890 firms and 522,000 workers in 2019. Even if just 1% of this figure ordered something online and got it delivered to work, it would account for 5,222 deliveries. The impact of this demand then shifts to the roads, and with it set to increase further, firms are taking some bold steps.
The most strident of moves has been by firms who have banned its workers from receiving personal items at work. Whilst for some this can alleviate the burden on the workplace, it does shift the logistics delivery elsewhere. Some larger firms or large multi-tenanted buildings are employing the use of consolidation centres outside of the centre.
One such highprofile new development that will be using a centre is 22 Bishopsgate in the City which is due to complete construction in Q1 2020. When operational, all deliveries whether it be post, food and drink, or the pair of trainers that you ordered will in the first instance be delivered to the centre. Then these will be caught up in regular deliveries to and from the centre. Whilst this example was part of the planning process for the skyscraper in order to cut down on traffic, other firms around London are also emulating this model. With a greater awareness of the environmental and social impact of the increasing number of deliveries, we expect to see an uplift of larger businesses more willing to adopt tactics such as consolidation centres. It may even spur on the establishment of community/district schemes. Yet, availability of warehousing or suitable buildings to house these facilities have become increasingly scarce in and around our cities. As a result, values for this kind of asset for investors will improve, hopefully sparking further interest to ameliorate the last mile of for all consumers alike.