Why it’s time for the sector to build on a new level of awareness created by the COVID-19 Pandemic
In February, before COVID-19 struck, internet sales as a percentage of total retail sales in the UK stood at just 18% and few people understood (or cared) how the goods they ordered online, or picked from the supermarket shelf, actually arrived at their final destination. However, on the 16th of March, when the entire country went into lockdown, all that changed.
As bricks and mortar stores closed their doors, and everyday items such as pasta and toilet roll were cleared from supermarket shelves at an alarming rate, national newspapers were suddenly talking about supply chain resilience as the logistics and transport sector struggled to cope with a level of demand that many grocers and online retailers described as ‘trying to deliver Christmas every day’. Indeed, in just a few short months, internet sales as a percentage of total retail sales had jumped from 18% to 32.8% in May – growth that on the pre-existing rate would normally take a decade to achieve.
Described by some as the ‘Cinderella’ of UK industry, often overlooked or ignored entirely, the importance of the logistics and transport sector to the health and wealth of the nation quickly became clear: workers within the sector were given keyworker status, logistics companies and online platforms were drafted in, alongside the army, to solve the government’s PPE supply chain crisis and home delivery drivers were applauded as they delivered groceries and other essential items to the nation’s locked-down population.
The COVID-19 pandemic has highlighted the critical importance of the logistics and transport sector and the enormous contribution it makes to the UK economy. With online sales unlikely to drop back to pre-COVID levels and many companies seeking to store more goods in the UK to ensure supply chain resilience due to concerns raised by both the current pandemic and Brexit, it’s important we capitalise on this new found awareness of, and affection for the sector, to ensure its needs are considered by both national and local government going forward.
Although conversations about the future of the logistics sector, in particular, often revolve around rapidly emerging technologies such as automation, robotisation, and AI (artificial intelligence), there is a fundamental asset all logistics companies will need if they are to meet the growing demand for last mile delivery in urban areas. That fundamental asset is space, and in the right places.
The growth in online sales driven by the pandemic and a need to store more goods in the UK and closer to where people live and work will have a significant impact on market demand, property types and locations. Close to cities like London, for example, where industrial land competes with fierce demand from different uses, such as residential, finding locations on which to locate logistics buildings is challenging. To give an idea of the scale of this loss, over the past decade, the capital has lost around 100 hectares of industrial land annually, compared to a release benchmark of just 37 hectares per annum in the current (2016) London Plan.
At Prologis, we’ve invested over half a billion pounds in London and the Home Counties over the past 18 months to ensure we can provide the urban logistics facilities our customers need and intend to continue investing in this location at the same level; however, we are concerned that the government’s current proposals for a reform of the planning system in England could pose a serious threat to the future of urban logistics in London (closely followed by other major UK cities) if the need to protect industrial logistics space is overlooked.
Whilst the need to prioritise housing across the country – especially in London – is understandable, the government’s white paper – planning for the future – makes no mention whatsoever of logistics in its 84 pages and the worry, therefore, is a further loss of strategic industrial logistics sites to residential in the long term.
With London’s population expected to grow to almost 10 million in 2030 and with more urban housing planned to accommodate its residents, the demand for last mile deliveries will only increase, as too will the need for employment within these urban communities. With the retail sector in decline, and no-one quite what will happen in the office sector, the logistics and transport sector could be one of the only sectors capable of delivering a boost to local economies. Indeed, an independent study published recently by Oxford Economics confirmed the value of logistics property to the UK economy. Based on an assessment of the economic impact of the 22 industrial logistics parks owned and run by Prologis in the UK during 2019, the study found that they were responsible for the employment of around 100,000 workers, with an annual flow of goods of £54 billion, which is approximately 2.6% of UK GDP.
The experience of living through a pandemic has served to highlight just how important the logistics sector is to the economy and our way of life. We must now capitalise on this newfound awareness to ensure the needs of the sector are not overlooked and we should start by ensuring the sector has access to the space it needs to make modern life possible. For this to happen, Government must acknowledge employment land, particularly logistics, as a growth industry and the planning changes must include an employment needs assessment that includes logistics with compulsory employment land retention and land allocations embedded in every plan.
A successful and sustainable economy requires the jobs and supply chain capabilities provided by the logistics and transport sector. A presumption in favour of housing by the government’s planning white paper is, therefore, not just a missed economic opportunity but also profoundly unsustainable.