The following article is an Viewpoint extract from New London Architecture’s report entitled “Industrial & Logistics : Can London Deliver?” Full report here
Locating last-mile logistics facilities in urban areas is the key to powering sustainable local economies, filling crucial talent shortages and enabling the sector to continue its essential work.
The logistics sector supports the smooth functioning of society, not to mention 2.6 million jobs across the UK economy, but it took a global pandemic for the vital daily role it plays to be truly recognised. From February 2020 to August 2022, internet sales as a percentage of total retail sales jumped from 19.1 to 24.2 per cent and whilst peak growth during the pandemic has levelled the trajectory is clear.
A key challenge facing the sector, here in London and beyond, is space. Every year £67bn worth of goods flow through Prologis distribution centres in the UK alone — the equivalent to 2.5 per cent of the UK GDP. Knight Frank data suggests that for every extra £1bn spent by British consumers online, an additional 1.36m sq ft of logistics space is needed. And according to Prologis, for every sq ft of space required for a bricks-and-mortar retail store, 3 sq ft of logistics space is needed to fulfil the same demand online. However, last-mile logistics facilities can’t be located anywhere.
Online consumers want products to be delivered fast with a growing demand for same day deliveries. With the speed at which goods can be supplied to consumers beholden of how far away they are, last mile logistics facilities must be located within urban areas with dense populations.
Whilst locating large warehouses on motorway junctions works well for storing bulk goods, it’s naïve to think you can just stick all last-mile facilities there as well. We’ve not yet come up with a teleporter to move things faster. As the need for goods to be delivered quickly continues to grow, you’ve got to hold a body of those goods closer to people. Of course, there is a housing crisis that needs to be solved but we need a sense of balance and greater awareness, among consumers and the government, of how important these facilities are.
“There is a damaging misconception that locating these facilities outside of cities is good for sustainability, reducing traffic and improving air quality. That couldn’t be further from the truth. Through research produced in partnership with MIT, Prologis demonstrated that to be sustainable, last- mile logistics facilities should be located close to where people live to enable the last-mile route to be faster as well as be handled by electric vehicles.
According to the research, online shopping is 36 per cent more sustainable than bricks-and-mortar shops, a further 50 per cent if the right number of these buildings are in urban areas, and another 27 per cent via the shift to electric vehicles.”
In addition, locating logistics facilities closer to where people live not only allows for faster deliveries but creates lots of job opportunities close to home, from entry level to senior management. An Oxford Economics study (2020) of the 22 industrial logistics parks owned and run by Prologis in the UK found they were responsible for the employment of around 100,000 employees. Warehouse roles have become less prominent, accounting for 49 per cent of current jobs compared to nearly 70 per cent in 2006. A quarter of employees are in an office-based role while managerial roles make up 12 per cent of jobs.
Prologis has invested one billion pounds in London and the South East in the past two years to ensure it can provide the urban logistics facilities its customers need. Meanwhile, it has also recently introduced the Prologis Warehouse and Logistics Training Programme, a digital learning and development programme aimed at training those leaving education, the unemployed and those looking to re-skill, equipping them with the knowledge needed to pursue a career in the logistics sector. The initiative is aiming to retrain 25,000 individuals globally by 2025. Some of the most difficult roles for the sector to fill are software engineers and project managers, and Prologis have already got our customers queuing up to provide opportunities for the people we’re training.
Prologis are proud to support such a crucial sector for our economy: it does a great job of getting on with what it’s asked to do without making a big fuss. But for too many years, we’ve taken it for granted. It’s a sector that should not be overlooked because it is vital for society to function in the 21st century. It is essential to everyday life, so we need to start planning for it now, whether that’s for creating local jobs or the sustainable location of last-mile facilities.
