Article written by Keith Taylor, Managing Director of UK Land Estates
OUR SHOPPING habits are changing, and with them the landscape around us.
Big warehouses, logistics centres and distribution hubs are in demand by the retailers that are expanding with this rapidly growing market.
For the North East, an opportunity lies in this historic trend.
Internet giant Amazon already has three major facilities in the region – “fulfilment centres” as the jargon goes – at Symmetry Park in Darlington, Integra 61 in Durham and the forthcoming Follingsby Max in Gateshead.
That’s not to mention the other distribution hubs it operates in the region.
Each centre brings hundreds of jobs. By the end of this year, Amazon will have taken on 10,000 new staff across the UK – more than 2,000 of which are here in the region.
And it’s not only Amazon driving the trend. Supermarkets, clothing brands, electrical retailers and more besides are doing the same.
The stats are quite remarkable. As many as 87 per cent of households in the UK have made online purchases this year. And the trend is pointed upward. In July internet sales accounted for 28.1 per cent of all sales, up from 19 per cent in 2019.
Parcels distribution companies such as DPD have reported volumes up between 40-50 per cent on pre-COVID levels and Tesco is looking to recruit an additional 3,000 drivers to satisfy more than 1 million weekly delivery slots.
With sustained online demand, there’s an opportunity not only to reap jobs and investment connected to our own regional market, but also to become a distribution hub with links to Yorkshire, the North West and Scotland.
The retailers fuelling this trend are looking for several key ingredients: price-competitive land, excellent connectivity, a workforce and close proximity to centres of population.
On all fronts, the North East delivers.
Inside the “big boxes”, sophisticated storage and picking technologies make rapid delivery possible. It’s what we now expect whether we’re buying a weekly shop or a replacement lightbulb.
Space and flexibility are the watchwords. Amazon’s Darlington site covers 2 million sq ft and is one of the country’s largest logistics facilities.
Sometimes rapid re-organisation of the floorspace is required to accommodate new product lines and stocking arrangements that need to be responsive to consumer demand.
Like all businesses, e-commerce players like Amazon are looking for value for money. And in Gateshead, the retailer will benefit from tax incentives and other packages tied to the North East Enterprise Zone in which the site is located.
While COVID has supercharged the online retailing trend in the past seven months, it’s also restricted the development of new buildings.
Some speculative developments were promptly put on hold as lockdown started to bite, and their developers had to contend with nervous financiers and jittery tenants.
It means a shortage of good quality logistics space has been exacerbated with new developments going in to the second half of the year often significantly behind schedule. This is set against the first half of the year, when take-up of logistics space in the North East and Yorkshire was the highest on record at 7.13 million sq ft – a 170 per cent increase above the long term average. The largest deal in that period was Amazon’s commitment to the 2.5 million sq ft Follingsby Max site.
The country now has an even bigger demand, but dwindling supply.
Going in to 2021, its fair to assume the trend will continue and we’ll be left with few of the large scale “big box” buildings these retailers need. So far most of these properties have been built to the particular specifications of one business, there’s little out there that can be adapted for someone like Amazon to move into.
Our region could and should capitalise on the trend – attracting investment, jobs and supply opportunities.
To do so, we need a few things. Firstly, a good quality supply of sites primed to enter the planning process. That’s eminently possible in the North East where we have a number of large brownfield sites and existing industrial parks with the space and utilities to make developments happen quickly.
Secondly, we need a coordinated approach to marketing the region specifically as a logistics and ecommerce hub. That means we need to tell a great story, nationally and internationally, about the connectivity, skills and development costs in the region.
The North East also has strengths in a complementary industry – electric vehicles. Retailers will be looking to make their delivery process as sustainable as possible, and electric vans and trucks will feature in fleets much more.
Some may argue we need to see what longer term impact COVID disruption has on consumer spending levels – a key determiner of the strength of online retail market – but if we wait too long we risk missing out to other regions, equally hungry for investment and ready to make a play for the market.
Let’s make sure we seize the opportunity.