Sector Focus: Logistics & Warehousing
Planning for the future Refashioning the links in the supply chain In addition to covering over 45 separate known risks, we often work on a bespoke basis. We can provide a completely tailored solution to meet your client’s exact requirements, and have an enviable reputation for introducing innovative products to meet ever-changing market needs.
We can tailor these policies to cover not only the standard legal ownership related risks, such as restrictions on title and reserved rights, but also more complex developerspecific interests, such as promotion and planning costs, equipment relocation, as well as items such as loss of profit or loss of rent.
Leading Title Insurance
Investment To build warehouses of significant capacity takes millions in investment and can take a long time to erect. The potential problems that can arise which could jeopardise these transactions range from planning issues and rights of way to missing title documents and lack of clarity as to the legal ownership
of the land. Where speed is of the essence, developers can confidently rely on title insurance to help enable a timely completion. Unfortunately for businesses hunting down storage space – and despite some warehouses lying vacant - Savills says the UK is an ‘under-warehoused country’ with just 7.61
17.5%
21%
2019
2019
16.0%
20.1%
2018
2018
Large scale business investment in PURCHASED additional distribution premises (UKWA)
Large scale business investment in RENTED additional distribution premises (FTA)
per cent of warehouse accommodation per head compared with almost 39 per cent in the US. It says: “More stock is needed, and fast.” At the end of 2018, Savills reported that developers are responding with a 134 per
cent increase on the five-year average of new speculative warehouses under construction. Also, with the high level in demand for warehousing space, landlords and developers may well be able to charge higher rates.
)
L ( O N LI N TAI E E R
28.2%
£3.32bn 2014
The 3-year rolling average investment volumes has now the highest level ever recorded (Savills)
3 PL
26.3%
ON
2.1bn
/
TI
2019
TR D IS I B U
Retail businesses are taking proactive action, and online spend forecast to reach £75bn by 2023 (CBRE)
Demand for space
Even before the word ‘Brexit’ was coined, warehouse space in the UK was in demand and the logistics sector was a healthy industry. At the same time, the rush to build houses to meet the Government’s aim of 300,000 homes a year by 2020 (and even that won’t be enough, according to Government) has led to a depletion of suitable land available for warehousing and logistics sites.
UK logistics take-up million sq ft 35 30 25 20 15 10 5 0 2009
That the UKWA says 75% of warehouse owners have taken on business from new customers illustrates just how big the demand for warehousing is.
2010
2011
Second-hand
2012
D&B
2013
2014
2015
2016
2017
Speculative
16m sq ft (Jan-May 2019 nationwide)
TAKE-UP OF WAREHOUSE SPACE
2018 YTD 19
Annual average
UK logistics availability
WAREHOUSE SPACE AVAILABILTY BELOW
30m sq ft
VACANCY LEVELS
6.5% (lower in some regions)
UK development pipeline
11.3m sq ft (55 UNITS) (announced for 2019)
GRADE A UNITS
TOTAL DEVELOPMENT PIPELINE
17.55m sq ft
Sectors affecting the supply chain
Labour The FTA Logistics Industry Survey 2018 / 19 highlights a lack of skilled staff in the industry. With a majority of the current skilled workforce nearing retirement age, there is a challenge to recruit for specific key roles and to attract youngsters to train.
LABOUR RATIO - WIDER LOGISTICS INDUSTRY 10 9 8 7 6 5 4 3 2 1 0 Warehouse staff EU Citizens (1 in 5)
HGV Drivers UK Nationals (1 in 10)
EM
PLOYEES
UK
(2018)
RECRUITMENT UP
S
200k
J
R VE
DR I
S-RELATED
APPRENTICE
30% (2017-2018)
APPLICATIONS DOWN
S
PS HI
IC IST
85%
OB
LO G
2.7m
NATIO NALS
Sectors affecting the supply chain
Haulage The Annual Investment Allowance (AIA) - with its two-year increase from ÂŁ200k to ÂŁ2m, available until 31 December 2020 - is aimed at stimulating business investment. However, driver shortages, increasing fuel costs and new regulation around emissions, together with the cost of moving towards electric vehicles, are forcing the transport industry to
come up with new ways to mitigate crippling expenditure. All this without passing on the costs to the customers and meeting their demands for even shorter delivery times. The industry also needs to embrace technology that can help in planning cost-effective processes and sharing trailer space.
TOTAL HGV OPERATING COSTS YEAR-ON-YEAR 8% 6% 4% 2% 0% -2% -4% -6%
2014
2015
2016
2017
2018
ING FU LUD E
W LO
I
L
NC
S
UL T
AG E C O
RA
LOW EMISS I
ON
UL
N
ZONE
ST
HA
6.31%
E M I S SI O
3.29%
ZONE
RHA Haulage Cost Movement Report 2018
From 2019 more cities enforcing low and ultra low emission zones
Sectors affecting the supply chain
Technology
Back office
V TI
SHARE ELY DA
S
Warehouse / Transport
S
PL
IA
CE
NCE
D E VI
Lower costs ~ Greater efficiency ~ Safer systems
|
Automation Big Data AI
TA
AC
Where to start? So many great ideas but implementation and uptake is slow due to barriers such as legislation, resistance to new technology and cost.
VE
HIC L E S
|
AP
Robotics Autonomous vehicles Smart tachographs Drones Consolidation
‘Internet of Things’
Top 5 trends
1
EVs
2
Platooning
3
‘Internet of Things’
4 5
Electric vehicles.
Linking trucks in convoy to ease congestion and fuel consumption.
A network of internet-connected objects able to collect and exchange data.
Big Data Extremely large data sets that may be analysed computationally to reveal patterns, trends, and associations.
Driver Demand Demand drivers are used in forecasting for capacity and size.
Sectors affecting the supply chain
Stockpiling
Rental costs
There’s no doubt that businesses are stockpiling ahead of Brexit. This stockpiling means businesses’ storage requirements have risen steeply.
The picture for lease or purchase of distribution premises is quite different to a year ago. Sixteen per cent of respondents stated that additional distribution premises had been purchased in 2018, and 20 per cent indicated that extra space was rented, up by several percent from the previous year.
Businesses from across all industries are increasingly concerned about potential port delays, a rise in trade tariffs and a slow up in the free flow of goods. As a result, they are ordering ahead but - at the time when they need short term storage space more than ever before – they are being turned away by many warehouse businesses. Not every commercial warehouse operator is willing to rent out storage space on a short-term basis – say, up to six months – it is just not cost effective. However, some warehouse owners are reportedly adding new racks and offering ‘Grey space’ for short-term leases; spare capacity due to seasonal fluctuations.
Storage costs
Enquiries prompted by Brexit
25%
85%
Prime rental growth
Land Value
2018
A L IN C R EA
70%
Y
For W Midlands
EA
R- O N-YE
2017
Prime rental growth (larger units 100k sq ft)
3.5% 2018
4.8% 2017
S
20% Nationally
AR
5.5%
U NN
E
6.2%
A
(small sheds 10k-30k sq ft)
Sectors affecting the supply chain
Construction / raw building materials Despite uncertainties around Brexit, the ongoing trade war between the US and China, and currency fluctuations (which all affect the price of imported steel) ‘build costs and delivery time scales have remained largely static’ (Savills ProgrammE and Cost Sentiment Survey).
7.0%
However, demand for new distribution, logistics and warehousing facilities is strong for all the reasons around stockpiling and growing online businesses.
7.2%
(2017-2018)
(2017-2018)
INDUSTRIAL CONSTRUCTION
BRICK DELIVERIES
Construction material exports
Construction material imports
(average per quarter)
(average per quarter)
2.3%
4.0%
2018
2018
1984
1984
Harbours sector expected growth
Construction material exports (average per quarter)
W G RO T H
10%
10% 2019 & 2020
2020
12% 2019
20% 2018
Government Support
Planning
Site availability
Kevin Mofid, Director at Savills, says:
While the availability of warehouse space in the UK is fast diminishing as far as businesses with immediate and short term needs are concerned - the wider problem for the logistics and warehousing sector may be a general shortage of land for development.
‘Government intervention in the provision of energy will be key to ensuring companies within the supply chain are able to weather any electrical storm’. And that: ‘...political backing of the ‘internet of things’ and 5G.... will help to manage inventory levels ... plan deliveries and stock levels’. He also points out that: ‘...local authority involvement is extremely important on how it handles applications for large warehousing schemes.’
UKWA chief executive, Peter Ward, has said few developers had been building warehouse space without confirmed tenants because urban land was being prioritised for homebuilding. ‘...businesses seeking to build warehouses in built up areas ... will find themselves up against resident action groups and complaints ... often from the same people who expect next day delivery’.
Suggestions for government / industry / FTA 1
Improve image of logistics industry
2
Investment in training and apprenticeships
3
Lobbying Government
4
Cutting fuel duty
5
Resolving Brexit
6
Investment in roads, infrastructure and facilities
Liana Di Ciacca Head of Scotland / NI Underwriting LDiCiacca@firsttitle.co.uk +44 (0)141 413 8803
Nicola McCluskie Senior Underwriter Scotland / NI Underwriting NMcCluskie@firsttitle.co.uk +44 (0)141 413 8803
Call: +44 (0)141 413 8800 Email: scotinfo@firsttitle.co.uk Visit: www.firsttitle.co.uk
Simon Hewitt UK Head of Sales & Marketing shewitt@firsttitle.co.uk +44 (0)207 160 8556
Martin Wilks Head of UK Underwriting mwilks@firsttitle.co.uk +44 (0)207 160 8604
Call: +44 (0)207 160 8666 Email: comm.team@firsttitle.co.uk Visit: www.firsttitle.co.uk
The statistics and graphs contained within this document have been obtained from sources believed to be reliable. It is the intention of this document to collate numerous sources of data relevant to the area, and by doing so, provide a comprehensive - and we hope - informative focus on the sector. Should you have any comments, queries or feedback, please contact us at marketing@firsttitle.co.uk
First Title Insurance plc is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. First Title Insurance plc is registered in England under company number 01112603. Registered office: First Title Insurance plc, ECA Court, 24-26 South Park, Sevenoaks, Kent TN13 1DU. 1352-0919