The rise of ecommerce has led to a big increase in deliveries, with negative implications for traffic levels and the environment. Could consolidation centres be the answer?
Everyone hates traffic. It’s noisy, smelly and a waste of time. It’s especially acute in overpopulated urban locations. And in recent years, the rise of online shopping and resulting deliveries have exacerbated the problem, particularly in the narrow, twisting streets of London’s Square Mile. Now, however, a partial solution to the practical and environmental problems thrown up by too much traffic may have arrived via a new planning requirement for large office developments.
The shiny 62-floor, 1.3m sq ft skyscraper being built by Brookfield Multiplex for AXA IM – Real Assets at 22 Bishopsgate in London was granted planning permission last year on the basis that it uses an offsite consolidation centre for all its deliveries. It’s the first time an office block has been subject to such a planning requirement.
So does this decision mean consolidation centres will become a mandatory planning requirement for big offices in London? And if so, how will the subsequent demand for warehousing space with easy access to London be met?
Efficiency measure
The theory behind consolidation centres is simple. As well as cutting down on traffic, they introduce a “well-organised delivery system rather than a haphazard one”, says Bridget Outtrim, a director in Savills’ South East industrial team.
“Effectively we are talking about outsourcing the post rooms of big offices. If you address a package to 22 Bishopsgate it won’t go there. It will go to its consolidation centre; then [it will be] brought into the building during a controlled delivery slot.
“One of the key drivers is [London mayor] Sadiq Khan’s position on the environment and air quality. Another is people getting their home shopping delivered to work. Some businesses have banned people from doing it, as dealing with personal packages puts a huge strain on their post rooms.”
Harry Badham, AXA IM - Real Assets’ head of UK development, is responsible for delivering 22 Bishopsgate, which is expected to complete in 2019. He predicts that consolidation centres will become increasingly common.
“The pressure on London’s streets between competing uses is very likely to mean that many central London offices will need to use consolidated deliveries,” Badham says. “At 22 Bishopsgate, for instance, we are able to approximately halve the number of deliveries to the building and to completely avoid deliveries during times of peak pedestrian and cyclist activity.”
That’s a significant reduction and a “sensible solution to the rapid growth of online shopping, since the many vehicles delivering individual items to office workers every day increases both congestion and air pollution”, says Paul Weston, senior vice-president and head of London and South East markets at Prologis.
He points out that consolidation centres are not a new idea. In 2006, Prologis built a 55,000 sq ft consolidation centre for BAA at Prologis Park Heathrow to minimise delivery traffic to and from the airport shops. Weston believes the Heathrow model continues to work well and says there is “every reason to think the same model can be successfully adapted for ecommerce deliveries to office developments across the City and the West End”.
Seth Love-Jones, a partner at TFT, believes that consolidation centres will become a requirement for significant developments. “Given the way last-mile distribution has become so fragmented, it’s going to become absolutely essential,” he says.
It’s early days, so it would be hard to gauge what size of development might be required to use a consolidation centre, but Love-Jones believes it will depend on the locations and what the access routes are. “Those are better criteria than square footage. But if you’re talking about a development like 22 Bishopsgate it has to be a requirement.”
A logistical problem
Outtrim describes this as an emerging demand sector for industrial buildings and thinks local authorities could look to apply retrospective requirements for consolidation centres on existing office buildings, via traffic management policy rather than planning policy.
“I’ve no idea how large the consolidation centre for 22 Bishopsgate will be, but it could be that it will serve more than one building,” she says. “Shared consolidation centres would make sense. Why serve one office building when you can serve three or four?”
She also points out that a warehouse on the edge of town is much cheaper than the space taken up by the post room in a city centre office building. “That could become office space, so space in an expensive office building could be rentalised,” she adds.
Demand will inevitably increase as environmental measures play a greater role in future cities, putting an even greater strain on land supply. According to Jonathan Priestley, commercial director of AXA IM - Real Assets’ logistics platform Baytree, the implications of zero-emission cities, restricted delivery traffic and limited hours of distribution for vehicles are progressing the need for consolidation centres to service the main office and financial districts.
“And it’s not just London - it’s also Birmingham, Frankfurt and Paris,” he says. “Land for this sort of development is scarce. Sites that were commercial are coming forward as residential. So being on the outskirts of cities and providing the services these buildings need to provide is going to be the biggest challenge.”
In its Last Mile/City Logistics research report, CBRE says the pressure to establish “adequate delivery sites in and around cities is mounting”. But as Weston highlights, the industrial land supply around London is shrinking at an alarming rate. “If offsite consolidation centres are to become a planning condition for office developments, the Greater London Authority must start thinking strategically and release sufficient industrial land to make this policy viable,” he says.
Indeed, Priestley says land for this sort of development is rare because competition is extremely high.
“How that will play out, whether it’s large companies, developers or investors, is that the first movers will get the benefit of locking down properties in the right locations with the right corridors into the city,” he says. “Those that come after will have reduced options.”
‘Good thing for cities’
He expects big third-party logistics operators to become more acquisitive, which would compound the problem.
“They’re all acutely aware they need to organise and maybe restructure their city logistics to secure the properties they need,” he says.
As a result, the industry is lobbying hard for government to acknowledge the growth of consolidation centres “as a good thing for cities” and encouraging authorities to make sure they retain sites where these types of facilities can be offered.
Gordon Reynolds, partner at Cushman & Wakefield, agrees. “If you introduce planning policy in one sector that creates demand in the industrial sector, the government needs to be mindful of the land requirement and ensure there is an available supply and a planning process that supports the creation of the real estate needed to deliver that policy,” he says. “In short, if you’re going to require the use of that type of facility, that facility needs to be available.”
The solution to one problem then throws up another. Government, local planners and the property industry will have to work together to ensure that the introduction of consolidation centres works in practice.
Original link - www.propertyweek.com
