Warehousing and Logistics Construction Boost

The Coronavirus outbreak has put a strain on the country’s supply chains, especially as there has been retail demand which has led to greater pressure on supply chain to keep shops well stocked with essential goods. However, this increased demand has led to a boost in investment in new warehousing and logistics construction.

In an early April update, shortly after lockdown began in the UK, David Sleath, Chief Executive of Segro, the FTSE 100 developer which is the largest provider of warehouse space in the UK, said that it he expected trends which have been driving occupier demand for high quality, well located warehouse space to remain intact.

Mr Sleath added: “…it may even be strengthened by the crisis, as the importance of logistics supply chains has been thrown into sharp focus in recent weeks.”

In order to mark its confidence in the logistics sector, Segro maintained its dividend payment to shareholders even though most of the group’s new construction projects will inevitably be delayed this year, due to COVID-19. However, Segro has retained a significant new development programme. Earlier in the year the group outlined plans to undertake development capital expenditure over 2020 – which includes infrastructure and land acquisitions – and expects them to exceed £600 million.

Last year, Segro completed a record 871,800 sq m of new space, which was mainly warehousing, of which 92% is let. And, until the UK-wide lockdown, the group had 826,200 sq m of new space under construction, the majority of which has already been pre-let.

The growing trends of e-commerce and urbanization are continuing to drive demand for warehousing and are also encouraging Segro to believe it can maintain development at these levels. The positive message from the group has also be echoed in recent data from the likes of Glenigan. This shows that the value of new warehousing and logistics project starts in the three months to February 2020 was up by 40% on the same period the previous year.

Meanwhile, data also shows that Segro alone started 10 projects which were worth £228 million in the year to January 2020. Other key players within the logistic sector with significant development programmes include:

• IDI Gazeley, with a development programme worth £169 million in the year to January
• Roxhill with a development programme worth £142 million
• Coventry and Warwickshire Development, worth £140 million, and
• St Mowden, worth £121 million

Construction data from Glenigan has also highlighted the strength of the construction pipeline within this sector, and, the key logistic projects on which work is set to get underway around the country, including:

• In Leeds, Peel Logistics had plans approved for a £69 million development of four warehouses, as part of Phase 4 of its Gateway 45 project, where work is expected to start in late 2020, for a period of 11 months.
• In Northamptonshire, plans have been submitted for a £65 million automotive logistics maintenance building at a motor speedway. The Rockingham Hub Development is currently at the pre-tender stage. The project involves more than 6,000 sq m of space. Work is due to start in the autumn and will last for 12 months.
• In Leicestershire, plans have been granted for four new distribution centres which will cover 1.2 million sq ft in a £47.5 million extension by Gazeley UK to Magna Park, Lutterworth. TSL Projects has been appointed as main contractor, and work is due to start this summer, and will continue for 25 months.

Smaller logistics plans are also on the drawing board. In the South West of England, plans by Stoford Developments for a £1 million storage area at Exeter Logistics Park have been approved with work due to start in summer 2020, and to continue for a further six months.

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