3rd June 2020
Lockdown accelerates move to online retail and is driving change and opportunities for the logistics sector.
If you are reading this you are probably one of the millions of consumers who shop online; that expensive waffle maker you’ve only used once was most probably bought via a platform like Amazon. You, much like millions of other Britons including myself, see the convenience in online purchasing. However, since the lockdown online purchasing has gone from convenience to necessity. The question is can retailers deliver consumer needs with current property assets and is the construction industry ready for the shift to predominantly online shopping?
The steady increase in online purchases over the last 20 plus years has meant the “death of the high street” and a boom age for online retailers. The obvious impact this has had in construction is the building of more warehouses. And now it appears Covid19 is the final straw for the high street – we have been in lockdown for over two months and during this period there has been an increase in online sales of 40%. More significantly, the HIM & MCA UK Recovery Report 2020 suggests half of these shoppers plan to continue to use online services even when lockdown has ended. This is forcing many of the remaining high street retailers online and companies such as Primark are now preparing for the move, following significant recent losses.
So, what does this mean for construction? Savills research team believe the logistics and warehouse sector will either, in the most conservative scenario maintain its growth, or more realistically rapidly increase. However simply building more warehouse space is not the answer. Wounds from the 2008 global financial crisis are still raw as we head towards what might become ‘the worst recession since the Great Depression of the 1930s’. Solutions to drive lower costs need to be explored and with land being an ever-reducing commodity innovation is our only ticket.
One clear shift to development models is the integration of warehousing into residential mixed-use projects i.e. ‘Beds and Sheds’. The housing shortage, a key headache for the government still unresolved, is sometimes seen as the remedy to struggling town centres, but what benefit are flats if there are insufficient jobs in the area? Beds and sheds would deliver evolving consumer needs whilst providing employment-led mixed-use schemes creating a possible vaccine to the country’s economic illness.
Market events will also see an impact on the type of logistic and warehouses produced. Recent years have seen an increase in the use of robotic warehouse systems and a move away from labour-intensive models. As lockdown eases and employers look to adapt their places of work for safe distancing, the increased dependency on robotics will ensure social distancing is maintained with no loss to operation.
The new planning laws to be published in the government’s white paper this summer are set to ease planning restrictions on development and provide additional powers to councils to seize land that developers have failed to build on. Coupled with a requirement for infrastructure and motorway junction upgrades these will be a welcome boost to the industry.
One thing is for certain; this is a sector we should all be focusing on.