Retail giants aim to go the extra mile

Kasmira Jefford
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Retailers including Ocado have had to open up distribution hubs closer to city centres to meet increasing demand
Online demand is moving retail sheds closer to town

THE BOOM in online retailing has created a scramble for small plots of land close to city centres that can be used as nimble distribution hubs for the click-and-collect generation.

Vast 500,000 square feet to 1m sq ft warehouses at the heart of the countryside were previously enough to stock all of a retailer’s wares until they reached the high street.

But following that revolution has come the need for a new smaller distribution hubs closer to city centres to deliver the goods to shops, consumers’ front doors or click-and-collect points at ever increasing speeds.

The pressure on what the industry calls that “last mile” delivery to stores and customers has surged, and with it the number of developers and investors looking to invest in that space.

Clearbell is one such company looking to exploit this demand for small distribution hubs. The private equity real estate fund management business has 2m square feet of retail distribution space let to supply chain outsourcers, including Wincanton and ultimately retailers including Shop Direct, Morrisons and Ebay.

Chief executive Manish Chande said: “There are plenty of people who provide large retail sheds, but one of the problems is the last mile conundrum.”

“Retailers are having trouble finding smaller units. There is limited stock that has been built over the last six years, and some of the stock that is there is not fit for purpose and, as a consequence of that, higher rents are being charged. Therefore, as an investment class – it’s quite attractive.”

Segro, Europe’s largest industrial landlord, was one of the first to develop the smaller hubs. Origin, its latest development opened last year at Park Royal in west London, signed up tenants including John Lewis as well as Ocado, which uses it as a base to deliver groceries to central London.

Segro’s chief operating officer Andrew Gulliford said the lack of available land to build such hubs in and around London was pushing up rental value at its sites, with space at Origin, costing £14 per square feet compared with £12.50 per sq ft last year.

“In the last 30-odd years, the London supply of industry land has reduced by around 45 per cent and has been overtaken by housing and retail schemes such as Nine Elms.”

Consumers spent £100bn online last year, with this set to grow to £116bn by this year, according to retail analysts IMRG Capgemini.

Gulliford warned that more land needed to be available for industrial developers to meet demand: “It is great to have growth plans for housing, but that needs to be balanced with also retaining industrial and logistics land, so we have got the jobs and the servicing of those houses.”

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