Boost to warehousing and logistics construction

The strain which the coronavirus crisis has put on the country’s supply chains for keeping retailers stocked with essential goods is set to boost investment in new warehousing and logistics construction.

In an early April update after the lockdown had started, David Sleath, chief executive of Segro - the FTSE 100 developer which is the largest provider of warehouse space in the UK - said that he expected that the trends that have been driving occupier demand for high-quality, well located warehouse space will remain intact.

He added that 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 a mark of its confidence in the logistics sector, Segro maintained its dividend payment to shareholders.

Although most of the group’s new construction projects will be delayed this year due to the coronavirus, Segro retains a significant new development programme. It outlined plans earlier this year to undertake development capital expenditure over 2020 - including infrastructure and land acquisitions – which it expected to exceed £600 million.

Last year, Segro completed a record 871,800 sq m of new space, mainly warehousing, of which 92 per cent is let. And up until the lockdown, the group had 826,200 sq m of new space under construction, most of which has been pre-let.

High level of development

The growing trends of e-commerce and urbanisation are continuing to drive demand for warehousing and are encouraging Segro to believe it can maintain development at these levels.

The group’s positive message on the sector is echoed in recent Glenigan data. It shows that the value of new warehousing and logistics project-starts in the three months to February 2020 was up 40% on the period a year earlier.

Meanwhile, the Glenigan Construction Review shows that Segro alone started 10 projects worth £228 million in the year to January 2020. Other key players in the logistics sector with significant development programmes include: IDI Gazeley (with a development programme worth £169 million in the year to January), Roxhill (£142 million), Coventry & Warwickshire Development (£140 million) and St Mowden (£121 million).

Key logistics projects

Glenigan Construction data also highlights the strength of the construction pipeline in the sector and the key logistics projects where work is set to get underway around the country.

In Leeds, Peel Logistics has had plans approved for a £69 million development of four warehouses on Phase 4 of its Gateway 45 project where work is expected to start in late 2020 and continue for 11 months (Glenigan Project ID: 17014889).

Meanwhile in Northamptonshire, plans have been submitted for a £65 million automotive logistics maintenance building at a motor speedway, the Rockingham Hub Development, which is at the pre-tender stage. The project involves over 6,000 sq m of space and work is expected to start in autumn 2020 and continue for 12 months (Glenigan Project ID: 15187432).

In Leicestershire, detailed plans have been granted for four new distribution centres covering 1.2 million sq ft in a £47.5 million extension by Gazeley UK to Magna Park Lutterworth. TSL Projects has been appointed as the main contractor and work is due to start this summer and continue for 25 months (Glenigan Project ID: 20163376).

Also in Lutterworth, Cullina Logistics has recently submitted plans for a £7.1 million extension to a warehouse/distribution facility where work is planned to start in autumn 2020 and continue for nine months (Glenigan Project ID: 20158801).

Smaller logistics are also on the drawing board. In the South West, plans by Stoford Developments for a £1 million storage area at Exeter Logistics Park have been approved with work set to start this summer and continue for six months (Glenigan Project ID: 20107952).

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