Property experts analyse portcentric logistics
20 November 2020
Savills is predicting a continued shift of the UK supply chain from road freight towards port-centric logistics, accelerated by recent structural changes including Brexit and Covid-19.
Historically, occupiers have typically taken warehouse space within the golden triangle, in the middle of the country, where the majority of the population can be reached within a four hour drive time. While still essential to the UK logistics landscape, the evolution of online retail and more mature manufacturing supply chains has seen a switch in focus from delivery to major retail outlets to a low volume, multiple drop solution straight to the consumer.
The firm notes that being located port-side makes it possible to reach 85.4% of the population within 170 miles, between London Gateway and the Port of Hull, saving occupiers both time and money, whilst also being up to four times more sustainable.
Consequently, retailers and logistics companies are now looking at creating the right supply chains for the right products. This means that some product will still flow through the existing networks, which include the golden triangle, whereas for other fast moving goods a port-centric option may be more cost effective and efficient. Data from the Department for Transport shows that 53% of imported goods land in the south, yet half of freight imported through southern ports have a final destination north of Birmingham, which is then transported primarily by road.
The environmental impact is also significant, with road freight releasing up to four times more CO2 than an equivalent sea freight shipment. Therefore, shipping containers direct to northern ports to service local consumers provides a far more sustainable option than the traditional road haulage approach.
Kevin Mofid, head of industrial research at Savills, comments: “Ultimately, port-centric logistics allows you to store your shipment near the port thus reducing the number of handling stages throughout your storage and distribution process, in theory saving both time and money. What’s more, as a result of both Covid-19 and Brexit, supply chain resilience has become critical and nearshoring and increasing the role of short sea shipping has further accelerated this trend.”
Savills also notes, that when comparing a central 500,000 sq ft (46,451 sq m) distribution centre in a traditional location, with two sites of 250,000 sq ft (23,225 sq m) at both London Gateway and the Port of Hull, an occupier on a like-for-like basis would yield a 1.72% rent and rates saving. Over the course of a 20 year lease this would deliver a saving of close to £2 million.
Bonnie Minshull, director in the industrial and logistics team at Savills, adds: “It is now more important than ever to distribute the right products from the right locations in order to improve efficiencies from a cost, time and environmental perspective. As the structural changes continue, more occupiers will move away from legacy supply chains towards port-centric logistics due to the significant operational benefits that will prove essential to mitigating future supply chain risk.”