26 May 2023

Why the logistics sector is under pressure to evolve – Victoria Towers writes for React News

Commercial Real Estate Partner and Co-Head of the Industrial & Logistics group, Victoria Towers, has written for React News on the evolution of the logistics sector and how owners are pushing to innovate and meet sustainability goals.

Towers writes that “[Forsters’] recent Outside the Box study of the expectations of investors and developers in the [industrial and logistics] sector confirms our own experience as lawyers in advising on our clients’ innovations. Multi-storey formats, renewable energy and integration with residential require legal and technological support.”

From the survey, we saw that the greatest consensus was on multi-storey sheds. “77% believe they will play a large role in the UK logistics sector in the future and 52% have seen an increase in developer appetite in the past year.”

The key driver for this is the competition for land, with all that’s missing a confidence in the resilience of this new multi-storey shed format. “Are there cost-effective structural engineering solutions and ways around a vehicle stuck on a ramp? Are goods lifts now reliable enough?” Regardless, Towers says we should expect to see a proliferation of warehouses, light industrial units and the occasional 20-storey tower.

“In the meantime, lawyers will develop the legal structures needed to ensure that a multi-tenanted, multi-storey scheme remains attractive to both tenants and investors.”

The co-location of residential and urban logistics is causing issues in relation to design, technology and legal rights, with classic NIMBYism in play.

The solution will most likely lie with technology, which will also improve prospects for planning. Key forms of technology raised in our survey include clean energy, modernised site infrastructure, air filters and quieter HGV engines. There is also particular optimism for the impact of e-commerce, robotics (67%) and EV charging.

The real cause for excitement is, however, the impacts expected from artificial intelligence. Towers explains that “automation has required tighter legal controls on landlords to avoid them marching in on an inspection and getting in the way of a robot. As we start to see the uses emerging for AI we will get a clearer sense of the legal principles no longer fit for purpose and the gaps in regulation.”

Missing link

Battery storage has been a particular source of debate. Industrial real estate is becoming increasingly power hungry, and the “broad, flat roofs of our sheds are a gift for photovoltaics.”

“Battery storage is the missing link. The industry needs the capacity and ability to retain the energy generated by photovoltaics. If the panels produce excess energy, it is wasted should the National Grid not buy it back and there is nowhere to store it.

“The innovations we have discussed so far could have a big impact on the efficiency, value and deliverability of industrial real estate. But there could be a more disruptive change in the pipeline.”

Towers goes onto highlight the environmental incentive of shifting from road to rail, with particular reference to HGVS. This sentiment is shown in our survey with many anticipating rail freight generating the greatest growth in occupier demand in 2023.

“The picture that emerges is of a sector that is far from complacent in surfing the continuing wave of strong demand and high values. The industrial real estate sector is conscious of pressure to transform its environmental performance, and is investing in the innovations that will deliver a cleaner and more efficient industry.”

To find out more about our ‘Outside the Box’ campaign and explore the findings of our survey in detail, click here.

This article was originally published on 22 May 2023 by React News and can be read here (behind their paywall).

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