UKWA National Conference 2018 - What You Need to Know...

 

The UKWA (United Kingdom Warehousing Association) held its annual conference earlier in March and SEC Storage was delighted to be invited along with 120 other delegates.

 

The two day event would see a range of thought leadership presentations, panel discussions and networking all surrounding the core theme of the conference; adapting for success in an unpredictable world.

 

Brexit, the economy, new laws and the future of warehousing were key subjects throughout, providing focus on what was a very thought provoking 2 days for third party logistics providers and warehouse occupiers alike.

 

We thought we’d share with you all you need to know and what could change the way you do business in 2018 and beyond…

1) Logistics = The Real Economy

 

The conference kick-started with a state of the state address from Walter Boettcher of Colliers International and some very good news! Inflation is expected to fall in 2018, thanks in part to the real economy.

 

Regional PMI (Purchasing Managers' Index) data shows that the West Midlands, Wales, North West and North East have all performed well since August 2016, with London not so much.

 

Why? August 2016 is a few months after the UK Brexit vote. London continues to be challenged by the “balance sheet” economy and the uncertainty over Brexit, but all other areas are performing well due to increase domestic spending, including fast moving consumer goods.

 

The real economy is something we all play a part in and the forecast is good!

Image Right: Photo by UKWA on Twitter

Walter Boettcher, Colliers International

State of the State...
 

"Logistics plays a key part of the real economy, which when compared with the balance sheet economy is performing well. Inflation is likely to fall in 2018 thanks to the real economy."


- Walter Boettcher, Senior Economist at Colliers International

2) UK needs the EU, and EU needs the UK…

 

Second on the agenda was the “elephant in the room”…Brexit! Lesley Batchelor OBE, Director General Institute of Export & International Trade said that the EU is by far the biggest market for the UK. Although manufacturing represents 10% of UK businesses, it equates to 44% of our exports and 50% of the cars we manufacture go to the EU.

 

But did you know the aircraft market is bigger than the car market? For example the UK manufacturers the wings, landing gear and fuel systems for Airbus.

 

She also went on to say that a Switzerland style deal isn’t a solution for the UK; they aren’t happy with the way they are working with the EU!

 

So there is huge benefit for both the EU and UK that a deal will be struck. However the HMRC is planning for 4 possible Brexit scenarios including No Deal, said Tom Parry-Jones from the HMRC. The two most favourable deals are a Highly Streamlined Customs Arrangement or a New Customs Partnership.

 

It was evident that although with 387 days to go, we aren’t much clearer on the deal.

 

Tom Parry-Jones from the HMRC expanded to say the Government will seek an implementation period to provide a smooth and not “cliff edge” transition, with the transition expected to last 2 years.

 

The HMRC’s aim is that businesses will only have to change once for Brexit. Watch this space!

Image Right: Photo by Lesley Batchelor OBE on Twitter

Barbara Scott, Customs Associates

Preparing for Brexit...

 

"We should prepare for Brexit by:

1. Review current operations, process and do an impact assessment based on the four deal possibilities

2. Engage with your customers

3. Engage with the UKWA and other relevant trade associations to your organisation

4. Consider an Authorised Economic Operators (AEOs) application (although the scheme is likely to change to a “trusted trader” scheme post-Brexit, it is a start!

5. Pray!"

 

- Barbara Scott, Director at Customs Associates

3) The French are coming...

The 120 delegates at the UKWA Conference were treated to a very thought provoking presentation from French national, Italian heritage UK business owner, Pierre Liguori, Managing Director of Tokema Ltd.

 

He suggested UK business should be like a chameleon, not dinosaurs. Chameleons change and adapt to their environment. Dinosaurs didn’t and they’re not here anymore!

 

He quite convincingly suggested that northern France should be seen as a logistics platform for UK businesses into the EU. A foot in a door of the EU, as it were.

 

There are 80 million customers within a 300km range of northern France, with approximately 13 million sq m of warehouse capacity and more than 30% of the region are below 25 years old, providing a young workforce.

 

Looking for warehouse space?  Vive La France!

 

Image Right: Photo by UKWA on Twitter

Brexit panel discussion at the UKWA National Conference 2018

Opportunities for warehouse operators post-Brexit?
 

"The school of thought is that if Brexit causes a slowdown of the supply chain (i.e. additional checking at borders) there is merit to hold stock to guarantee your own rate of supply, rather than rely on a just-in-time principle."


- Peter Ward, Chief Executive of the UKWA

4) Fulfilment House Due Diligence…

If you store goods in the UK for sellers established outside the EU, you may need to apply for the Fulfilment House Due Diligence Scheme. And if you haven’t heard of this scheme or not sure if it affects you, you should engage with the HMRC as soon as possible at: www.gov.uk/guidance/fulfilment-house-due-diligence-scheme

 

It was a very interesting session on a new law that could affect a number of UKWA Members. Howard Catherall of Gotelee Solicitors offered sound advice on the scheme.

Image Right: Photo by UKWA on Twitter

Warren Gordon, HMRC

Does Fulfilment House Due Diligence apply to you?

 

"If goods are imported from a country outside of the EU, if the goods are owned by, or stored on behalf of, someone established outside the EU,  if the goods are being offered for sale and haven't been sold in the UK before, then you must be registered."


- Howard Catherall, Partner at Gotelee Solicitors

Top Tweets from the Conference. Follow the story at #UKWANatConf2018...

5) "It’s all a bit weird at the minute…"

This was one of the opening remarks from Kevin Mofid, Director of Research at Savills on his take on the real estate, as there are many conflicting signals from key market headlines.

 

In 2016 Amazon took 25% of available UK logistics space, which represented an overall increase in space uptake. However with Amazon taking less space, 2017 has seen uptake drop of 30%.

 

It is very much still a landlords market, with just 6.5% vacancy rates in 2017-2018 and just 3% in London. It was 25% - 30% in 2007! This means landlords are controlling rent rates with demand going up and supply going down, as well as investments driving up rents.

 

Did you know that nothing over 600,000 sq ft has been speculatively built for over 10 years? The developer First Panattoni recently announced that they will build a total of 3m sq ft of speculative warehouse space per year for the next 4 years. As a comparison, Savills is currently tracking just 3m sq ft of vacant space countrywide.

 

This is welcome news to businesses seeking logistics space across the UK.

 

Warehouse occupiers are having to relocate to where there is space, availability of labour and proximity to the national grid. This has seen rental growth over the last 5 years of between 32% and 37% in the West Midlands, Manchester and Bristol. The traditional logistics Golden Triangle is no longer a thing; is a Lightning Bolt of Logistics across the country.

 

To summarise. Warehouse space is at a premium and investment interest is high, meaning it is a landlords market which in turn is driving up rates. Occupiers have to be more intelligent with their warehouse space, and what warehouse space they take!

Image Right: Photo by Rob Fisher on Twitter

Kevin Mofid, Savills

Real Estate - the essential tool
 

"A client in order to service the west-London market has taken a warehouse in Swansea! Transport costs and other factors are now a minor consideration when taking warehouse space; end users have to go where space is."


- Kevin Mofid, Director of Research at Savills

6) Sheds and beds...

Tim Ward from Chetwoods Architects started the session on the Warehouse of the Future, saying that flexibility in warehouse space is key.

 

Warehouse space availability is decreasing but the demand for urban space is increasing, being fuelled by the increase in eCommerce sales. There is a focus on the London area, where 16% of industrial land has been lost to residential.

 

The key trends will be for warehouse space to go up, with Tim giving the example of a Hong Kong facility over multiple floors, which could even accommodate HGVs on upper levels. The other trend will be to integrate warehouse space into mixed use developments. This could include warehouse space in basements, with retail and residential on subsequent floors, topped off with parks and community spaces.

 

Also as the war on cars in cities grows, vacant car parks are said to be prime for redevelopment, as are larger vacant retail outlets similar to those occupied by Toys'R'Us.

 

There is also a trend to builder higher quantities of smaller urban warehouse for last mile logistics. Aisling Sands from Kingspan said they have seen growth in 15,000 sq ft warehouse developments. Kingspan in the past have supplied eight 1m sq ft warehouses per year. In 2017 they only supplied one.

 

However, it was said that existing landlords are looking to bring existing space up to standard by upgrading lighting and other sustainable features, so that they can demand the high level of rents that can be achieved.

 

Warehouses will undoubtedly change in the future, but at present occupiers need to consider how to better use their existing space in order to remain flexible.

Image Right: Photo by UKWA on Twitter

Tim Ward, Chetwoods

Warehouse of the Future
 

"One of the biggest barriers to future mixed-use "sheds and beds" style developments is that there currently is no planning class for such properties, so no developer has been able to build one."


- Tim Ward, Managing Director of Chetwoods

7) 4 Meals Away from Anarchy...

During the Warehouse of the Future panel discussion, Peter Ward of the UKWA highlighted the MI5 maxim that society is “four meals away from anarchy”. This was shown in the recent bare shelves after the Beast from the East struck the UK. It highlighted the necessity for logistics and warehouse spaces to adapt to changing demands.

 

Chetwoods had presented their WELL-line proposal. “Transforming London’s longest brownfield site, the underground Postal Railway, into a supply line linking a series of ‘wells’ built on brownfield sites to support and re-connect city-centre manufacturing, logistics and social enterprise.”

 

This 6-mile underground railway which can service the movement of goods in and out of the city, including parcels, blood and waste. Send logistics underground, not people, was the key message!

 

Not only will warehouse spaces have to change for the future, but logistics and how we deliver goods and services. The coming years including Brexit will impact logistics and warehouse. It could be a real game changer!

 

Image Right: Photo by © Chetwoods

WELL-line © Chetwoods

Lobbying for new planning category...
 

"Everyone is talking about mixed use developments and the UKWA is lobbying for a new planning class, collaborating via the UKWA Real Estate Advisory Board to bring the Warehouse of the Future into reality."


- Peter Ward, Chief Executive of the UKWA

8) Retail is dead…long live retail!

Day 2 was kick-started by John Munnelly, Head of Operations at John Lewis’ Magna Park campus in Milton Keynes.

 

In his fascinating presentation on John Lewis, he cemented the theory that “logistics is the new retail”.

 

John Lewis has been able to succeed by remaining flexible and adapting to changing consumer demand. Automation has been key to this flexibility, which has made the more traditional warehouse jobs more interesting, rather than replace them.

 

Here’s some interesting facts for John Lewis:

  1. 40% of its business is online, with the expectation that by 2020 it will be 50% of its business
  2. Magna Park Milton Keynes services 75% of its online business
  3. 50% of its online sales are Click + Collect
  4. 56% of its Cyber Monday demand was online
  5. 65% of John Lewis’ profit was made during the Black Friday & Christmas period.

 

John Lewis’ goal is to become the UK’s leading omni-channel retailer. Flexibility has remained key to their business, and whilst it is expensive, it is fundamental.

 

However in all the facts and figures surrounding the rise of online, John Lewis still believes in the retail environment and continues to invest in new stores. They are expected to open their 50th store in Westfield White City in 2018. Stores continue to serve as key logistics spaces for fulfilling their online sales.

Image Right: Photo by Rob Fisher on Twitter

John Munnelly, John Lewis

Yesterday's Challenge. Today's Reality.
 

"1 weeks online demand in 2009 was filled in 2 hours in 2017. Servicing this level of demand was achieved with technology and automation."


- John Munnelly, Head of Operations at John Lewis

What did we learn? A summary.

 

The two-day UKWA National Conference was full of insight and trends for any warehouse operator or logistics provider.

 

It is evident that there is demand for warehousing but lack of supply, which means you, the warehouse occupier needs to be a bit more efficient with how you use the space. And with efficiency comes the necessity to remain flexible.

 

With the rise of eCommerce, retail and the supply chain is changing. So if you don't have an online presence, you should, and if you provide services for others, be prepared to adapt to their eCommerce demands and the demands of their customer. The next-day culture is here and here to stay!

 

Brexit is coming, and the need to remain flexible and adapt is even more important! But remember, we are a vital trade partner for the EU, so there should be a deal that benefits all!

 

So the key takeaway? Flexibility. Be flexible how you operate and use your warehouse space. And be flexible where you take space!

 

We can't wait for the 2019 conference and look forward to seeing you there...

 

Post by Dean Kahl