Flex for success: why logistics real estate must adapt to survive
As the last 12 months have proved, the ability to operate flexibly has become a necessity for the success and survival of many businesses. In this two-part study, Managing Partner of SGP, James Nicholls, looks at the importance of flexibility in the logistics sector and how real estate owners and developers can respond to the evolving needs of their tenants.
The last 12 months have seen businesses of all kinds having to adapt to extraordinary circumstances. Best placed to quickly and successfully navigate the global pandemic were those businesses with the ability to be flexible, both in terms of their operational systems and their employees. Hard lessons have been learned along the way, but for many businesses flexibility is now a key component of leadership and success; the ‘new norm’, if you like.
As we cautiously emerge from this global health crisis, the challenge now is for the real estate sector to respond quickly and confidently to the flexible needs of its tenants. For some forward-thinking logistics owners and developers, flexibility is part of a much bigger plan than just recovery from the pandemic. It is about remaining adaptable and prepared for a rapidly changing world; it is about providing flexible solutions for business expansion, transformations in working culture, pace of demand and means of delivery, as well as the ability to accommodate greater automation and technological advances.
Yet adapting to the needs of clients, customers and employees in an industry as innovative, dynamic and fast-paced as logistics is not without its challenges.
Challenging the institutional standards
The institutional standards that typically govern the design of an industrial and logistics building is the first hurdle that needs to be addressed if we are to achieve greater flexibility in the sector. Even before the pandemic, we had started to question some of these development standards and, in some instances, have actively challenged their parameters in the face of a logistics industry that is becoming increasingly diverse with myriad different requirements. There is an urgent need for developers, investors and architects charged with the delivery of industrial and logistics space to unify and improve these standards if we are to better serve the requirements of 21st century occupiers.
A good example is the traditional requirement to provide a fixed percentage of office space in a warehouse scheme. In a post Covid19 world, this requirement feels too restrictive as organisations get to grips with all the anxieties associated with a return to the workplace, as well as rapidly evolving work-life expectations. Occupiers are now interrogating the role of the office and its place within an organisation, both from a practical design perspective (Does it require more or less space? One floor or two floors? How much distance between workstations?), as well as the part it plays within the company culture (would space be better used for training and mentoring, breakout areas, leisure or health and wellbeing purposes?).
Imaginative thinking, better spaces
Providing flexibility for occupiers, particularly on tighter sites, requires imaginative thinking, but in challenging this standard, we have been able to offer occupiers design that better suits their needs and maximises space – for instance, building only the first floor of offices and fitting out the undercroft for ancillary use, such as a canteen or breakout space. Indeed, we have seen the use of roof spaces, whether external or internal, increase during the pandemic, allowing the creation of flexible, user-friendly areas for staff to work safely or eat their lunch whilst socially distanced.
As I noted in my previous piece, People First: the healthy choice for logistics, recent years have seen people-first policies become the focus of enlightened funds, developers and operators; these policies will take even more precedence in the coming months and years as the world recovers from the Covid19 pandemic. Therefore, flexibility should also be considered for external areas, providing active spaces for cycling, walking and community engagement. This is particularly true of logistics parks, where the physical size of the facility can lend itself to big ideas; readers might be surprised at the progressive nature of some of the proposals. We have worked with enlightened developers looking at ideas as far ranging as allotment spaces, five-a-side pitches for Sunday League football, trails for walkers, as well as amenities for scout groups or other community organisations wanting to use the site.
Whilst there is an immediate need for the logistics property sector to respond flexibly to tenants’ needs post pandemic, there are other forces that will continue to require owners and developers to think flexibly, most notably technological advances that are progressively being integrated into all operations. In Part Two of this discussion, I will examine the impact of technology on the sector and how real estate and design can respond.