Cambridge grapples with distribution hubs issue
While Amazon’s drone delivery service is tested in Cambridge at its UK Research Centre, Bidwells latest research finds that the city’s ‘last mile’ delivery centres – the urban bases that many online retailers rely on – are being crowded out by competing uses.
Bidwells latest industrial space research for the industrial and logistics sector finds competition from higher value uses is taking its toll on industrial space stock levels in Cambridge, writes Sue Foxley of Bidwells.
There is clearly increasing pressure from the online retail industry for same-day and next-day delivery for them to be able to complete in a challenging retail environment. This is driving intense demand for locations for distribution activities near to major conurbations.
Research by MSCI published in July showed this to have a particularly marked impact in London, The Outer London area was found to have the largest proportion of assets in the top total return performing deciles. The South East and Eastern region in second and third places. This aligns with our own research.
Cambridge has a large and rapidly growing population, which characterised by a relatively wealthy catchment area, reflecting its business sector profiles.
The city is also challenged by severe development constraints due to the historic nature of the city itself but also protection across much of its surrounding greenspace.
These physical constraints are compounded by the market pressures of the locations which is crowding out other uses. Despite industrial rents in Cambridge reaching record highs during the first half of 2018, competition from higher value uses is taking its toll on stock levels.
Office rents in Cambridge have risen strongly over recent years achieving historic highs at the end of H1 2018.
Furthermore, residential values have risen sharply, driving the loss of many industrial sites to residential development, including many on the edge of the urban areas with value to the distribution sector in particular.
These market pressures have resulted in Cambridge losing approximately a third of their respective industrial floorspace to alternative uses over the last 15 years.
This clearly presents a challenge for the ever-burgeoning online retail sector in Cambridge and beyond.