As the London Olympics approach, I suspect we will be hearing more from the official provider of logistics services for the Games, which has a slogan ‘we love logistics’ and a jingle to go with it. Now one might expect a leading logistics company to love logistics, but why should the rest of us? With a moment’s reflection, I think it should become clear.
Logistics is about managing the flow of materials, components and finished goods from the point of origin to the point of consumption in order to meet customer requirements, together with ‘reverse’ flows, such as waste. In the past it was widely seen as a business cost to be minimised, but today it is recognised as a differentiator and value driver and a key source of competitive advantage for manufacturers and retailers alike. For retailers, for example, efficient logistics is key to on-shelf availability, competitive pricing and to the development and growth of a multi-channel offer.
Moreover, the importance of logistics is merely most obvious in manufacturing and retailing; logistics is also fundamental to a whole range of other industries and, indeed, to the successful functioning of towns and cities and the well-being of the populations that live within them. Without logistics, hospital services would rapidly grind to a halt and rubbish would go un-collected, as happened in Naples last year.
In real estate terms, logistics activities generate wide ranging requirements for land. The most obvious of these is for warehousing to meet requirements for storage and distribution, but to this we could add land required for freight transport activities, including ports, rail-terminals and, to a degree, airports. To these could be added land for the distribution and storage of energy and for waste management.
Compared with retail, offices and residential property, logistics uses have always had the lowest land values. To my mind, the combination of relatively low values and strong fundamentals is part of a compelling case for investing in logistics real estate or logistics infrastructure for long-term performance. Given its role and significance, I think we should all love logistics.
Click here for our latest view on the UK logistics market