Amazon Killed The Golden Triangle
The Golden Triangle’s days of dominance are over. And it was Amazon that wielded the knife.
New data from Savills shows how thoroughly the Golden Triangle has lost its status as the unchallenged big shed location, as online retail has reshaped the geography of U.K. warehousing.
The area roughly bounded by the M1, M6 and M42 motorways was the treasured heart of the U.K. logistics sector. Now it is just one of many locations competing for big shed requirements.
In the period from 2007 to 2016 Midlands online retail take-up rose from zero to 3M SF. But in the same period the UK-wide take-up by online retail rose more than twice as fast, up from 1.47M SF to 12.23M SF.
Some observers have suggested that the Triangle, stretched and pulled by online demand, is not much of a triangle any more.
“Amazon has been more footloose than traditional warehouse operators, so the Midlands has not been as strong on online retail as you might imagine," Savills Research Director Kevin Mofid said.
Savills figures show Amazon took 4M SF in 2017 — 82% outside the Midlands. This is a step away from the Midlands compared with 2016, which saw Amazon take 7.9M SF, of which 73% was outside the Midlands.
“Online retailers are more footloose because they do not have the legacy of retail stores to determine their warehouse locations," Mofid said.
"So we’ve seen retailers like Amazon take warehouses in the North West, Yorkshire, Wales, all of which tells us the Golden Triangle isn't the only show in town. The market is evolving, and the shape of the logistics sector is changing as online retailers push into areas with more land, more labour and better energy supply — the areas that will be future prime.”
The way Mofid explains it, the Golden Triangle has a kind of first mover disadvantage: being the first big shed location, it has filled up quickest and is the most crowded. So land prices, rents and the competition for labour are all high. The result is a triangle stretched to include lower-priced areas with better labour supply.
Online retail accounted for about 22% of the Midlands market in 2016, manufacturing was 21% and third-party distributors 25%. Mofid concludes the Midlands is a balanced market, and as for the Golden Triangle, today it stretches up the Pennine chain and is now “more like a lightning bolt”.
Developers like Harworth Estates, who have a strong presence in the North, are anxious to find more sites in the Midlands market. Already this month they have acquired an 8.7-acre site at Berry Hill Industrial Estate in Droitwich from DHL for £5.2M, and immediately agreed at 112K SF lease-back to DHL at £450K a year, a net initial yield of 8.15%.
According to Harworth Director of Asset Management Ian Ball, the Golden Triangle is not top of their list because in the last two years online retail has reshaped supply chains.
“We’ve a desire for more exposure to the Midlands market, and we have sites like [the] 100-acre Lounge site at Ashby-de-la-Zouche with good connectivity. We’re seeing e-commerce requirements ripple out to those kinds of locations because online retailers are very cost-conscious. They do not often set record rents,” Ball said.
“The Golden Triangle isn’t dead but it is evolving. Retailers like Amazon showed you can provide hubs further north, and that the super-centres of the Midlands are not so important. Amazon showed it could be done.”
Can the Golden Triangle retain its appeal — albeit stretched into a different shape? “It’s not so much the death of the Golden Triangle, as the expansion of the Golden Triangle,” JLL industrial and logistics director Richard James-Moore said.
“Same-day delivery demanded by consumers means they have to spread their depots, hence smaller, mid-box, final-mile delivery hubs. The Golden Triangle remains the stronghold, but where alternative locations offer labour supply, locations close to motorway junctions and a power supply, they will be considered.”