“Location, Location, Location” Blog Series – Issue Three: Road Network

“Location, Location, Location” Blog Series – Issue Three: Road Network

Ben Thomas

Ben Thomas

Director, National Valuation

t: +44 207 182 2663 Ben.Thomas@cbre.com
Judy Zhu

Judy Zhu

Senior Analyst, National Valuation

t: +44 207 182 2683 Judy.Zhu@cbre.com

“Location, Location, Location” is an ongoing blog series, which will look to explore the rationale behind the decision-making process and each new entry will focus on a key factor. Click here to read the previous post.

In previous posts in this series, we have looked mainly at the labour market, which is a primary driver when an occupier is considering the location of a logistics warehouse. Now we focus our attention on the topic of access to transportation.

In the UK, and under EU Legislation, HGV drivers with a vehicle of over 3.5 tonnes must not drive for more than 9 hours in a day, with a break of at least 45 minutes after the first 4.5 hours (including loading and unloading). As a result, more than 20% of big boxes in the UK have been built in the “Golden Triangle.” This is an area in the centre of the UK that broadly runs from Birmingham, up towards Derby and Leicester and then down to Northampton and Milton Keynes. It is estimated that 90% of the UK’s population live within a four-hour drive from the Golden Triangle which allows goods vehicles to deliver without the need for a driver break.

With the Golden Triangle being the heart of the logistics system, the road network is therefore the veins.

In this post, we are going to discuss some facts and figures of the road network in the UK.

  • Top Roads by HGVs Traffic

The map below shows the top 20 roads with the highest HGV traffic volume in 2016. We can see the top 3 are the M6, M1 and A1.

Top 20 Roads by HGV volumne

Data Source: Department for Transport

The M6 accounted for 8% and the M1 7% of the UK total HGV traffic volume in 2016. These two roads combined carried more than one third of the total HGV traffic across the busiest 20 highways in the UK.

The M6 and M1 were more heavily used by larger HGVs than smaller goods vehicles: 11% of all 2-axel to 5-axel trucks travel on M6 and M1 combined, which is almost half of the amount of 6-axel vehicles do, where 21% of all 6-axel trucks use these roads. If you are interested to read more about different types and weights of trucks, please click here.

  • Goods Moved by Road

There are three key metrics to identify the trend of goods moved by HGVs by road. Namely: Goods Lifted (the weight of goods carried); Goods Moved (the weight of goods carried multiplied by the distance hauled); Length of Haul – (Goods Moved divided by Goods Lifted).

In the graph below, it is worth noting that articulated vehicles over 33 tonnes moved the most goods throughout last decade. This is mainly due to the high tonnage carried, rather than the length of haul. As we can see the average length of haul was broadly similar for articulated vehicles above and below 33 tonnes.

For all HGVs, length of haul decreased by 1.33% annually over the last 5 years. Meanwhile, goods lifted increased by 4.19% annually. This trend is much more pronounced in smaller goods vehicles.

Goods Volume Changes

Data Source: Department for Transport

Some theories as to why this is happening:

  1. To cater for the increasing demand for faster delivery from online shoppers, there are an increasing number of small size warehouses been built across the country, often labelled as ‘Urban Logistics’. Therefore, distance between the last-stop warehouse and the final destination has decreased.
  2. To achieve faster delivery, it requires more than just shorter delivery distance, the logistics model also need to be more flexible. As a result, there are an increasing number of smaller HGVs being used to serve as the “last mile” delivery solution or transporting goods efficiently between units. This can explain why the annual change of the metrics for smaller HGVs are bigger than larger HGVs in recent years. This would be even more pronounced if ‘white vans’ were included in the statistics (however, at a weight of around 1.5 tonnes, they fall below the 3.5 tonnes threshold for HGVs).
  • HGVs Registration

Now we know the total goods lifted by HGVs each year have increased, but what are the main drivers behind this? Is it a result of an increase in the number of vehicles on the road or an increase in the goods being carried?

In the graph below, we can see that vehicles over 41 tonnes had the largest increase in registrations. However, these vehicles didn’t have the biggest increase in the goods lifted.

In contrast, vehicles in the lowest range (3.5t – 7.5t) had the biggest annual increase in goods lifted, but they had the lowest annual growth in the number of registrations. This means the average amount of goods carried by each vehicle has increased significantly, which proves the efficiency of smaller HGVs has been improved in the latest logistics operating model. In essence, smaller trucks are carrying more than before.

HGV Registration

Data Source: Department for Transport

 

  • Summary

In the UK, the traffic volume of HGVs, especially the larger sizes, has the highest density on the main motorways. However, the smaller road network is playing an increasingly important role in the logistics system. This is due to the shift of logistics model toward faster, more flexible and efficient operation in order to cater for the growing demand for a shorter delivery time.

In the next issue, we will cover the topic of access to ports.

 


If you are interested in more details of this report or our other logistics reports, please contact Ben Thomas, Director of CBRE National Valuation – Logistics & Distribution, or Judy Zhu, Senior Analyst of CBRE National Valuation.

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“Location, Location, Location” Blog Series – Issue Two: Workforce Demand and Labour Cost

“Location, Location, Location” Blog Series – Issue Two: Workforce Demand and Labour Cost

Ben Thomas

Ben Thomas

Director, National Valuation

t: +44 207 182 2663 Ben.Thomas@cbre.com
Stephen Fleetwood

Stephen Fleetwood

Head of Location Advisory EMEA

t: +44 207 182 3243 Stephen.Fleetwood@cbre.com
Judy Zhu

Judy Zhu

Senior Analyst, National Valuation

t: +44 207 182 2683 Judy.Zhu@cbre.com

“Location, Location, Location” is a new, ongoing blog series, which will look to explore the rationale behind the decision-making process and each new entry will focus on a key factor. Click here to read the previous post.

In the previous post of this blog series, we considered four factors which impact on workforce supply: namely existing employment in the sector and region, the unemployment rate, education level and migrant workforce supply.

For this post, we are going to focus on workforce demand and labour cost. Staffing costs are a significant part of the total operational cost of a warehouse. Therefore, to have a clear picture of labour cost, an astute occupier will take workforce supply and demand into consideration.

  • Workforce Demand Across Industries

Regionally, an occupier will be competing for workforce not only with other logistics operators but also with employers from other industries requiring staff with similar skill sets.

In the line graph below, we can see the ratio of vacancy to employment in a range of industries. Employment level is the existing amount of people employed in an industry, while vacancy level is the amount of job vacancies in an industry for which employers are actively seeking recruits.

From the ratio of two, we can see the activity level of recruitment in each industry. This allows the focus to be on activity levels within an industry regardless of its size.

After the crisis of 2008/9, employment levels remained broadly unchanged, while vacancy level all picked up slightly. Therefore, the upward trend in recent years has been driven mainly by an increase in vacancy levels.

Labour Demand by Industry

Data Source: ONS

  • Workforce Demand in Logistics Sector

Within the logistics sector, there are many companies competing for workforce. As we can see in the graph below, Walmart and Deutsche Post (DHL) are the two largest oversea employers in UK logistics sector.

Labout Demand by Companies

Data Source: fDi Markets

The map below shows the hotspots for logistics jobs across the UK. London is clearly the largest job creator for the logistics sector, despite there being fewer true big boxes in London than the rest of the UK. The large volume of employment is a result of the large volume of logistics operations from airports, ‘last mile’ facilities and drivers. Needless to say, across the rest of the UK the hotspots for logistics jobs marry with the hotspots where logistics warehouses have a large presence.

Labout Demand by Region

Data Source: fDi Markets

  • General Labour Cost Level

Labour cost by area

In the animated map below, we can see the top three regions with the highest salary level across all industries have consistently been London, the South East and the East of England. Meanwhile, Scotland, Yorkshire and Humberside and the North West enjoyed the highest average annual salary growth for last 10 years, with all being above 2.0% per annum.

Earnings by Region & Year

Data Source: ONS

Labour cost in Logistics sector

Looking at the salary level specifically in the logistics sector, the average annual salary growth rates for men and women were 2.77% and 3.62% respectively. It is noteworthy that, salary level in this sector has seen an increase in growth over recent years. Looking back over 20 years, the average annual growth rate for the logistics sector was 3.19%, below the 3.25% overall rate across all industries. However, over the past 10 years, the rate for the logistics sector had overtaken at 2.46%, versus the overall rate of 2.16%.

Data Source: ONS

  • Summary

The demand for labour in the logistics sector continues to increase faster than other industries. So much so that the annual growth rate between 2015 and 2016 for employment level and vacancy level for logistics rank first and second respectively among all private sector employment. However, while workforce demand has increased, the labour cost has followed suit. With Britain in the process of leaving the European Union and uncertainty around the free movement of people coupled potentially impacting the migrant workforce and consumer demand for online retail expected to increase we are likely to see an even more competitive Logistics labour market in the coming years. This will be most noticeable in the areas of the UK where there is a concentration of existing units.

In the next article, we will cover the topic of access to transportation.

If you are interested in more details of this report or our other logistics reports, please contact Ben Thomas, Director of CBRE National Valuation – Logistics & Distribution. If you are interested to learn more about CBRE Location Service, please contact Stephen Fleetwood, Head of Location Advisory EMEA.

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“Location, Location, Location” Blog Series – Issue One: Workforce Supply

“Location, Location, Location” Blog Series – Issue One: Workforce Supply

Ben Thomas

Ben Thomas

Director, National Valuation

t: +44 207 182 2663
Ben.Thomas@cbre.com

Stephen Fleetwood

Stephen Fleetwood

Head of Location Advisory EMEA

t: +44 207 182 3243
Stephen.Fleetwood@cbre.com

Judy Zhu

Judy Zhu

Senior Analyst, National Valuation

t: +44 207 182 2683
Judy.Zhu@cbre.com

In recent years, the logistics sector has become a rising star among other property sectors. But what makes a good location for a new unit and why do occupiers choose certain places for their warehouses? “Location, Location, Location” is a new, ongoing blog series, which will look to explore the rationale behind the decision-making process and each new entry will focus on a key factor, selected from the graph below:

Top factors

Data Source: fDi Markets

For the first post in the series we are going to focus on the labour market and workforce supply.

As we know, staffing costs are a large part of the total operational cost of a warehouse. For example, most of the international 3PL operators see staffing costs average between 30% and 35% of the total operating expense. So when considering a location for logistics warehouse, the workforce will be a major consideration.

We will cover the 4 main aspects of workforce supply: existing employment in the logistics sector, unemployment rate, education level and migrant workforce supply.

 

  • Existing Employment in Logistics sector

From the existing logistics employment in an area, we can understand the supply of skilled and experienced workforce in the sector. But we should also consider the demand level in the same area, where higher employment could also mean higher demand, which we will discuss in a later blog in this series.

As we can see from the following animated map, by the end of 2016, London, the South East, the North West and the North East had the highest employment level in Transport and Storage sector. In the UK, more than half of the employment in this sector comes from these four regions. Over the past two years, the South West and West Midlands have witnessed the highest employment growth in this sector, with 33.3% and 32.6% increase respectively.

Logistics Employment by Region & Year

Data Source: ONS

 

  • Unemployment Rate

The unemployment rate provides a general picture of the available workforce in an area. Regionally, the North East, London and West Midlands had the highest unemployment rate, with all being above 5.5% in 2016. On a county by county basis, the top five with highest unemployment rates were the West Midlands, Tyne and Wear, Inner London, South Yorkshire and Greater Manchester, all of which were above 5.5%.

Employment Status by LA District

Data Source: Nomis

 

  • Education Level

In the logistics sector, educational requirements for employees are generally considered to be low. Areas with these lower education levels often see a higher workforce supply for the logistics sector. Among all the regions, West Midlands has the highest proportion (26.5%) of people with no formal qualifications; the North East shows the highest proportion of the population at apprenticeship level (4.6%); East of England is highest (14.7%) for people with level 1 education, which is defined as: 1-4 O Levels/CSE/GCSEs (any grades), Entry Level, Foundation Diploma, NVQ Level 1, Foundation GNVQ, Basic/Essential Skills. Click to download the full explanation.

Education Level - Age_16-34

Data Source: Nomis

 

  • Migrant Workforce Supply

Migrant workers contribute a large proportion of the overall logistics workforce, with a concentration of staff from Poland, Romania and Bulgaria. In the animated graph below, it shows the changes in net immigration flow from EU8 and EU2 countries. This is the result of immigration inflow less the outflow. According to the ONS definition, EU8 includes: Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Slovakia and Slovenia, and EU2 includes: Bulgaria and Romania.

The International Passenger Survey stated by the end of 2015, South East and London had the highest net immigration flow from EU8 and EU2 countries.

 

Data Source: ONS

 

Summary

It is clear that population density in isolation will not give the true picture of the labour supply in an area. Unemployment rate, education level and volumes of migrant workers will also factor heavily in understanding if the local population can support the hundreds of jobs created by a distribution warehouse.

However, this is only one of many considerations an occupier should take and in the next article, we will cover the topic of labour demand and labour cost.

If you are interested in more details of this report or our other logistics reports, please contact Ben Thomas, Director of CBRE National Valuation – Logistics & Distribution. If you are interested to learn more about CBRE Location Service, please contact Stephen Fleetwood, Head of Location Advisory EMEA.

 

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