Property futures Research

Urban Consolidation Centres are gathering momentum

Q3 2016

Increasing demand for online retail, combined with rising concern regarding the resulting traffic congestion in major urban centres, is inevitably driving interest in so-called Urban Consolidation Centers (UCCs): urban warehouses for consolidating and sorting freight for the last-mile delivery.

In the UK the consolidation of the city logistic sector is not in its infancy anymore. We have found a myriad selection of UCCs serving small size areas as well as city centers or specific sites such as shopping centers, high streets, airports or major construction sites. In 2019 one of the first office buildings using an off-site consolidate delivery center is expected to have been built in the core of London’s financial district.

A steady demand for e-commerce, in which consumers expect products to be delivered to their door in two days or less, has led to an increased number of vehicle trips entering already high-dense urban areas. To meet the compelling promises of fast delivery, the movement of freight is typically performed by a very large number of delivery companies who inefficiently duplicate each other’s journeys/paths with partially filled trucks and vans. This has resulted in unnecessary high levels of city congestion, unsafety, pollution and rising distributions costs.

To deal with these negative externalities, public authorities across Europe have started partnering with third party logistics businesses and retailers determined to improve the distributive efficiency of their on line and bricks-and-mortar retailing operations to deliver innovative solutions: the Urban Consolidation Centres (UCCs). This situation, combined with an already chronic shortage of sheds and pressure on industrial land, is making the further growth of this new kind of space an inevitable outcome.

But what exactly is consolidation and how does it work? Broadly speaking consolidation is defined as the process of combining goods shipments into fewer deliveries to reduce the numbers of vehicles carrying freight entering the city by making sure that their carrying capacity is fully utilised. An UCC is a logistics facility that is situated in relatively close proximity to the urban area that it serves. Cases across Europe and Asia demonstrate that there are a myriad of different consolidation centres serving different areas. The areas an UCC could serve are:

  • Different boroughs or part of the city (examples include the London Boroughs of Camden, Enfield and Islington UCC)
  • A city centre (Broadmead in Bristol and Bath, la Rochelle in France and many other German UCC schemes)
  • A specific site such as high streets and shopping centres (examples include the Regent Street UCC in London and the Meadowhall UCC in Sheffield), or airports (Heathrow retail UCC); or major construction sites (the University College London UCCC and the London UCCC based in Silvertown, east London)

The UCCs’ footprint varies considerably case by case – ranging from 312,000 circa sq. ft at the Beaugrenelle UCC in France to the 2,000 sq. ft of the London Boroughs Consolidation Centre (LBCC).

The two-floor UCC of Beaugrenelle, funded by a public-private partnership, is a major hub located in the fifteenth arrondissement serving a huge area of the Paris Municipality. The LBCC is a public funded single facility shared among the central London boroughs of Camden, Enfield, Waltham Forest and Islington.

Goods destined for the urban area are delivered to the UCC storage space by transport operators whereupon they are sorted and consolidated for delivery to the final destination by the UCC operator. This final delivery – the so called “last mile” – often uses environmentally-friendly vehicles such as electric and gas-powered goods vehicles, and in some cases electrically-assisted cycles reducing any environmental impacts.

Despite the support of public money and the emphasis on sustainability, historically, UCCs have met considerable resistance. This is mostly due to the assumption that their use delays deliveries and adds cost, as well as concern over a loss of control by the sender or receiver of the goods. However, as many successful cases show, the many consolidation solutions available today can address these concerns and deliver positive benefits. UCCs reduce goods vehicle traffic and its associated environmental impacts, while also generating commercial benefits by improving information flows and increasing transparency, by using the vehicles and load carriers most suitable for the work or by streamlining supply chains (the so called uber-isation of the logistics sector).

In London, with a fair number of UCCs implemented and new ones under construction, the consolidation of the logistic sector is well on its way. On 5th of April 2016 the City of London Corporation used its powers to facilitate the development of 22 Bishopsgate tower proposed by AXA Investment Managers – Real Assets and Lipton Rogers. Despite the uncertainty that the EU referendum has brought, AXA is still in the process of working on the contract. The 1.3m sq. ft skyscraper, which is to be built by Brookfield Multiplex by March 2019, would be one of the first office buildings in London to use a consolidated delivery process. The 62-storey skyscraper by PLP Architecture, that is set to be the tallest building in London's financial district, will involve an off-site consolidated delivery centre to minimise vehicle movements to the site – reducing pollution and ultimately improving security. Supplies to and waste from the building will be delivered to a consolidation centre outside central London and energy efficient vehicles will then make far fewer deliveries to the site outside peak pedestrian movement and rush hour times.

The urban consolidation centres (UCCs) have been trialled across a number of major European urban centres for some time and both concept and practices are rapidly moving forward: from retail to the office sector. There are a number of significant consolidation initiatives going on in the UK, as public authorities and private stakeholders recognise the benefits across the commercial, environmental and social spheres. In the London metropolitan area, the strong demand for logistics space and higher rents are building momentum for these new shared logistic facilities. Over the next years, following the increasing rate of urbanisation, the fast-growing e-commerce demand and its impending impact on traffic volumes, we can expect increasing support for UCCs by the public sector. However, an efficient use of this new type of space will rely heavily on the 'big data' expertise of occupiers. Looking ahead, the use of ‘big data’ will become increasingly key, as major retailers and grocers look to leverage customer purchase data and social media data to optimise warehouse efficiency, gain market share and ultimately deliver profitability.