There could be increased appetite from investors for ‘first-mile’ logistic assets as global supply chain disruption drives a need for firms to improve upstream, business-to-business supply chain logistics, according to a new report from global property advisor Knight Frank.
Knight Frank’s latest Future Gazing Report explores the changing requirements and opportunities for first mile logistics, including how the need for increased resilience is driving a reconfiguring of supply chains, evolving infrastructure requirements and the relocation of manufacturing hubs.
Knight Frank’s report explores how firms’ safety stock requirements increase in line with upstream spikes in supply lead times. If maximum lead times increase due to supply chain shocks generated by trade tensions, labour shortages and Covid-related shutdowns and shipping disruptions, firms need to raise their total inventory holdings to protect their order books.
As well as holding additional safety stock, many manufacturers are planning to diversify and invest in their supply chains to improve visibility and security, which could provide opportunities to grow UK manufacturing as firms weigh up the benefits and costs of reshoring operations.
Firms across a range of industries are considering reshoring. According to Knight Frank’s analysis, reshoring discussions are currently most prevalent among pharmaceuticals and healthcare-related industries, supplemented by automotive firms, including those focused on alternative fuel vehicles, technology and biotech firms. A relocating or diversifying of production bases will likely necessitate a change in the configuration of the supply chain.
‘The rise of e-commerce has led to considerable change at the consumption end of supply chains, with additional costs and facilities being allocated to this part of the supply chain in order to raise service levels and reduce delivery times,’ said Claire Williams, Industrial and Logistics Research Lead at Knight Frank. ‘However, rising costs and delays at the production end of the supply chain are driving a rethink of the locations of these facilities and the transport connections linking them to downstream operations.’
He added: ‘As we enter the next phase of the economic cycle and perhaps a new era for global trade, logistics investors and operators must look to supply chains, assets and opportunities that can provide stability for their operations and returns. First mile markets can enable firms to build and maintain a secure and responsive supply chain for their end users. This demand will continue, with the potential to create attractive opportunities for income-driven investors looking to deploy capital into assets underpinned by strong structural tailwinds.’
