16 August 2010
In an uncertain economic climate, occupiers who are expanding their operations are choosing to stay with Prologis.
There can be no doubt that the recession in the industrial property market has produced its own economic microclimate within which some organisations have perished and others have thrived. Since shoppers are becoming increasingly aware of value, sectors such as single price retail, online retail and the logistics companies that deliver their supplies have prospered. ASOS, the UK’s largest independent online fashion and beauty retailer; single price specialist 99p Stores, and freight distributor, The Pallet Network (TPN) are just three companies that have grown during the recession. When the economic downturn hit, all three were Prologis customers. Then, as they each made the decision to move to larger distribution facilities to service their expanding businesses, it was with Prologis that they decided to stay.
Working Together
99p Stores was growing before the downturn, but the recession and the collapse of Woolworths rapidly accelerated both sales and store expansion and having snapped up a number of prime Woolworths’ sites, the company needed to increase its distribution capacity quickly. In April 2009, when it had only 12 months remaining on the lease of its 152,498 sq ft facility at Prologis Park Daventry, 99p Stores started talking to Prologis about moving to a larger building. Although 99p Stores then started to focus on a second-hand warehouse in Rugby, it soon became clear that the building would not suit its operations and 99p Stores re-opened discussions with Prologis. As a result, in December 2009 a deal was agreed on a new 372,572 sq ft distribution centre at Prologis Park Pineham.
The building undoubtedly provides the space that 99p Stores needs for its next expansion phase. But, the deal is good for 99p Stores’ business in several other ways as well. The lease has been structured so that 99p Stores can manage early payments in line with its growth forecast and in addition, Prologis included the building fit-out as part of the deal, which meant that 99p Stores was able to maintain the continuity of its operations and move with the minimum disruption to its business. Another important benefit was that the two buildings are close together, so 99p Stores was able to retain staff. However, one of the main advantages of the move to Pineham is that the new warehouse is highly cost-efficient to run.
Energy-Saving Buildings
With BREEAM ‘Excellent’ accreditation and an EPC ‘A’ rating (CO2 index 25), the operational energy costs of the new 99p Stores building are 67% lower than an older EPC ‘E’ rated (CO2 index 76) building of the same size. As a similar analyses of the new ASOS and TPN facilities show, the ProLogis approach to environmentally sustainable buildings means that it can consistently deliver buildings that are cost-effective to operate.
ASOS, for example, moved from a 158,250 facility at Prologis Hemel Hempstead to a new 503,002 sq ft BREEAM ‘Excellent’ accredited, EPC ‘A’ rated (CO2 index 24) distribution centre at Prologis Barnsley. In comparison with another new warehouse of the same size that is Building Regulations compliant with an EPC ‘B’ (CO2 index 48) rating, Prologis Barnsley delivers a 55% reduction in energy costs, a saving that increases to 77% when the building is compared with an older existing building with a typical EPC ‘E’ (CO2 index 103) rating.
Choice of Strategic Sites
ASOS chief executive Nick Robertson has said that Prologis Barnsley, “has the ability to turn us into a £1 billion business within the next five years” and for ASOS, one of the building’s main attractions is its location. At the end of April 2010, ASOS had 3.7 million registered users, but Barnsley is within a two hour drive of 15 million potential customers. With the prospect of continued rapid growth, ASOS also needed to a large pool of available, skilled labour and this was another benefit that Prologis Barnsley was able to provide.
Similarly, when TPN decided to move from a 224,000 sq ft facility at Prologis Central Park Rugby to a 314,000 sq ft BREEAM ‘Excellent’ accredited, EPC ‘B’ (CO2 index 27) building at Prologis Park Midpoint, location was a priority. Prologis Park Midpoint is within minutes of the M6, the M6 Toll and the M42, making it an ideal site for a distribution company. As Adam Leonard, managing director of TPN said:
"Our distribution hub at Rugby was an excellent site and has served our business very well. Despite the recession, TPN’s business has continued to grow and it became clear that we needed a larger facility to ensure our expansion plans can be implemented. We looked closely at a number of potential sites, but Prologis Park Midpoint met all our requirements including size, location and minimal environmental impact."
As these companies expand with Prologis, the business relationship between the Prologis and its customers seems to grow stronger. As Gordon Brown, Chairman of 99p Stores said:
"We are now working with Prologis on our mid-term plan of opening another NDC within four years in the north of England to build our chain to over 600 stores."
