Why the New “Big Shed” Isn’t Always the Correct Solution...

Flexible, cost-effective logistics solutions...

Logistics Insights from Martin Eldred, Chairman, Eldred Group  

When a prospective client wanted to relocate to South Yorkshire we were tasked with  finding a competitive solution to their move. Our first hurdle came with matching their price aspirations with reality on the ground...


Currently there is a shortage of competitively priced properties on the market. What sheds are available come in the size range 200-300,000 sq ft.  With all charges, these work out at circa £7.80 per sq ft:

New build costs                      £50 sq ft
Rent asked                              £4.50-£5.00 sq ft (10-15yr lease)
Rates, electricity/services       £2.50 sq ft
Insurances, racking                 £0.50 sq ft    

New build premises always include large expensive office facilities, attracting high rates. This can only be recouped over the service/pallet charge out rates.

With the current market price of pallet storage being circa £1.10-£1.30 per pallet/week there is a large variance between this and a total managed package (see example below on new build projects).

230,000 sq ft at £7.80/sq ft/annum = £1,794,000
18,000 racked spaces income generated/annum = £1,216,800

The problem is there isn’t enough surplus pallet storage space in the area and certainly not in one location that meets the £1.10- £1.30 price bracket. Companies have been attracted to South Yorkshire over the last three years initially because of its central location with excellent road/rail infrastructure coupled with competitively priced labour, buildings and services. These cost advantages may, however, be impacted in the next five years by the increase experienced in building costs, rates (up 2.25% this year) etc. Labour charges will inevitably increase above inflation (the impact of pension provisions +8% plus the increased need/cost of training which the job increasingly demands).To stay in the race we need to offer a flexible labour and management solution which can be spread across several contracts to lower the variable costs. This may not be enough where the core rent/rates price is 30% higher than their initial budgets.

With the Eldred Group's three industrial estates in the area we have always been able to “shuffle the pack on tenants” to satisfy our clients' immediate needs. One of the main attractions to customers has been our flexible approach to racking and service requirements. We acknowledge that each has a specific pallet height requirement, be it 1m-2.5m, which we adapt as required. The pallet heights frequently need changing to suit our customers' own racking, in-store requirements or purchasing procedures.

The saturation of supermarkets on the high street is now leading to their reduction in numbers. This will feed down the supply chain, which  will result in reduced warehouse requirements. Our region is well serviced with such premises which will create new opportunities for the client. The message to clients is to be flexible and willing to adapt. It may not be necessary to rush into expensive leases when the availability of warehouse space is likely to change.