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Flexible Logistics

Edward Bavister • 16/08/2023

As the logistics and industrial market reaches another key junction, conversation in and around the sector is beginning to pivot. The recent wave of investment has transformed the sector not only in terms of its physical footprint and fresh contingent of new occupiers, but also from an operational perspective. Owing to supply chain stresses, the understanding of physical real estate’s role within wider supply chains has evolved markedly throughout the last 2-3 years, resulting in the emergence of new best practices, supply chain technologies, and automation solutions. But as the occupational market begins to slow, and the investment market remains constrained by tough trading conditions, sector specialists and enthusiasts (if that’s what you call them) are beginning to identify the likely next evolutions of the sector. One such evolution that may prove a key tool for businesses and landlords alike is the flexible logistics space market.

What is flexible-logistics space? Just another link in the supply chain?

As with any emerging offer, a number of terms are used interchangeably to describe the sector, from pallet-by-pallet logistics to 5PL logistics, and temporary fulfilment, to “the Uberisation of warehousing”. However, the key in all of these is that the operating models behind the sector are distinctly different from the third-party logistics sector we know today.

We therefore identify the market as follows:

The Flexible Logistics Market specialises in accommodating and providing full- or part-life cycle logistics services for incremental volumes of goods, typically at levels that do not justify the establishment of a new dedicated real estate facility or even a new fixed-duration 3PL contract. Supply for the flex logistics market is typically facilitated through existing real estate where space capacity has been identified by the incumbent user or landlord.

In this market, logistics providers, and in some cases other occupier type, offer scalable and adaptable solutions for the storage, management, and transportation of inventory, on behalf of other parties. These services often focus on smaller quantities of freight than the 3PL model, with agreements typically signed for months rather than years, and typically with a high level of flexibility not seen within the FRI leases typical of today.

The primary objective of the Flexible Logistics Market is to provide companies with flexible and cost-effective alternatives to expanding their infrastructure, allowing them to seamlessly adjust their logistics operations in response to fluctuations in demand without committing to significant fixed investments. Similarly, this emerging market provides a platform for occupiers to recover cost against underutilised infrastructure during periods of lower throughput in their operations.

Demand is likely to be driven by a need for flexible and affordable solutions particularly for occupiers exposed to a high number of SKUs (stock keeping units) with volatile demand profiles. Another key attribute, and one that is likely to accelerate the market, is its potential to create secondary value for real estate users and even owners, who possess facilities with excess capacity. By leveraging this underutilised space for pallet-level logistics operations, owners and occupiers can optimize their portfolios’ performance, and generate additional revenue streams. Thus, the Flexible Logistics Market not only supports businesses in managing incremental volume but also offers a compelling opportunity for real estate stakeholders to maximize their return on investment through adaptive and innovative utilisation of their properties.

What is driving the emergence of flexible logistics space?


Greater strategic focus on supply chain risk Although the conversation around supply chains has changed markedly in the space of 9-12 months, supply chain risk remains a strategic priority for global businesses. And whilst, supply chain pressures continue to ease, and retail inventories have continued to trend downwards, supply chain decision makers remain firmly focussed on mitigating supply chain risk, and alternative flow planning.

Greater visibility over supply chain capacity Improvements in data reporting, demand forecasting, and a general focus on supply chain management as a result of heightened supply chain stress has resulted in a better understanding of where capacity within the supply chain is. As a result, pockets of spare capacity within the national supply chain are increasingly being identified by SC M (Supply Chain Management) technology and a new-wave of AI monitoring.

Greater homogeneity within supply chains We are now exiting an era where businesses competed on their supply chain capacity and function. This has come as a result of the investment made by businesses in order to meet fulfilment expectations at a time of rising inventory levels, and also due to the proliferation of large online market places offering fulfilment services. This has driven a wide-spread convergence and drive to quality within the market with supply chain operations looking increasingly similar. As a result, supply chain decisionmakers are becoming more agnostic, focussing efforts on ensuring that fulfilment times and risk appetites can be met regardless of who operates the facility and the potentially competing products stored above and below.

The time is right The emergence of the sector also comes at a time when market conditions remain challenging for occupiers, typified by undersupply and relatively high rental levels as a result. Although this is beginning to shift as the market slows, this means that facilitating and placing additional freight volumes comes at a relatively higher cost than compared to previous periods. The flex logistics market offers a flexible solution for those business with additional supply chain needs, particularly in economic downturns where credit conditions tighten, and scrutiny surrounding capital expenditure grows.

“One of the key challenges in delivering true efficiency within supply chains is that you have a combination of large fixed capacity assets serving a consistently variable volume of product. Virtually all supply chains experience ‘peak’ periods due to short periods of heightened customer demand for product, which, by default, means it is highly challenging to deliver a truly efficient solution as frictional under- or over-capacity is always present. The emergence of a flexible logistics market is highly beneficial to all parties, and will in turn allow businesses to access relevant supply chain expertise and space with relative ease.”

– Michael Carson, Head of Supply Chain & Logistics Advisory - EMEA

The real estate market is no stranger to the emergence of on-demand products, with the evolution of flexible workspace one of the defining drivers of real estate over the last decade. Currently the flexible logistics market remains in its infancy with no prevalent operating model or market leaders apparent, largely operating on an ad-hoc basis relying on the oversight of business development managers and individuals with strong supply chain networks. Whilst we do not expect the flexible logistics market to suddenly re-invent the role of the wider L&I sector, we do expect the flexible logistics market to become a significant tool for both businesses and landlords in years to come. An evolution of the flexible logistics market place is both necessary and likely. To find out more about the sector, and our views on its likely road map please contact us.

Media Contacts

ed bavister
Edward Bavister

Associate, Head of Retail, Logistics and Industrial Research
London, United Kingdom

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Michael Carson
Michael Carson

Edinburgh, United Kingdom


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