What is hindering your market at the moment?

The time taken to get deals done. It seems to be taking far longer for occupiers to make decisions about committing to a new project, such as relocating or securing a new facility. There has definitely been an uptick in the number of active requirements from occupiers since the beginning of the year, however, there is now more technical and financial due diligence earlier on in the process. This causes delays between the initial viewing stage and engagement about terms.

Whilst there is still some uncertainty in the market, and therefore we appreciate that companies need to get approval before committing to relocation expenses, we anticipate that once there’s some economic stability, the pace of decision-making will accelerate. We are expecting this shift to be later in 2024– particularly when supply begins to tighten.

What opportunities are you seeing in your market at the moment?

I feel like a slightly broken record, but the much-anticipated opening of Junction 1 on the M49 will significantly improve access to Severnside. This “ghost junction” has been promised for almost a decade, attracting major occupiers to Avonmouth, including Amazon, LIDL, The Range and DHL. As a result, it has already become an established distribution hub and is considered the gateway to the South West and South Wales. However, the delayed opening of the junction has likely hindered rental growth compared to other regional distribution centres.

The junction is expected to open in summer 2025 once the local authority completes the link road, and we’re confident that Severnside will become a significant growth market.

What’s the biggest change you have seen in your sector throughout your career?

The scale of industrial and warehouse buildings has grown dramatically over the past decade. When I first started in the industry around 12 years ago, a 100,000 sq ft warehouse was considered large. Whereas we’re now more frequently dealing with units in excess of 300,000 sq ft and we’ve been involved in handling several transactions over 1,000,000 sq ft over the last few years – the most notable being the 2,200,000 sq ft Amazon depot in Swindon, where we acted for Panattoni.

This growth is driven by the rise in online consumer spending and the pursuit of efficiency by third-party logistics providers and retailers. Consolidation enables the processing of a larger volume of products, whether for a single retailer or within a multi-user facility.

Looking further afield across Europe, XXL warehouses (over 500,000 sq ft) now account for around a quarter of the total take-up compared to approximately 10% a decade ago. With the help of advanced technology, warehouses are now able to handle larger volumes of goods, reduce errors, and improve overall customer satisfaction. It’ll be fascinating to see how warehouse sizes evolve by 2035 after another decade of advancements in the logistics sector!

What are your predictions for the next 12-18 months, in your sector?

In the first half of this year, the market was weighted in favour of tenants, allowing them to secure more competitive terms, including lower rents and rent-free periods for existing spaces. This shift was a direct result of the slower market during 2023, which led to landlords experiencing a longer void period than they had budgeted for, and delayed decision-making by occupiers. Consequently, supply remained high, and no speculative developments were initiated last year.

However, some deals are starting to materialise, and the existing space will finally be absorbed. If these deals eventually complete, the supply and demand dynamic will quickly flip in favour of landlords, leaving occupiers with fewer options to consider for immediate occupation. This shift will put upward pressure on rents, leading to anticipated rental growth towards the end of the year and a reduction in incentives offered.

What has been the best piece of advice that you’ve been given during your career?

I have been given two pieces of key advice:

1. ​ ​ “You make your own luck” – effectively the more proactive and efficient you are with your time, the more fortunate you will become, and luck will fall in your favour.

2. ​ ​ “Never burn a bridge and always be graceful in defeat, it’ll come around to benefit you in the long run” – a client from the US once shared a story where they put their country-wide agency mandate out to tender. One particular property agency firm was confident that they were guaranteed the appointment due to an existing relationship with the client. However, the mandate ended up being awarded to another company. The overly confident agency reacted poorly, damaging their relationship with the client.

It later emerged that the successful agency firm had a conflict that they could not manage, so had to turn down the work. If the bridge hadn’t been burnt with the runner up, they would have secured a guaranteed instruction. Instead, their behaviour led the client to exclude them from future considerations, ultimately awarding the mandate to another agency. The moral is clear: the market is too small, and reputations matter. What goes around comes around, and no instruction is guaranteed until terms are signed.

What is hindering your market at the moment?

The time taken to get deals done. It seems to be taking far longer for occupiers to make decisions about committing to a new project, such as relocating or securing a new facility. There has definitely been an uptick in the number of active requirements from occupiers since the beginning of the year, however, there is now more technical and financial due diligence earlier on in the process. This causes delays between the initial viewing stage and engagement about terms.

Whilst there is still some uncertainty in the market, and therefore we appreciate that companies need to get approval before committing to relocation expenses, we anticipate that once there’s some economic stability, the pace of decision-making will accelerate. We are expecting this shift to be later in 2024– particularly when supply begins to tighten.

What opportunities are you seeing in your market at the moment?

I feel like a slightly broken record, but the much-anticipated opening of Junction 1 on the M49 will significantly improve access to Severnside. This “ghost junction” has been promised for almost a decade, attracting major occupiers to Avonmouth, including Amazon, LIDL, The Range and DHL. As a result, it has already become an established distribution hub and is considered the gateway to the South West and South Wales. However, the delayed opening of the junction has likely hindered rental growth compared to other regional distribution centres.

The junction is expected to open in summer 2025 once the local authority completes the link road, and we’re confident that Severnside will become a significant growth market.

What’s the biggest change you have seen in your sector throughout your career?

The scale of industrial and warehouse buildings has grown dramatically over the past decade. When I first started in the industry around 12 years ago, a 100,000 sq ft warehouse was considered large. Whereas we’re now more frequently dealing with units in excess of 300,000 sq ft and we’ve been involved in handling several transactions over 1,000,000 sq ft over the last few years – the most notable being the 2,200,000 sq ft Amazon depot in Swindon, where we acted for Panattoni.

This growth is driven by the rise in online consumer spending and the pursuit of efficiency by third-party logistics providers and retailers. Consolidation enables the processing of a larger volume of products, whether for a single retailer or within a multi-user facility.

Looking further afield across Europe, XXL warehouses (over 500,000 sq ft) now account for around a quarter of the total take-up compared to approximately 10% a decade ago. With the help of advanced technology, warehouses are now able to handle larger volumes of goods, reduce errors, and improve overall customer satisfaction. It’ll be fascinating to see how warehouse sizes evolve by 2035 after another decade of advancements in the logistics sector!

What are your predictions for the next 12-18 months, in your sector?

In the first half of this year, the market was weighted in favour of tenants, allowing them to secure more competitive terms, including lower rents and rent-free periods for existing spaces. This shift was a direct result of the slower market during 2023, which led to landlords experiencing a longer void period than they had budgeted for, and delayed decision-making by occupiers. Consequently, supply remained high, and no speculative developments were initiated last year.

However, some deals are starting to materialise, and the existing space will finally be absorbed. If these deals eventually complete, the supply and demand dynamic will quickly flip in favour of landlords, leaving occupiers with fewer options to consider for immediate occupation. This shift will put upward pressure on rents, leading to anticipated rental growth towards the end of the year and a reduction in incentives offered.

What has been the best piece of advice that you’ve been given during your career?

I have been given two pieces of key advice:

1.​ ​ ​ “You make your own luck” – effectively the more proactive and efficient you are with your time, the more fortunate you will become, and luck will fall in your favour.

2.​ ​ ​ “Never burn a bridge and always be graceful in defeat, it’ll come around to benefit you in the long run” – a client from the US once shared a story where they put their country-wide agency mandate out to tender. One particular property agency firm was confident that they were guaranteed the appointment due to an existing relationship with the client. However, the mandate ended up being awarded to another company. The overly confident agency reacted poorly, damaging their relationship with the client.

It later emerged that the successful agency firm had a conflict that they could not manage, so had to turn down the work. If the bridge hadn’t been burnt with the runner up, they would have secured a guaranteed instruction. Instead, their behaviour led the client to exclude them from future considerations, ultimately awarding the mandate to another agency. The moral is clear: the market is too small, and reputations matter. What goes around comes around, and no instruction is guaranteed until terms are signed.

What could have the biggest impact on the property industry in the next 10 years?

Technology and artificial intelligence (AI). Automation has already had a significant impact on the industrial and logistics sector to improve consumer convenience, with increasingly more businesses committing expenditure to fully automated warehouse solutions.

AI is also already widely adopted within the supply chains process, but it is rapidly expanding due to an increasing demand for further automation, optimising operations, enhanced efficiency, improved decision-making, and the need for real-time data insights.

A key area of AI evolution within the logistics sector is ‘machine learning’, whereby machines are learning from data without explicit programming. This evolution impacts the sector in several ways:

· ​ ​ Predictive analytics: Utilising historical data and external factors to forecast trends and predict consumer spending habits, allowing businesses to focus on growth areas.

· ​ ​ Natural language processing: Bridging language barriers to enhance customer understand and experience.

This shift from reactive to proactive supply chain management will increase resilience and sustainability in the sector, particularly in lieu of the new volatile, uncertain, complex, and ambiguous (VUCA) world that constantly threatens to disrupt the marketplace.

In terms of future potential for the industry, there’s been considerable excitement around self-driving HGVs and delivery drones, which promise to transform logistics by reducing labour costs and enabling faster, flexible deliveries. While safety regulations pose a challenge, achieving these advancements within the next decade would mark a significant milestone for the sector.

What differentiates the service you offer to your clients, from your competitors?

There is a fantastic group of agents down in the Southwest and South Wales, but what sets us at Colliers apart is our proactive approach to instructions.

Without sounding cliché, we pride ourselves on a “can do attitude” and always go the extra mile for our clients. We work long hours but ensure we do so effectively and efficiently, driven by a commitment to do our absolute best for our clients. After all, repeat business is to the cornerstone of any successful company.

We prefer personal communication over emails, allowing us to thoroughly understand each requirement and business need. Clear and frequent updates are crucial, so we keep our clients regularly informed, enabling them to keep their funds or senior management up to speed with progress.

Finally, we recognise the importance of clear and frequent communication. We provide our clients with regular updates, ensuring they can keep their funds or senior management informed about progress.

The changing demographic within the UK has resulted in a situation where, for the first time, there are more people of pensionable age than there are children under the age of sixteen. This, coupled with the aging workforce in the construction industry, both within the contracting and consultancy markets, means that it is an alarming time for the industry. Satisfying labour workforces and recruitment demands has become a very real and pertinent issue for both contractors and consultancies.

Recruiting people into the industry is not a new challenge, but the changing demographic of the country is exacerbating the problem, requiring immediate attention. ​

Challenges caused by the construction skills shortage

It is essential to view these challenges within the broader context of the changing modern world, including increased flexible working, EU worker policy, the implementation of modern construction methods, and the efficiencies being driven through these technologies.

However, in the short to medium term, the aging workforce is straining the labour supply, leading to increasing labour costs. Wages have risen by 6% from a shortage of skilled tradespeople.

This is putting upward pressure on outturn construction costs as clients and developers strive to make their schemes viable. ​ Contractors are grappling with inflation, supply chain disruption, and a diminishing supply of workers to choose from as costs increase. Some contractors have even been forced to cease trading due to these challenges. All this has been too much for some contractors and we have seen some notable companies cease trading.

In terms of growth, the UK will look to construction to kickstart the economy in Q3 2023 and beyond. However, the drain of resources will put sustained growth at risk and make it difficult to meet the aforementioned numbers over the next few years.

Construction has historically leaned on workers from the European Union to satisfy this demand but according to the ONS, between 2020 and 2017 there was a 42% decline in the number of EU workers, compared to just a 4% drop from that of UK workers.

It remains to be seen what the effect of the ‘Back to Work’ budget will have on the industry after the government has relaxed migration requirements for key workers and whether this will mitigate some of this decline.

What are some of the schemes trying to help?

The government is trying to do its bit by the introduction of schemes to flood the younger end of the industry with the next generation. One such initiative is the introduction of the T Level in construction. This new technical qualification can be pursued after GCSEs and is the equivalent of 3 A Levels. Schemes like this can be used in collaboration with companies to meet their resourcing requirements and prepare the apprentices for the workplace. The courses are two years long and include nine weeks minimum working with an employer as an industry placement.

Although similar to apprenticeships, T levels will be more classroom-based, and give young people a route to academic achievement in a technical role.

In addition to the T level, there is the Construction Skills Fund, funded by the CITB, which aims to set up training hubs across the country. The funding supports live projects, providing to onsite experience to nearly 20,000 participants. Major contractors Wilmott Dixon, Balfour Beatty, and Morgan Sindall are just some of the major players in this scheme and have directly hired individuals for various roles.

Opportunities to help mitigate the skills shortage ​

The skills shortage is also impacting the consultancy sector of the industry. There is still a large proportion of the workforce that is aging, and the industry needs to do more to attract young talent.

The consultancy workforce has still seen the effects of Brexit and Covid 19; the exodus of EU workers and ‘big resignation’ of the older workforce after the pandemic. This is compounded by the globalisation of the construction industry and the attractiveness of international markets such as Australia, New Zealand, and USA in drawing talent away from UK consultants.

To address this, the Colliers Bristol Project and Building Consultancy team are actively contributing to rebalancing the scales by having over 25% of the team composed of apprentices. Two of them are pursuing their education at the University College of Estate Management, while the other two are enrolled in the local University of the West of England. ​

Additionally, there are a further two apprentices within the Bristol office that are part of the larger Colliers ‘Emerging Talent’ programme’. ​

Applicants are being encouraged for the next intake in 2024 and applications will open in autumn 2024.

In conclusion, there is a growing recognition within the industry of the challenges we currently face, particularly in the short to medium term, concerning the skills shortage. Initiatives like the government's T level and CITB Construction Skills Fund serve as positive starting points. However, it is now the responsibility of companies to drive their own programs, such as Colliers' Emerging Talent, to address these challenges.

The industry must adopt a cohesive and collaborative approach to: Attract skilled workers already working elsewhere in the industry

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The changing demographic within the UK has resulted in a situation where, for the first time, there are more people of pensionable age than there are children under the age of 16. This, coupled with the aging workforce in the construction industry, both within the contracting and consultancy markets, means that it is an alarming time for the industry. Satisfying labour workforces and recruitment demands has become a very real and pertinent issue for both contractors and consultancies.

These are the numbers that the UK construction industry is faced with currently.

Recruiting people into the industry is not a new challenge, but the changing demographic of the country is exacerbating the problem, requiring immediate attention. ​

Challenges caused by the construction skills shortage

It is essential to view these challenges within the broader context of the changing modern world, including increased flexible working, EU worker policy, the implementation of modern construction methods, and the efficiencies being driven through these technologies.

However, in the short to medium term, the aging workforce is straining the labour supply, leading to increasing labour costs. Wages have risen by six per cent due to a shortage of skilled tradespeople.

This is putting upward pressure on outturn construction costs as clients and developers strive to make their schemes viable. ​ Contractors are grappling with inflation, supply chain disruption, and a diminishing supply of workers to choose from as costs increase. Some contractors have even been forced to cease trading due to these challenges. All this has been too much for some contractors and we have seen some notable companies cease trading.

In terms of growth, the UK will look to construction to kickstart the economy in Q3 2023 and beyond. However, the drain of resources will put sustained growth at risk and make it difficult to meet the aforementioned numbers over the next few years. ​

Construction has historically leaned on workers from the European Union to satisfy this demand but according to the ONS, between 2017 and 2020 there was a 42 per cent decline in the number of EU workers, compared to just a four per cent drop from that of UK workers.

It remains to be seen what the effect of the ‘Back to Work’ budget will have on the industry after the government has relaxed migration requirements for key workers and whether this will mitigate some of this decline.

 

What are some of the schemes trying to help?

The government is trying to do its bit by the introduction of schemes to flood the younger end of the industry with the next generation. One such initiative is the introduction of the T Level in construction. This new technical qualification can be pursued after GCSEs and is the equivalent of three A Levels. Schemes like this can be used in collaboration with companies to meet their resourcing requirements and prepare the apprentices for the workplace. The courses are two years long and include nine weeks minimum working with an employer as an industry placement.

Although similar to apprenticeships, T levels will be more classroom-based, and give young people a route to academic achievement in a technical role.

In addition to the T level, there is the Construction Skills Fund, funded by the CITB, which aims to set up training hubs across the country. The funding supports live projects, providing to onsite experience to nearly 20,000 participants. Major contractors Wilmott Dixon, Balfour Beatty, and Morgan Sindall are just some of the major players in this scheme and have directly hired individuals for various roles.

Opportunities to help mitigate the skills shortage ​

The skills shortage is also impacting the consultancy section of the industry. There is still a large proportion of the workforce that is aging, and the industry needs to do more to attract young talent.

The consultancy workforce has also seen the effects of Brexit and Covid 19; the exodus of EU workers and ‘big resignation’ of the older workforce after the pandemic. This is compounded by the globalisation of the construction industry and the attractiveness of international markets such as Australia, New Zealand, and USA in drawing talent away from UK consultants.

To address this, the Colliers Bristol Project & Building Consultancy team are actively contributing to rebalancing the scales by having more than 25 per cent ​ of the team composed of apprentices. Two of them are pursuing their education at the University College of Estate Management, while the other two are enrolled in the local University of the West of England. ​

Additionally, there are a further two apprentices within the Bristol office that are part of the larger Colliers Emerging Talent programme. ​

Applicants are being encouraged for the next intake and applications will open in autumn 2024.

In conclusion, there is a growing recognition within the industry of the challenges we currently face, particularly in the short to medium term, concerning the skills shortage. Initiatives like the government's T level and CITB Construction Skills Fund serve as positive starting points. However, it is now the responsibility of companies to drive their own programs, such as Colliers' Emerging Talent, to address these challenges.

The industry must adopt a cohesive and collaborative approach to:

Attract skilled workers​ alreadyworking else where in the industry

Attract people​ back to the industry that have now left

Shortening qualification periods​ through intense training​ to meet demand quicker

Improving​ the retention of staff​ within the industry

Striving to increase productivity​ through innovation​

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Alex Vacher​
Director
Cost Management alex.vacher@colliers.com

Alex is ​ Director and Chartered Quantity Surveyor with over 10 years of industry experience in Cost Management and Quantity Surveying.

Alex is passionate about delivering excellent commercial advice for our clients for them to obtain best value. His focus is on how he can apply commercial acumen to add value for our clients through all stages of the project.

As the head of the Cost Management team at our Bristol office, Alex assumes the responsibility of leading a highly skilled and dedicated team, ensuring the delivery of outstanding results for our esteemed clientele.

 

Alex Vacher​
Director | Cost Management

Alex is ​ director and Chartered Quantity Surveyor with over 10 years of industry experience in Cost Management and Quantity Surveying.

Alex is passionate about delivering excellent commercial advice for our clients for them to obtain best value. His focus is on how he can apply commercial acumen to add value for our clients through all stages of the project.

As the head of the Cost Management team at our Bristol office, Alex assumes the responsibility of leading a highly skilled and dedicated team, ensuring the delivery of outstanding results for our esteemed clientele.