Construction is an area of the UK industrial market that is currently booming, and this has largely been driven by a continual growth of online retail. Interestingly enough, a report by Savills in April 2021, confirms that there has been a constant demand for industrial property, which is evidenced by fourth quarter2020 investment volumes reaching £5.6 billion – the highest quarterly total recorded since 2000.
Investor demand for industrial property continued into first quarter of 2021, with funding volume reaching £3.2 billion – the third highest quarterly total in the last twenty years. It appears that retailers are moving away from building mammoth, regional distribution centres, and instead choosing to favour smaller facilities that are between 5,000m2 and 25,000m2, and closer to population hotspots. The clear advantages that small industrial units can offer, include:
In this article we highlight the key factors to consider, when project managing the construction of a warehouse in the UK.
The management of industrial building project will generally involve obtaining design, architectural, planning and legal advice, and sourcing and monitoring trusted trade contractors to carry out the construction work. Effective management not only guarantees that a project is completed to a specified timescale, budget, and within scope, but it also ensures the safety and quality of the whole process.
A detailed brief is essential to a successful project and should be developed with input from all relevant parties. From the onset, it’s important to establish clear lines of responsibility and communication regarding everyone who is involved, and this should be ongoing from initiation through to completion.
Specifications and design considerations for the brief/plan should include:
Defining the budget is a key principal of a successful project and one of the most fundamental parameters when outlining a construction project plan. It’s imperative to take preventative measures to avoid unnecessary waste as well as correctly identifying the areas of budget allocation. Planning cost estimations through each phase of the project is a challenging task but when done correctly, is definitely one of the keys to success. At an early stage, a basic cost per square metre/ft can be established for the warehouse building whilst taking into consideration, the requirements of the brief.
Unit rates can be obtained from the Building Cost Information Service (BCIS) or a similar cost database. Current rates at third quarter 2021, based on a South-East location for warehouse/store building only, over 2000m2 in size, are between £694 to £776m2 mid quartile cost collected by the BCIS. The costs exclude external works, which can typically be 15-25% of the building cost, fit-out, heating, non-fixed fittings, tenants’ specified work, enabling works and demolitions, professional fees and VAT.
It may be surprising to know that capital allowances are a common form of tax relief on small industrial units. In addition, although the Industrial Building Allowance was abolished in 2008, clients may still be eligible to claim for Plant and Machinery allowances – these are also available on equipment, furniture and all qualifying fixtures installed within commercial property. In addition to capital allowances, developers and owner/occupiers may also claim tax relief through Land Remediation Relief (LRR). This is an enhanced corporation tax relief of 150 percent for qualifying expenditure on cleaning up contamination in land or buildings.
It’s important to stress that throughout the whole process, the budget should be kept under constant review by the quantity surveyor, with the help of the project manager.
The project manager may be responsible for assembling key personnel and will utilise their strengths to carry out various work and specific tasks involved in a warehouse project. Thus providing the necessary expertise that will contribute to the overall project objective. It is usual for the following roles to be appointed when implementing a warehouse building project:
Professional fees can be expensive, but it is important to remember that the lowest fees are not always the best value for money. By cutting corners in this area, you risk adding time and money to your budget further down the line by having to fix something that should have been picked up in the beginning. Don’t be tempted to directly employ a building contractor, as this could potentially expose the developer or client to risk. Professional services obviously vary but at present are approximately 10% of the construction cost. The procurement of collateral warranties in the favour of funders or tenants will most likely be needed, so ensure that these are identified from the offset, along with appropriate levels of professional indemnity insurance cover.
Industrial warehouse design will generally comprise of a reinforced ground-bearing slab, steel portal frame with concrete pad and perimeter strip foundations, aluminium cladding systems to roof and walls, external blockwork cavity walls to cladding rail height, internal blockwork walls, steel personnel doors, loading doors, WCs, basic lighting and natural ventilation. External works include access roads, service yard, pedestrian areas, car parking, and storm and foul drainage. Electrical charging points may also be required for battery powered vehicles.
For large warehouses split into smaller units, jumbo stud walls typically divide the units, which may require steel mesh built into the walls for additional security.
Security is an important factor when designing warehouse buildings and may include gated access, CCTV and intruder alarms within the building. For buildings that manufacture flammable goods or the storing of certain materials, may necessitate the need for sprinklers.
The project manager will need to ensure the design criteria is first established in the brief and then further considered and managed through each design development stage of the building procurement.
Planning constraints and the time needed to obtain permission can be onerous, therefore the project manager will need to consider whether the architect is suitably experienced and best placed to deal with planning permission or to engage the services of a specialist planning consultant.
Planning permission is usually needed for development that “encompasses the carrying out of building, engineering, mining or other operations in, on, over or under land, or the making of any material change in the use of any buildings or other land”.
The project manager together with the architect or planning consultant should check current planning policies, as some commercial developments may be able to proceed under permitted development rights and will therefore not require planning permission. New industrial buildings with an intended structure over 5m in height or 200 square metres of floor space, require planning permission, besides this exception, permitted development right may be used.
Outline planning consent may be appropriate in order to gauge if the size and type of development will be accepted but is not suitable where a change of use is needed. Outline planning permission is also subject to reserve matters and cannot start until these have been approved. However, it is worth noting that for any owner/occupier wishing to purchase a plot from a developer in order to construct an industrial unit, then it is highly likely that outline planning consent is already in place.
Full planning permission is far more complex and requires a greater level of detail and information to be provided in the submission. A few things for the project manager and team to consider, include:
It is worth noting that building regulations will apply to all new industrial buildings.
The developers’ main aim is a quick construction with time certainty and cost effectiveness, which are key points of construction management, and design and build.
Most developers who operate within the industrial sector are experienced and have several trade contractor relationships. Construction management is ideal for them as it is a highly flexible procurement method, which involves individually appointing trade packages, whilst all cost savings return to the developer. Other benefits of construction management include fast track programme – as there is no need to tender the works to a main contractor first, design flexibility, quality of product, and cost savings due to competitive tender of trade packages and the exclusion of main contractor overheads and profits.
Design and Build also offers a fast-track programme by overlapping design and construction activities. If there are no employer changes, Design and Build offers developers, cost certainty through a lump sum contract and a single point of responsibility for design and construction. What they offer is a low risk for developers but ultimately, they pay for that factor in the lump sum price. This method of procurement can lead to low quality products and a shoddy build, as it enables the cheapest route to meet contract specification. It’s wise to have strong ‘Employer’s Requirements’ as these are fundamental when it comes to identifying the exact specifications and needs for tendering the works. An Employers Agent will be required under Design and Build to administer the building contract.
Covid-19, Brexit and huge demand have all combined to drive up prices for the essential materials the industrial sector desperately needs. Material demand has risen, yet supplies have slipped and prices are still on the increase. *According to IHS Markit, February saw transport delays and stronger demand conditions, stretched global supply chains, greater shipping charges and rising commodity prices. All this has attributed to the sharpest increase in average cost burdens across the construction industry, since the summer of 2008.
*PCB today, 2021 building materials shortage: What is the price of building materials?
However, the aggregated construction material price index of ‘All Work’ annual increase of 14.7% (June 2020 to June 2021) hides larger price movements for some specific products and materials. The greatest price increases that affect the industrial sector are:
In addition to the above two, general steel materials used in warehouse construction have increased and are harder to procure, for example: trapezoidal metal decking and metal cladding panels for roofs and walls.
Given the present lack of design alternatives, it is a key objective to consider the current price of materials and the potential rise of cost during the project lifecycle when budgeting and cost estimating.
Closely linked to the reasons for material price increase are the lead-in periods for procurement of materials. Structural steel frame lead-in periods have increased from 17 weeks in 3Q20 to over twenty weeks on average. Trade contractors currently advise that certain manufacturers of cladding panels state that they are unable to take on any more orders and cannot deliver products before 2022.
Now, more than ever, the project manager should consider the lead-in periods for design, approvals, fabrication and installations of key trade contract work packages in the preparation of a Project Programme. It’s also highly advisable that the project manager engages early with trade contractors, to establish the present lead-in period to minimise the risk of assumptions made in the programme. The said document should ideally be presented in GANTT chart format comprising design, procurement, tendering and construction activities.
During the Construction Phase, the project manager’s role will mainly involve contract administration (referred to in ‘Employers Agent’) duties under a Design and Build procurement or liaising with the construction manager under construction management procurement.
Key responsibility of the project manager, assuming they are undertaking Employers Agent tasks, will include:
Evolution5 is a professional consultancy offering project management, employers’ agent, construction management, quantity surveying and principal designer services for industrial projects across London and the South East
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