Engaging with the diverse range of the workforce in our business in order to broaden our perspective
The CEO Commitments on Diversity are the start of an important journey, one that Real Estate Balance wants to invite you on. 101 senior industry leaders, including SEGRO CEO David Sleath, have signed up to ensure that property is an inclusive, diverse industry where women are supported and encouraged to aim for the top.
Check out how SEGRO is delivering against Commitment 9: Personally engage with the diverse range of the workforce in your business in order to broaden your perspective
How did your organisation implement this Commitment?
In February 2021, we launched Responsible SEGRO, a framework designed to build on existing work about doing the right thing and making a positive impact wherever we operate. Nurturing Talent is one of three priorities within this framework, and its ambition is to have an inclusive and supportive culture with a motivated workforce of talented people that reflects the make-up of the countries that we operate in.
During 2021, we implemented five initiatives, which were also used to engage with colleagues for a wider perspective on this topic:
- Employee focus groups and interviews as part of the National Equality Standard accreditation process. The findings and recommendations from these workshops enabled us to understand where we are today, and what is important for the future, with our diversity D&I agenda. 20% of colleagues across the Group engaged in the sessions.
- For the first time, our employee engagement survey sought views and opinions on diversity and inclusion via an updated question set. 94% responded to our survey.
- Social mobility insights were gained by inviting UK colleagues to participate in a survey organised by the Social Mobility Index. 50% responded with their views on social mobility at SEGRO.
- Two ‘Sofa Series’ seminars took place where colleagues joined a live broadcast to understand more about our Nurturing Talent programme from our CEO, Group HR Director and external speakers. The events also included a live Q&A.
- An online mandatory training course was designed to help colleagues understand the fundamentals of diversity and inclusion. Additional training was arranged for our Senior Manager and Leadership Teams.
What changes did you see in your organisation as a result? What were the outcomes?
Through our Nurturing Talent initiatives, colleagues have been able to engage and feel connected to our D&I programme. Their views and opinions have contributed to our plans, and via our internal communication channels, we have supported the understanding of our priorities, had meaningful conversations about D&I and enabled colleagues to get involved with our initiatives. Some of our successes range from appointing sponsors to lead initiatives such as graduate recruitment, or the 10,000 Black Interns programme, through to appointing steering and working groups on key focus areas such as wellbeing, early careers development, and internships. Other outcomes include:
- Achieving positive engagement and a good understanding across SEGRO of our Nurturing Talent programme.
- Enabling real ‘on the ground’ change through engagement, enthusiasm, and participation of colleagues in our programme’s initiatives.
How did you measure this?
D&I, as part of Nurturing Talent in our Responsible SEGRO framework, is a key strategic priority for SEGRO, and our Leadership teams regularly review progress.
Our initiatives have taken place during 2021 and we are in the process of setting up relevant metrics to monitor our progress, alongside a plan to define how this will be achieved. Metrics will include better understanding of our own D&I data to identify issues or priorities; measures to track the success of our early careers’ initiatives, and other recruitment activity; as well as continuing to provide engagement and feedback opportunities for colleagues.
We’re proud of all the progress made this year and look forward to continuing our journey to see more outcomes come to life during 2022 and beyond.
The investment market is also very strong, Knight Frank forecast a record year across Europe, with €38.3 billion already traded in 2021. Yields of 3-4% are now typical both in the UK and on the Continent, Germany probably being lowest.
The Urban Land Institute and PwC’s benchmark Emerging Trends in Real Estate research, released in November, continues to rank logistics facilities high in the list of the sector’s most desirable asset classes so weight of capital looks unlikely to diminish.
So where is the sub-sector heading in 2022? How does the world of warehouses continue to thrive in an already red-hot market? The re-opening of shops, affordability for occupiers, rising inflation through material shortages and supply chain difficulties potentially, in turn, leading to interest rate rises and, of course, a hugely competitive market for new opportunities are all cited as potential dark clouds on the horizon.
The rise of e-commerce – more recently turbo-charged by the pandemic – kick started the warehouse boom. with the latest iteration, ‘Q-commerce’ - operators like Deliveroo, Getir and Gorillas - generating demand as new entrants (particularly as they partner with established supermarkets), increasing on-line penetration in retailing appears to have no let up.
And other types of customer are also fuelling demand and reducing supply. I’ll pick on two examples. Data centres and creative industries. Netflix, an important new SEGRO customer in Enfield, has taken 250,000 square feet as a content production campus. This is speculatively developed space that would otherwise have been taken by more traditional warehouse users.
With demand so strong and supply of warehousing overall constrained by limited availability of land, a slow planning process and restrictive planning policy and now shortages of materials and labour, which is also pushing up construction costs, the equation can only result in continued rental growth.
This is good news for investors as rising rents continue to underpin low yields. And while that growth is in place, inflation becomes less a threat and more an opportunity. Even an increase in interest rates to dampen inflation (consensus by most economists being only modest rises anyway) is likely to be outweighed by the sheer level of capital looking for a home.
Affordability of warehouse space for occupiers then becomes the risk. Property Market Analysis (PMA) suggests that property continues to be a very small part of overall logistics cost.
Rent typically accounts for less than 5%, with transport at 50%, the carrying of inventory at 22% and labour at 10% (and rising). Occupiers are willing to pay a premium for the best locations because they are crucial to their business.
A company promising delivery within the hour in London, simply cannot lease a warehouse half-way up the M1 because it would torpedo their whole customer proposition.
But a word of caution to those looking at the sub-sector. Not all industrial property is equal. A tertiary, multi-let estate located on the edge of a small market town cannot accurately be described or regarded as ‘urban logistics’.
Its performance will not be driven by the themes I’ve described. Last-mile delivery locations need a large concentration of customers in their immediate radius and road congestion to inhibit easy access to them. That’s what justifies their high rents and valuations.
Overall, the outlook for warehouses remains extremely strong. The historic image of industrial property as real estate’s `Cinderella’ sector is certainly over, she really can stay at the ball!
Article first published in Property Week