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If anyone has driven up the M1 recently, they cannot fail to have noticed the sight of cherry pickers and steel frames popping up alongside the main route out of London to the Midlands and beyond.

For those in the know, the sheer amount of plant, steel and cladding that peppers the stretch of motorway north of Luton and before the turn-off for the M6 means only one thing: distribution warehouses.

And the chances are that, where there is a cluster of industrial buildings going up 鈥� sometimes known by the slightly dismissive shorthand of 鈥渟heds鈥� 鈥� Glencar will be involved.

If there has been one benefit of Brexit, then, says the firm鈥檚 chief executive Eddie McGillycuddy, it is the explosion in the number of distribution centres and warehouses that are used to stock everything from clothes to food to medicines. 鈥淚t used to be about just-in-time delivery, now it鈥檚 just in case,鈥� the Irish-born north Londoner says.

According to the Office for National Statistics, the warehouse and logistics industry was worth 拢5.59bn last year, the highest figure since it started measuring the sector鈥檚 value in 1985.

Underlining the boom, driven by the explosion of online shopping during the lockdowns of 2020 and 2021, was the 150% leap in value on the 拢2.29bn recorded in 2020.

Based in St Albans, Glencar, which takes its name from the County Kerry village where McGillycuddy was born, has been in the thick of this boom.

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McGillycuddy says the current demand for industrial and logistics 鈥� 鈥淚 and L鈥� as he calls it 鈥� began with Brexit.

鈥淧eople store a lot more onshore now, they manufacture more onshore. People are scared of borders: will stuff get in? am I going to be taxed more? The demand [for space] is significant.鈥�

A father of four, he has seen the growth of online shopping first-hand with deliveries to his Hertfordshire home, especially since the pandemic. 鈥淲e get boxes and boxes of stuff every day,鈥� he sighs.

Glencar was set up six years ago when McGillycuddy and fellow director Chris Gleave left McLaren after racking up 26 years at that business between them.

鈥淲e left on good terms,鈥� says McGillycuddy, whose father Pat, now Glencar鈥檚 chairman, helped to set up logistics firm Gazeley and was in charge for 30 years before it was bought by Singapore investor GLP five years ago.

McGillycuddy says he had an idea for a business opportunity but there was insufficient space to grow it at McLaren. 鈥淚鈥檇 always wanted to set up my own business. I approached Chris and asked if he wanted to come with me. I said, 鈥楾his is what it鈥檒l be called, this is how we鈥檒l do it鈥�.

鈥淲e resigned together. We worked out a six-month notice and, at the start, it was just the two of us.鈥�

The pair were retained by McLaren to close out contracts. 鈥淲e were ramping up Glencar while getting paid by McLaren. It was all done on good terms and the customers we knew at McLaren 鈥� like Access Self Storage and Ocado 鈥� we still work for.鈥�

Now with a workforce of 350 people, the niche that McGillycuddy had spotted was small-value contracts for warehousing space, the range between 拢5m and 拢10m in an area where jobs can be much more than that.

Its typical job is around 拢12m but its largest to date is a 拢135m vaccines manufacturing and innovations centre for the government at the Harwell Science Campus in Oxfordshire. It was deemed so important that then prime minister Boris Johnson paid a visit in September 2020 to see how construction was faring.

鈥淚 don鈥檛 see demand drying up,鈥� says McGillycuddy, pointing out that commercial developers such as British Land, better known for their retail and office developments, are repositioning to get more of the logistics market while Slough Estates, now known as Segro, is working with Berkeley Homes subsidiary St George on a multi-storey distribution hub, the first of its kind, at Park Royal near the Ace Caf茅 鈥� a well-known hangout for bikers 鈥� on the North Circular Road in north-west London.

He says warehousing is now less about the large space, known in the game as customer fulfillment centres which would typically be around 600,000sq ft, and more about the smaller sites, the last-mile hubs of possibly no more than 20,000sq ft from where stock is sent for same-day delivery.

McGillycuddy sees more demand for last-mile logistics 鈥� storage space built in the middle of towns and cities for products then dispatched to locations within a few miles 鈥� and more multi-storey space given that the warehouses springing up beside places like the M1 are being built on green-belt land. 

Where people were borrowing to fund, they鈥檙e not getting that funding at the moment. It was practically free, but now it鈥檚 not 

Eddie McGillycuddy, founder and CEO, Glencar Construction

The concept of 鈥渂eds on sheds鈥� 鈥� where residential is put on top of distribution centres 鈥� is also being looked at, although worries persist about noise levels given the 24-hour nature of the hubs.

But, at some stage, the country鈥檚 rampant demand for storage space will ease  and, to this end, Glencar is looking into other sectors such as data centres. The firm is currently bidding for three 鈥� two in the South and one in the Midlands.

鈥淚t鈥檚 a growth sector,鈥� says McGillycuddy. 鈥淭here is a lot of demand [for data centres鈥� services] but the infrastructure isn鈥檛 there. There needs to be more in the South and London. A lot of housing is being delayed because of a lack of power.鈥�

McGillycuddy and Gleave worked on data centres while at McLaren but the area is new to Glencar, where its rivals include familiar names such as ISG and Mace as well specialists such as Irish firms John Paul Construction and Mercury Engineering.

鈥淥n a data centre, you need to partner with an M&E firm,鈥� says McGillycuddy. 鈥淭hey tend to be smaller than a warehouse for a company like, say, Amazon but the fundamentals are the same. It has a steel frame, construction is around 12 months and then there is the fitting out.鈥�

Life sciences, too, are another area that Glencar is looking at and it considered the Merck building job, which will see an Access self-storage unit opposite King鈥檚 Cross station in London turned into a 10-storey healthcare complex designed by AHMM, but the firm decided the scheme, which has an overall cost of around 拢300m, was too big.

With offices across the Irish Sea in Dublin and Kerry, it is also looking at work in Ireland, including a handful of logistics jobs around the Dublin area.

In its last set of filed accounts, Glencar posted a turnover of 拢160m, but this year the figure is expected to have jumped to 拢417m by the time it files its accounts in the next few weeks. Next year it is expecting income to be between 拢550m and 拢600m. Workloads, then, seem to be holding up although, at first glance, margins appear wafer-thin.

The firm is expecting to post a 拢700,000 pre-tax profit this year but says its bottom line has been squeezed by investment in new staff and IT, as well as being caught out by several fixed-price jobs, agreed last summer, which saw their budgets blown as the cost of materials including concrete, rebar and cladding skyrocketed earlier this year.

Several subcontractors also went under, which saw Glencar having to pick up the pieces. But it is aiming for margins of 1% to 2% in the current financial year and 2% and over in the following 12 months. McGillycuddy points out that the firm is also cash-rich enough to make a 拢1,000 cost-of-living payment to staff this month.

But he cautions that the affordability of schemes might become more difficult in the coming year as the cost of borrowing money goes up 鈥� pointing out that US investors appear the most likely to sit on their hands. 鈥淲here people were borrowing to fund, they鈥檙e not getting that funding at the moment,鈥� he says.

鈥淚t was practically free but now it鈥檚 not. Those that have money will carry on developing 鈥� that鈥檚 what we鈥檙e hearing.鈥�

We used to call them crinkly tins but the one at Park Royal looks like a central London office block. It鈥檚 got 23 different facade treatments. They can鈥檛 just be big, square boxes anymore

Chris Gleave, founder and director, Glencar Construction

 

McGillycuddy says that next year some projects might take longer to get going and planning remains an issue. Gleave adds: 鈥淚t is a big sticking point and, in the past year it has got worse. Planning departments are under-resourced and can鈥檛 cope with so much demand.鈥�

Glencar says it has an eye on workloads for 2024 and says sectors such as data centres and life sciences are more recession-proof. 鈥淏orrowing money is going to cost more and those sectors are more resilient,鈥� McGillycuddy says.

The firm has also moved into film studios, which is a sector benefiting from tax relief. Its current jobs include work for Soho Studios and Ealing Studios.

But, like many, McGillycuddy and Gleave have worries about who will do all this. While Brexit has helped to create a boom in storage space, so it has squeezed labour, with many firms finding that workers went back home, especially to eastern Europe.

鈥淭here are struggles with roofers and cladders. A lot of the dry liners have not returned,鈥� Gleave says.

Glencar鈥檚 average payment time is 35 days and McGillycuddy says some firms have requested that they be put on two-week payment runs. 鈥淚f they need help, we will do that and also if they鈥檙e a long-term supply chain partner. If they need cash in the bank to buy materials, then fine. We would not get repeat business if our supply chain was not performing.鈥�

While industrial and logistics is seeing more two-stage bids, the majority of procurement is still single-stage. 鈥淚t鈥檚 quite competitive,鈥� concedes Gleave. 鈥淭here are still guys who will cut their own throats to win a job.

鈥淔ive years ago, it was all single-stage but I think clients are realising that to lock in delivery you need two-stage.鈥�

Clients are also realising that the warehouses need to look less like, well, sheds in order to attract people to work there. Chetwoods has designed a warehouse and office scheme at Nuneaton near the M6 in Warwickshire that developer Baytree says will include 鈥渆xercise equipment, edible landscapes, outdoor recreation places and reindeer moss walls鈥�.

Gleave adds: 鈥淲e used to call them crinkly tins but the one at Park Royal [designed by Michael Sparks Architects] looks like a central London office block. It鈥檚 got 23 different facade treatments. They can鈥檛 just be big, square boxes anymore.鈥�