Manchester’s moment

posted on 7th June 2018
Construction will start shortly on MAG’s World Logistics Hub and Airport City developments, the first significant attempt to build an integrated business and logistics district around a major UK airport. Will Waters talks to MAG Airport City director John Atkins

Despite Heathrow’s role as a leading international aviation hub, UK airports have generally taken a rather piecemeal approach to air cargo infrastructure development over the years, and so the advanced plans for a ‘World Logistics Hub’ at Manchester Airport stand out as a rare attempt to create an integrated airport logistics complex. Admittedly, the ambitiously named development is not on the same scale as a Dubai Logistics City, but the £100 million World Logistics Hub project is part of airport owner MAG’s broader £650 million Airport City development and looks set to build upon Manchester’s role as the UK’s number two bellyhold cargo airport.

Planning permission was granted in January for the Airport City project, which is i tself the focal point for a wider initiative, the government-designated Greater Manchester Enterprise Zone, which aims to transform Manchester Airport from a regional transport hub into an international business destination in its own right, attracting global businesses that would not have otherwise located in the region, or even the UK. The Airport City Manchester development is the first significant attempt in the UK to build an integrated business district around a major airport, featuring new offices, industrial units, hotels, and retail and leisure facilities, in addition to the new logistics infrastructure. It is intended to compete with existing airport city or ‘aerotropolis’ projects in Europe, such as Amsterdam, Frankfurt and Copenhagen – creating a hub for multi-national businesses that require access to a major city and international markets, to move people and goods across the world.

Outline planning approval for the World Logistics Hub (WLH), which forms the southern part of the development, was granted last November by Manchester City Council, and construction work on the underlying infrastructure is due to start this spring, continuing for nine to 12 months. MAG’s Airport City director John Atkins says: “In the meantime, we are talking to potential occupiers who are looking to either acquire or build, or for us to build specific proposals on the site, which would be going on in parallel with some of the infrastructure provisions.” The first facilities are expected to be operational early next year.

The plan is to create up to 130,000 square metres of high-quality landside logistics facilities within a 36.9-hectare site, linked to the airport’s existing ‘World Freight Terminal’ area, to create “a world-class logistics district, providing facilities for assembly and processing activities for freight forwarders and other logistics business, with easy access to the airport’s apron, train station and the UK motorway network”. The development will include a mix of medium-sized and small logistics units, ranging from 20,000 square metres to around 750 square metres.

Atkins says the WLH is effectively an extension of the existing cargo centre. “It is literally the other side of the road, and so it is linked into the existing airside gate,” he says. The existing freight terminal is home to five cargo handling companies and around 50 freight forwarding and logistics providers, as well as airline offices, sales agents and EU-approved Border Inspection Post facilities.

Strong interest

He says there has been strong interest. “We have got ‘heads of terms’ with two occupiers and we are down to a shortlist of three options for a third occupier,” says Atkins. All three of these potential occupiers are multinational third-party logistics providers (3PLs) wanting warehousing, office and yard space for their logistics operations totalling 5,000-15,000 square metres.

Individual planning applications will be dealt with on a plot-by-plot basis via a simplified planning process, although effectively the scheme has planning consent already, says Atkins. “The parameters have been set out within the original consent, so as long as the schemes are developed within those constraints in terms of size, up to 14 metres in height, we effectively are able to develop within that footprint of 1.4 million square feet (130,000 square metres). We are expecting to be working on the first schemes later this year and we would expect to see buildings operational by the end of the financial year 2013 to 2014, so by spring 2014.”

Atkins believes interested freight forwarders and 3PLs will view the facilities on several levels. “At the highest level they see it as a strategic site, where they may be linking their operations at Heathrow to a satellite location at Manchester. I’m not suggesting that it’s a rival to Heathrow, but there is limited space to expand at Heathrow, and many of the same operators are operating out of Manchester, which is the second largest bellyhold freight airport in the UK.”

Within a two-hour drive of 60% of all UK businesses and a consumer market of over 24 million, forwarders may route some business through Manchester that could otherwise be flown out of the southern English airports.

“But they will also be looking at it from a local perspective, as a high-quality logistics space with links to an airport, within the Manchester conurbation. If you do a search, there are limited opportunities in that south-west quadrant of Manchester, with links with the M56 and the M6.”

He expects the facilities will be used mainly, but not exclusively, for the air freight business of forwarders and 3PLs. “But most of these businesses don’t tend to be single mode anyway, so what you tend to find is that they will have a range of activities that they’re providing out of a hub-based location such as an airport, which might include their air business but may also include some sea freight business and high-value logistics elements.  That is true of the existing cargo area as well, in our experience; a majority of those operators will have a mixed-mode operation – apart from the transit sheds that are just dealing with freight going into and out of the airside areas.”

Meaningful network

Manchester is clearly not expecting to rival an airport such as Heathrow in terms of size or airline connections – its annual cargo volumes of around 110,000 tonnes are roughly one tenth of those of Heathrow. Nevertheless, the airport has built up a meaningful network of long-haul bellyhold cargo capacity, in addition to a handful of freighter destinations. Scheduled freighter services are currently limited to thrice-weekly Cathay Pacific flights to Hong Kong and Lufthansa Cargo’s thrice-weekly connection between Houston, Dallas-Fort Worth and Frankfurt. But the airport has a total of 69 scheduled long-haul flights per week flying ‘east’ to the Middle East and Asia, and a total of 50 scheduled long haul transatlantic flights.

Long-haul passenger services east include Emirates flying three times daily to Dubai; Etihad twice daily to Abu Dhabi; Turkish twice daily to Istanbul; and daily Qatar services to Doha. Asia services include Singapore Airlines six days a week and a total of seven weekly connections with Pakistan via a combination of Pakistan International Airlines and Air Blue. Transatlantic flights include daily connections with Chicago and JFK (American), Atlanta (Delta), Newark (United), and Philadelphia (US Airways). “So there is good route development,” says Atkins. “There is a plan to attract a Chinese airline as well.”

European model

Atkins says the wider Manchester Airport City development has been designed around successful models such as Schiphol, Munich, Copenhagen and Frankfurt. “So we have been following a European model, which is building a mixed-use airport city out of an existing substantial airport with over 15-20 million passengers,” he says. That has applied both to the logistics hub and the wider airport city. “The world logistics hub sits within that wider proposition,” says Atkins.

So, with the southern English airports renowned for making cargo a poor second priority to passenger, is there an opportunity for a regional airport with a significant existing network to offer something different, with a model that is more logistics focused?

Atkins responds: “If you look at the Heathrow model, that is a hub airport and so it is difficult to compare that with Manchester, because their scale is different and the purpose is different. Manchester is mainly a bellyhold-driven airport. Having said that, we have got two runways and therefore we do have some availability of slots for freighters, so we have a mixed opportunity for freighters and for bellyhold freight. So we have got capacity.”

But Manchester’s role will remain different from that of East Midlands airport, the integrator-specialist airport also owned by MAG. Although there could be elements of integrator traffic at Manchester, this is not essential to make the WLH viable.

“It is difficult to see where we would find the space to support a full-European-scale integrator hub within the airport site at Manchester, just because of the dedicated aprons that are required, and the land that would be required in order to achieve that,” he says. “We have got more of the space available to do that within an East Midlands model rather than a Manchester model. Having said that, there are some sub-elements to the integrator model that you could see operating, but it would be a more satellite type operation.”

Atkins expects to have the whole WLH filled within seven or eight years. “One of the things that we will be looking at is the opportunity to potentially do some speculative development, depending on where we get to with the partner process,” says Atkins. “We will be working with a partner, so clearly that needs to be a joint decision. But I’ll be part of the process.”

MAG is seeking a joint venture co-investment and development partner or partners for the Airport City project, and in December appointed leading global property advisor, CBRE, to manage the tender process on its behalf.

Economic environment

Atkins says the ambitions of the projects are in no way dimmed by the current economic environment. “We announced the project two years ago, and so its origins are more within the current circumstances, which you could argue are improving rather than getting worse,” he points out.

There are lofty local ambitions to potentially boost exports from the Greater Manchester region from the commercialisation of the wonder-material Graphene, which was originally isolated at nearby University of Manchester, and an initiative to revive Britain’s textile trade in Manchester with a re-born so-called ‘Cottonopolis’. Moves to ‘rebalance’ the UK economy as a whole in favour of manufacturing and exports may also bring benefits to the north-west England region around the airport. Atkins believes the region will see growth, but says the success of the WLH project is not dependent on the success of any specific initiatives.

“I think it is more about logistics supply chains throughout industry,” says Atkins. “So it could be anything from fashion to pharmaceuticals, or aviation-based products as well; the usual higher value air freight type units.”