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ASPECTSOF TRADE2018savills.co.uk
0203INTROPET CREMSCHARGING PORTSDRIVERLESS CARSR E C YC L I N G & P L A S T I C SL O W C A R B O N H E AT & P O W E RSTOR - A BALANCING ACTC O N S T R U C T I O N M AT E R I A L SWelcome to the 2018 edition of Aspects of Trade. 2018,as 2017, is overshadowed by Brexit uncertainties andthis is bound to continue well beyond the 31 March2019 deadline. UK property-based trading businesseswill be watching keenly as divorce negotiations reachtheir climax; all eyes will be on our leaders as theycomplete the package - whatever it turns out to be.Hopefully the effects across the trade related propertysectors will be manageable. Without fail there will bethose who benefit and those who will find it toughgoing.In this issue we comment on factors affecting specific traderelated sectors covering a broad spectrum, including thewell-established sectors of pet crematoriums and recycling,but also some exciting emerging markets including STOR’sand driverless cars. We think you’ll agree that we are livingin exciting times, let’s just hope the ride ahead isn’t toobumpy.Ian SimpsonHead of Department20182018//////////////04050608101214
0405PET CREMSF O R ‘A C O U N T R Y O F A N I M A L - LO V E R S ’The United Kingdom is oftengiven the moniker of ‘A Countryof Animal-lovers’. With over halfof all UK households owning a petand 90% of those considering theirpets members of the family, thestereotype seems well-founded.Animals have featured prominentlyin the life of Britons for centuries,though widespread pet-keeping is arelatively recent phenomenon. Untilthe 19th Century, most animals ownedby households were working animalsregarded as commodities. However,in the 19th and 20th Centuries, inour increasingly urban environmentsand as disposable income grew, petsbecame more desirable.Today pets are held in such esteemthat a nationwide poll in 2017concluded that 12% of owners werehappy to state that they love theirpet more than their partners, and 9%loved pets more than their children.With pets now being considered partof the family for many households,it is only natural that owners areconsidering alternatives to traditionalroutes when it comes to end of lifeoptions for their animals.An estimated 1.5 million dogs andcats die every year, according to theAssociation of Private Pet Cemeteriesand Crematoria. Approximately 20%are buried in the garden, nearly 7%individually cremated, and around0.7% buried in pet cemeteries, withthe remainder incinerated as clinicalwaste.Cremations have long been themost popular option at the end of ahuman life and through the openingof specialist sites, pet cremation isbecoming a more commonplacealternative to home burial or routineveterinary incineration.Whilst home burial can provide apersonalised way of honouring abeloved pet, there are a number ofconsiderations which can make thisroute more complex. In order toallow for garden burial, the land usedshould be freehold and considerationmust be given to the necessarydepth of any grave, the water table,the potential presence of utilitiesin the ground and the emotionalimplications of moving house ordevelopment at a later date.Cremation removes some of theseissues and provides a variety ofoptions for owners such as scatteringthe ashes, internment or safe keepingin the family home.With over 50 crematoriums offeringservices for pets currently operatingin the UK, owners aren’t limited intheir choice of operator. The petfuneral industry as a whole is worthover 100 million a year and, withpublic awareness of the variousoptions growing, the sector isexpected to continue expanding.2018In developing new sites, as withtraditional crematoriums, planningpermission is often difficult due tothe sensitive nature of the proposeduse.Any change of permission at a laterdate should also be considered.Whilst the land itself is notconsecrated and so future change ofuse is easier in terms of restrictionsimposed, limiting the impact onvalue, any future development of theland still remains ethically sensitiveand emotive.A growing market and limitedsector regulation could attract newentrants to the industry and aspublic perception surrounding petcremation continues to improve, weexpect cremation to attract a widermarket share from other alternatives.Whilst the death of a belovedpet remains a difficult subject formany, the growing desire of ownersto have wider options and morepersonalised end of life care for theirpets continues to be a driving forcefor the sector and we expect anincrease in new sites in the mediumterm.In line with the sector growth, Savillshas seen an increase in demand forour services, in particular providingvaluation or consultancy advice toboth existing and potential sites.CHARGING PORTSW H AT C A M E F I R S T T H E C H I C K E N O R T H E E G G ?Without a strong network of electricvehicle charging points away fromhome, consumer worry has led tothe number of electric car salesdropping, yet without a quantum ofready customers, what incentive isthere for commercial investment insetting up charging stations?The Society of Motor Manufacturersand Traders (SMMT) data for Januaryand February 2018 suggests thatelectric car sales dropped by 33.7%compared to the same period inthe preceding year. The fall is muchgreater than the decline in overall carregistrations. Some commentatorshave suggested that this is due tothe biggest challenge and changein infrastructure since the rise ofthe electric car at the start of thedecade, yet surely this was alwayson the horizon?Initial charging stations weresupportedbymanufacturersand also by companies such asEcotricity, who plumbed rapidchargers into 96 per cent ofmotorway services and every IKEAstore, while Chargemaster andothers put lower-voltage posts onstreets and in car parks. Initiallyall were free to use, however withgovernmentpolicysupportinglarge scale transition to electricvehicles, a market has developedfor ‘charging’ at charging points.Like the Betamax and VHS scenario,there is no one single system whichhas yet emerged for charging a combination of types requiredifferentchargingtimesanddifferent chargers, vehicles havediffering range capabilities andstations have different paymentmethods. The costs vary fromstation to station, with some venuescontinuing to permit free chargingand others offering a discount (forexample from energy networks ifyou are a home energy customer).Rapid chargers are generally moreexpensive, reflecting the fact thatthey can upload more electricity intothe battery in a shorter time. Typicalcosts per kwh can be anywhere from17p to 40p, with some also having aninitial flat rate connection charge.At least 20 different companiesand organisations have installedand operate national or regionalelectric car charger networks in theUK. Other systems are operatedindependently and may be availableto users of larger networks too atthe discretion of their owners, forexample chargers at work premises.For those wanting to invest asoperators in the sector, location willbe key and dependent upon datademonstrating high traffic flow andlimited local competition.2018There are opportunities to combinerenewable energy such as solarpanels and wind turbines withtechnology such as battery storageto maximise the efficiency ofsites. There is also the potential tocapitalise on retail possibilities with‘Costa’ style units keeping peopleoccupied while they charge.There are however no accurate costsfor site installation and costs willvary according to scale, which itselfwill rely on local research. Taking asan example a 20 unit charging point,the overall cost including access andparking area, installation and mainsconnection, payment technology,planning, professional and othercosts, might approach 1m.Being the pioneer is likely to comewith downside risk. There is almost nodata regarding the future estimatedtake up speed or numbers and noreliable forecasting on advances intechnology to future proof the sites.However, this is a sector that seemsbound to increase and Savills isdeveloping an expertise to supportit through site search, acquisitionand valuation.
0607DRIVERLESSCARSW I L L D R I V E R L E S S C A R S I M PA C TO N PA R K I N G I N T H E U K ?There is a lot of hype around driverlesscars, but the potential impact on carparks is likely to be very significant,although as yet difficult to quantify.We try and highlight some of thepossible changes below.driverless cars have the potentialto relieve the stress of parking andfreeing up time. This neverthelessseems a massive change requiringa major shift in public attitudes totransport.According to research published bythe British Parking Association in2013 there were between 8 and 11.2million car parking spaces in the UK,covering between circa 23,000 and32,000 acres of land. The majorityof this land is in and around citycentres. Some estimates predict thatdriverless cars have the potentialto release up to 90% of this spacealthough this would mean removinga huge number of individually ownedcars from the road and replacingthem with effectively driverlesstaxis. According to some studieswe currently spend 106 days of ourlives looking for a parking space, butWith city centres changing towardsservice as the internet altersshopping habits, driverless cars aremost likely to be rolled out in citieswhich is where the impact will bemost felt. This will affect parking incentral locations. These sites maybe developed for alternative usesthereby reducing pressure on centralhousing infrastructure in major citiesand provide improved amenities tolocal communities. It could spell theend of roadside parking meaningthat pavements could be widened,which will enhance the feel of manyovercrowded central urban locations.2018Of course, driverless cars do haveto be parked somewhere andreasonably close to their area of use.Planneddevelopmentsrelatingto the infrastructure to supportautomated vehicles is providingbusiness opportunities. For instance,a new 1.6 billion battery andvehicle-charging network is plannedfor Southampton next year, and UKinstitutional investors are backingenergy start-ups to deliver 45charging dock sites across the UK.Whilst it may not be immediatelyapparent that driverless cars are tobe involved, in the car world changeis afoot and everything is altransportinfrastructure - a future with electriccars, and eventually, driverlesselectric cars.There are many billions being spenton driverless car research. What wecan hope is that at some point in thefuture our parking problems will bea distant memory and we can all geton with our lives. One thing is forsure, we are in for exciting times –just make sure you’re strapped in!Savills value many car parks each yearand although there are predictionsas to the impact driverless carsmay have on parking, until we see amarked rise in driverless cars takingover our roads, the current impacton values remains unproven.2018
0809R E C YC L I N G &PLASTICSTHE FUTURE OF PLASTICFor those who work in the recycling and wasteindustry, the recent media storm regarding plasticmay be something of a surprise. Plastics have longbeen used and recycling options considered, yetrecent media attention has highlighted the issuesand encouraged a public desire for change.Bearing in mind the years of research alreadyundertaken, can this spotlight on plastics createnew innovation within the industry of wasteand recycling? Initially, it would seem that thegreatest drive will be towards reducing the use ofplastics, on the back of the public mood, beforeconsidering re-use and recycling. In this regardfood manufacturing and packaging industries,nurseries, retailers etc. are looking to change theamount of plastics produced in the first placerather than leap straight into high tech solutionsto recycle.France has taken the legal route, withthe country’s Government banningnon-biodegradable disposable cups,plates, knives and forks from 2020.Perhaps edible cutlery and packagingwill become commonplace there;innovation may then re’, ensuring products last for a longtime and using less hazardous materialPreparing for re-use refurbishing and checkingrepairing,Preventioncleaning,Preparing for re-useOther Recovery - incineration with energyrecovery, anaerobic digestion, gasification orpyrolysis which produce energy (fuel, heat andpower)RecyclingOtherRecoveryDisposal - landfill and incineration without energyrecoveryDisposalPlastic can have multiple uses but once it needsto be disposed of, recycling fits into the hierarchyas an efficient and sustainable use of materialresources.The British plastic recycling industryreports that the perspective of thewhole waste management industryemphasizesthathouseholdersneed to be more responsible forthe waste they produce and havethe opportunity to demand changethrough their buying power. The ideaof proximity and circular economy isalso championed and should fit withBrexiteers visions about bringingback power to local populations,making the UK more self-sufficient.This has been further emphasisedthrough China’s limit on plasticimports.Whilst there is global progress onreducing the use of plastics butthey will always form a crucial partof industry and day to day life, soprogress also needs to be made onrecycling.Nearly all types of plastics can berecycled, however the extent towhich they are recycled depends2018upon technical, economic andlogistical factors. As a valuableand finite resource, the optimumrecovery route for most plastic itemsat the ‘end-of-life’ is to be recycled,preferably back into a product thatcan then be recycled again andagain.Progress will only be made onrecycling with further infrastructure,capital investment and growth ofend markets. The Ellen MacArthurFoundation notes that there is valuein this sector, but those revenueswill never be fully achieved withoutdesigning new ways to break downand re-use 30% (by weight) of theplastic packaging that isn’t currentlyrecycled because the material iscontaminated or too small for easycollection, has very low economicvalue or contains multiple materialsthat cannot be easily separated.Withthegenerallyincreaseddrive towards sustainability weanticipate that the opportunity forgrowth within the waste sector willcontinue, in particular for recyclingand treatment sites. In the shortand medium term this bodes wellfor improved plastic recycling2018and we should see growth in thesector, albeit balanced by potentialreduction in material throughputif plastic usage falls. In due course,as more businesses, developers andoperators move into the marketas it matures, competition willincrease and profits are likely to fallwith pressure on charges, slowingthe rate of progress. However, ifthe public continues its pressurethen government intervention mayhelp maintain improvement bysupporting research, innovation andimplementation through financialincentives.The waste and recycling industry hasfor some years been consolidating,with significant capital expenditureoften a barrier to entry. In this regardparties are unlikely to invest heavilyin new technology for one specificmaterial – particularly if the drive isto eliminate it in the long term. Thereare opportunities however for smallertrading enterprises to capitalise onthis wave of sentiment in marketingtheir products or creating new smallscale markets. Perhaps innovationsuch as plastic eating mushroomfarms will become the new ‘wasteand recycling’ centres of the future.
1011Generating heat and electricity fromCHP units is not a new concept.Thomas Edison’s Pearl Power Stationin Manhattan was not only theworld’s first power station but alsothe first CHP district heating scheme.Edison’s power station was reportedto have a 2.5% electrical efficiency,today CHP units are typically hittingelectrical efficiencies of 40% plus.The Battery and Control Room in the first Edison Electric Lighting Station atPearl Street in lower Manhattan in 1882,Engraving with modern watercolor.The Feed-in Tariff (FIT), RenewableObligation (RO) and Renewable HeatIncentive (RHI) all provided supportfor biomass fuelled CHP. The graphbelow shows the growth of schemesapplying to the RHI Biogas Tariffsince 2011.LOW CARBONH E AT & P O W E RThose businesses that use atechnology such as biomass CHPor Anaerobic Digestionand usethese to offset energy bills canboth reduce their energy costsand bring in an income throughAD OR BIOMASS SCHEMES COULD PROVIDEA N O P P O R T U N I T Y TO D I V E R S I F Y I N CO M E600500400300200100020132014subsidies. This technology hasbeen popular particularly amongstfood processors, dairies and plantnurseries.Having an AD or biomass schemecan also provide an opportunity tofurther diversify income. For instance,we are increasingly seeing the CO2produced by these systems beingutilised as a commercial product.Ethically using the heat producedby the process also provides cashbenefits. Our research shows thaton average biogas plants only utilise41% of the heat they are eligible toclaim RHI subsidy on. Granted therewill inevitably be some losses butthis still means there are potentiallysignificant amounts of cheap heat14.012.0Gas HighGas Reference8.0Gas Low6.0Electricity High4.0Electricity Reference2.0Electricity 70.0YearSource: BEIS, Updated energy and emissions projections: 2017 Annex M ed-energy-and-emissions-projections-2017All prices exclude inflation and are in 2017 prices2018201620172018available from these systems thatcould be used to give a new businessline an edge. Some examples ofbusinesses using this cheap heat areglass houses for growing tomatoes,heating for new ents and most commonly –drying floors for grain, woodchip andthe like.Unlike wind turbines or solar PV,which are sometimes called fit andforget technologies, getting thebest out of AD and Biomass CHPrequires daily attention. Ongoinginteraction requires a mechanicallyminded person onsite and thereare also ongoing environmentallicensing and subsidy sustainabilityregulations to adhere to. This canmake AD and Biomass CHP systemsappear a higher risk investment,something that is often reflected inthe interest lenders will charge forthe construction loan.The renewables team at Savills havebeen involved in the constructionfunding stage of 18 of these schemessince 2015. Now, we are seeing asecond wave of projects that havebeen operational for 18 – 36 monthsand can be considered lower risk,with cheaper funding options.Savills can bring in our forestry,farming, planning and buildingsurveyor specialists to completea due diligence review, and ourtrading team are experts in valuingthe installations in the context of thewider business.18.016.010.02015Data source: yment-data-march-2018BEIS: Service Industry’s Energy Price Predictions to 2028Price (p/kwh)TheUKGovernmentpredictsa significant rise in the cost ofpurchasing energy over the next 10years. For the commercial consumersteps can be taken to reduceenergy demand through efficiencymeasures, or by generating energy.A popular choice is using CombinedHeat and Power (CHP) to do both.CHP produces electricity at a fractionof the cost of supply from the grid.Mains gas powered electricity costsroughly 2p/kWh whereas electricityfrom the grid can cost anythingfrom 10-15p/kWh. Mains gas CHPsystems typically pay for themselvesin around 5 years from the energysavings and also qualify for enhancedcapital allowance. Natural gas is themost common fuel, although theintroduction of renewables subsidieshave seen an increase in lowercarbon alternatives being built, suchas biomass.Number of Full Applications to the RHI Biogas Tariff by Year2018
1213Stand alone installations – Thesetend to be larger installations and areconnected to the Grid.UK electricity prices per MWK80STOR A BALANCING ACTW E E X P E C T G R O W T H W I T H I N T H E S E C T O R TO C O N T I N U EAs the balance of our energy shiftsfrom traditional fossil fuels to lessreliable renewable energy sources, theNational Grid has the tricky obligationto ensure that ‘the lights stay on’.They are tasked with maintaining theconsistency of the three key elementsthat form our national electricitysupply: frequency, reserve andcapacity.National Grid must ensure thatsufficient generation and/or demandis held in automatic readiness tomanage all credible circumstancesthat might result in frequencyvariations. This has resulted in theemergence of a market to provideNational Grid with energy to copewith changes in demand for electricity.National Grid purchases energy fromthe Short Term Operating Reserve(STOR) at times when actual demandrises above forecasted demand, orthere is an unexpected drop in outputof a generation plant.The two principal STOR technologiesthat have developed over the lastcouple of years are energy storageand peaking power.Energy storage uses large scalebattery installations, of which wehave seen three main types:2018On site storage - Battery arraysare installed alongside high energydemandproperties,suchasglasshouses. The batteries takeenergy from the Grid when electricityis cheapest and it is then stored foruse when the demand for electricityis higher and the prices are inflated.This helps businesses curtail theirenergy costs.Co-location – Sites adjacent toexisting energy generation sites suchas anaerobic digesters or solar panelsare used for battery storage, thereforeenabling the energy generation andstorage to work together.4020Source: Thomas Reuters. Updated January 2017With the increased drive towardssustainability and renewable energy,we anticipate that the opportunity forgrowth within the sector will continuealthough as always, those swiftly offoot will gain the best rewards. Asmore businesses, developers andoperators move into the market asit matures, competition will increase,subsidies are likely to be reduced andprofits are likely to fall with pressureon charges. The graph above detailschanges in 2017 energy prices, as thedemand and supply factors impacted.Location will become more importantas being close to demand and supplywill help keep costs as low and incomeas high and as stable as possible.Savills provide an all round advisoryservice in this area, from planning toproject feasibility and development.We have experience in securingpotential sites for STOR and otherNational Grid balancing schemes aswell as the aggregation process forexisting diesel and gas generators.We also have excellent links acrossthe energy sector with developersand aggregators in the STOR marketand lenders in the sector.2018Dec 2017Oct 2017Aug 2017Jun 2017Apr 20170Feb 2017There are a range of governmentand Ofgem initiatives to supportthese installations and a varietyof investors keen to capitalise onthis. Commentators in the marketgenerally consider that, as the switchto renewable energy maintainspace, the demand for grid balancingtechnologies will increase, while at thesame time the cost of the technologydecreases.60Dec 2016Peaking power installations arerelatively small generation units,including gas or diesel-fired turbines.These generators only operatewhen called upon by National Gridto provide extra capacity withinthe electricity network. They useless space than traditional energygenerating installations, like majorfossil fuelled generators, solar or wind,and generally make profitable usefrom otherwise unused brownfieldland, so long as there is good accessto the Grid.
1415CONSTRUCTIONM AT E R I A L SESSENTIALB U I L D I N G B LO C KS FO R T H E E CO N O M YAfter several years of stronggrowth the sales of aggregates andconstruction materials fell for thefirst quarter of 2018. This dip wasnot unexpected as many quarryoperators had reported a slow-downin sales after enjoying several yearsof buoyant demand.The cause of this is attributed inpart to poor weather conditions inthe first quarter (the Beast from theEast) but there also appears to havebeen a more general decline in sales(particularly around London andthe South East). How much of thisis attributable to the uncertaintiesassociated with Brexit is not knownbut the Governor of the Bank ofEngland recently stated that growthhad been reduced by 2% since thevote to leave.House building has continued togrow but this was not sufficientto offset the overall drop in sales.Not all is gloomy as forecastersexpect to see a pick-up in demandfrom 2019 when several large scaleinfrastructure projects such asHS2, Thames Tideway and HinkleyPoint are planned to commenceconstruction.Theseprojectswill consume large volumes ofaggregates and draw materials froma wider area which in turn will havethe effect of tightening supply.Since the UK came out of recessionthe consumption of aggregateshas outstripped the replacement ofconsented mineral reserves (sand& gravel and crushed rock) by aconsiderable margin. The fact thatthe UK is consuming its mineralreserves faster than they are beingreplaced will at some point in thenear future lead to supply constraint.Finding new mineral resourcesis proving ever more difficult asthe process of securing planningpermission is difficult and slow.The lead in time from identifyingpotential resources to convertingthem to mineral reserves withthe benefit of planning consentis typically in excess of 5 years. Amineral site must be first promotedinto the Mineral Local Plan forallocation and this depends on thereview cycle and whether there isa shortfall in the size of the minerallandbank (a minimum of 7 years forsand and gravel and 10 years forcrushed rock).Quarry operators have recognisedthat replacing mineral reservesis essential as future supplyconstraints will impact their abilityto do business. Quarry operatorsare now very active in their searchfor new reserves be that as anextension to an existing quarry orthe development of a green field site.2018This is an excellent opportunity forprivate and corporate landownerswith prospective mineral sites tobring them forward for promotionand development and approachquarry operators with a view toexploiting the value of underlyingassets. New quarry development willrelease considerable value and thereis also the possibility of creatingother opportunities associated withrestoration.2018The fortunes of the quarryingindustryareintimatelylinkedwith construction activity. Salesof aggregates and constructionmaterials have enjoyed a strongperiod of growth and there has onlynow been a brief pause for breath.We expect demand to pick upstrongly next year and private andcorporate landowners should notmiss this timely opportunity.
S AV I L L S T R A D E - R E L A T E D S E R V I C E SW H O W E A R E A N D W H AT W E D OVA L U A T I O N , A G E N C Y A N D P R O F E S S I O N A L /A D V I S O R Y W O R K I NT H E FO L LOW I N G :Leisure PropertyTrade-related Property Golf Visitor Attractions Ports and Airports Churches Holiday Properties Water-based Leisure Caravan Parks EquestrianWaste Transfer andrecycling centresNurseries and gardencentres Hotels & Resorts Renewable Energy Schools and colleges Licensed Premises Abattoirs and foodprocessing Mineral extraction/landfill Sports Venues VineyardsUrban LeisureCrematoria,graveyards andwoodland burial sites C O N TA C T SHealthcare – 0207 409 9966Leisure & Trade-Related Property:Hotels – 0207 499 8644North - 01865 269 000Planning – 0207 420 6371Central - 01244 328141Minerals – 01245 293 290South - 01392 455794London - 020 7409 8060savills.co.uk
options for their animals. An estimated 1.5 million dogs and cats die every year, according to the Association of Private Pet Cemeteries and Crematoria. Approximately 20% are buried in the garden, nearly 7% individually cremated, and around 0.7% buried in pet cemeteries, with the remainder incinerated as clinical waste. Cremations have long .
