PropCast: Building up, not out – Bloom’s ultra-urban logistics strategy

But for Tom Davies, co-founder of Bloom, June 2020 marked the right moment to back a long-held conviction: that London and other major cities are structurally undersupplied with modern, well-located urban logistics space.

Speaking on this week’s PropCast, Davies explains how Bloom was formed, why ultra-urban warehousing is fundamentally different from traditional last-mile logistics and why specialism matters more than ever in today’s higher-for-longer interest rate environment.

Davies left Segro Plc shortly before the UK entered its first Covid lockdown. Although he initially explored building a technology start-up through Antler (the global early-stage VC firm), the real estate themes he had been working on, in particular inner-city warehousing in London and Paris, quickly drew him back.

“Consumer expectations around speed and convenience were already changing before 2020,” Davies says. “In Asia and the US, centralised urban logistics was well established. In comparison, London was lagging.”

The subsequent rise, and retreat, of quick-commerce and dark kitchen operators helped validate the importance of location, even if some of the early models proved unsustainable. Today, Davies notes, the concept is returning, led by established e-commerce businesses rather than venture-backed start-ups.

Bloom was founded with a specific focus on what it defines as the ultra-urban market: industrial assets in Transport for London zones one to three. In these locations, congestion, land scarcity and competing uses mean proximity to customers can materially reduce delivery times and operating costs.

“When we launched our first joint venture with TPG Angelo Gordon, we were competing directly with residential and student developers,” Davies notes. “But industrial values could often justify themselves off the back of the yield compression and rental growth in the sector.”

While change-of-use opportunities can be challenging, Davies sees scope in edge-of-town locations where secondary office stock and large car parks can make the numbers work, This as ever, remains subject to planning.

High land values and planning pressure in central London have driven Bloom towards multi-storey industrial solutions. Working with Michael Sparks Associates, Chetwoods and UMC, the firm has delivered a series of two-level schemes with five-metre clear heights, goods lifts and enhanced floor loadings.

“Occupier acceptance has moved on significantly in the last 12 months,” Davies says. “We’re seeing a broad range of businesses comfortable operating in multi-level space and paying the rents we originally underwrote.”

International precedents matter. Multi-storey logistics is well established across Asia and increasingly common in cities such as Paris and New York. “The product will keep evolving,” Davies adds, “but the direction of travel is clear.”

Davies argues that industrial has become far more nuanced than the traditional ‘logistics equals e-commerce’ shorthand. Sub-sectors now include last-mile, ultra-urban, industrial outdoor storage, cold storage and data centres, all with their own different occupier dynamics.

“That fragmentation is healthy,” he says. “It means design, pricing and valuation are becoming more sophisticated.”

While Bloom typically targets consistent rents across occupiers, certain uses may justify additional capex or bespoke layouts. Over time, Davies expects clearer differentiation in capital values as performance data builds.

Rather than betting on a single occupier type, Bloom designs buildings for adaptability. Schemes feature high power capacity, strong telecoms connectivity and, level floors suitable for automation and enhanced loadings.

Sensors installed in collaboration with tenants allow occupiers to track energy use and operational efficiency. “Even without AI, businesses want buildings that won’t become obsolete,” Davies recognises.

Sustainability is embedded through air-source or ground-source heat pumps, photovoltaics and modern M&E systems, with Bloom targeting EPC A+ and BREEAM Excellent or Outstanding ratings.

Alongside development, Bloom is also repositioning existing stock. Through a newer strategy with Crosstree, the London investor, the firm is upgrading 1980s last-mile assets across London and the South East, improving ESG performance without taking full development risk.

Davies contrasts today’s market with the post-GFC environment. As interest rates remain high with limited scope for yield compression, returns increasingly depend on income growth and asset management.

“You can’t rely on the market doing the work for you,” he says. “That’s why being a specialist and really understanding your vertical matters.”

As Bloom expands across London, the South East and into Western Europe, Davies is confident that owning and integrating a deep understanding of the entire urban logistics ecosystem gives the business a long-term edge.