Spotting Opportunity in the B2-B8 Evolution

In Wales, the lines between manufacturing (B2) operations and storage/distribution (B8) are blurring, driven by automation and advanced logistics. Traditionally, manufacturing has been seen as more valuable, but the rise of e-commerce and sophisticated logistics is challenging this view. Modern B8 facilities now incorporate advanced systems, technical specialists, and extensive management teams, contributing significantly to the economy and requiring a skilled workforce. As both sectors evolve with increasing power demands and changing site selection criteria, it's crucial for the Welsh development market to embrace flexible use classifications and adapt development strategies to meet contemporary demands.

To support this modern logistics operation the sector requires a diverse workforce with varying skill levels and specialities.

Roles include:

• Technical specialists who can manage advanced warehouse management systems, automated equipment and robotics
• Data analysts and business intelligence experts who review predictive analytics and performance metrics
• IT professionals for software and cybersecurity
• Engineering and maintenance teams of robotics and wider facilities.
  This advancement of B8 operators has led to an increase in skills required. Operators demand qualifications including NVQ level through to degree, some have apprenticeships or graduate roles providing long term careers, a stark contrast to the traditional view of low paid, low skilled warehouse roles.

Both Use Classes are experiencing increased power usage due to automation, expanded production capacity, and electrification of plant, machinery and vehicles. Power needs to meet present demand but also have capacity to futureproof operations and is not something that can be compromised on.

The market requires development sites that offer robust power infrastructure capable of supporting both B2 and B8 operations. Readily available power supply has become a critical factor in site selection, as delays in power provision can significantly extend project timelines. Consequently, occupiers are prioritising sites with established power capacity over traditional decision factors such as location or rental costs, fundamentally shifting the site selection criteria.

B8 properties have demonstrated a stronger investment performance in recent years. Several factors have played a part in this stronger performance:

• Increased demand for e-commerce and last mile requirements
• Lower operational risk, as B8 operators typically require a less specialised facility
• Greater flexibility in repurposing space for different occupiers, presenting less risk
• Stronger tenant covenants, major logistics operators have financial strength
• Long lease commitments providing income security.

B2 properties typically generate higher yields, reflecting both elevated risk and greater obsolescence vulnerability. These assets demand increased capital expenditure for ongoing maintenance throughout the lease term, as well as substantial additional investment for modifications and eventual repositioning at the end of the lease.

The economic resilience of these asset classes differs considerably. B8 facilities are typically institutional builds which provide a greater ability to adapt to changing market conditions and have relatively low conversion costs between logistics users and in some instances B2 operators.

"South Wales has a number of prime development sites along the M4 corridor providing desirable options for occupiers to grow or relocate. We must seek a balanced tenant mix to mitigate risk to developers and create diverse occupier ecosystems, strengthening investment value while ensuring sustainable, vibrant business communities," notes Heather Lawrence, Director - Industrial & Logistics at JLL.

A number of B8 operators have acquired new facilities in recent years. In 2024 Evri took a purpose-built facility of 81,325 sq ft, in Bridgend and Owens Logistics took 156,000 sq ft in Magor. The Indurent scheme located in Newport continues to be very successful with current occupiers all operating a distribution element for the majority or all their operation. The scheme has a wide range of tenants including Aerfin taking 110,739 sq ft, Genpower taking 101,252 and Oprema at 100,482 all who were existing occupiers of South Wales and moved to the estate for modern, larger premises.

The distinction between storage/distribution (B8) and manufacturing (B2) operations has become increasingly nuanced in today's market. Manufacturing facilities now feature enhanced automation that reduces workforce density while optimising operational efficiency and space utilisation. Simultaneously, logistics facilities have evolved into sophisticated operations creating higher-skilled employment opportunities that require staff investment and retention, with long term career pathways. The traditional view that the B2 manufacturing sector represents superior value for jobs and economic impact can no longer be justified in the modern market.

Macroeconomic impacts have put a heightened focus on supply chains and supply chain security. B8 facilities now represent essential infrastructure within complex supply chains and their value should not be overlooked.

The Welsh development market must acknowledge this evolution and adapt accordingly by supporting flexible use classifications and delivering development sites aligned with these contemporary requirements.

In an economy characterised by continuous transformation, regulatory frameworks should maintain corresponding flexibility.

Seeking guidance on how the B2-B8 evolution impacts your property strategy? Contact Heather Lawrence to discuss your specific requirements or visitto explore our full range of industrial and logistics services. Our expert team can help you capitalise on emerging opportunities in this rapidly transforming sector, whether you're an occupier, developer, or investor.