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EP_19.jpg July/August 2005
Cover Story
Up to Speed
A Better Future
Bovis Homes

As CEO of Gazeley, John Duggan has helped build the business into a leading European developer of large-scale warehousing. Lee Jones finds out more from the man himself.


01.jpg Gazeley was formed in 1987 by Asda with responsibility for all of the supermarket chain’s property activity. This new business rapidly set about developing over 50 supermarkets, and was responsible for delivering one of the most envied distribution networks in the UK retail market. Over the last eight years, Gazeley has increasingly focused on its core business, the development of distribution space and the company’s flagship development is Magna Park UK, at Lutterworth, near Rugby, the largest dedicated logistics park in Europe. In 1999, Wal*Mart bought Asda for £6.7 billion and Gazeley became part of the world’s biggest company with a sales revenue of $280 billion. Gazeley has subsequently expanded beyond the UK into France, Belgium, Germany, Switzerland, Italy and Spain.

Today, the company has a land bank in excess of 1947 acres with a potential development value of more than $2 billion. This comprises 31 sites – 20 of which are in the UK. Gazeley has nine new Magna Parks accounting for 900 acres in locations across Europe with plans for further acquisitions across the continent.

John Duggan joined Gazeley in July 1988 as MD and subsequently became CEO in 1998. A qualified accountant with an MBA from Cranfield, John is an experienced business manager with over 25 years experience in the real estate sector. Prior to joining Gazeley, he was with house builders Hunting Gate and Barratts before spending four years as a director on the Asda Management Board.

“At one time we were very much like any other developer who is attached to a retailer, covering retail, office and industrial developments, but in recent years our core business has increasingly been the development of large-scale warehouses,” John begins. “Wal*Mart acquired us when they bought Asda, but they’ve been very supportive of us because we are a complementary, profitable, and successful business, and we don’t require any management input from them. It gives them the strategic advantage of having distribution expertise in Europe, and they also benefit from our ability to provide state-of-the-art facilities for both Asda and Wal*Mart.”

John believes that the decision to specialise Gazeley’s services in large-scale warehouses has proved highly beneficial to both the business and its clients. “As you can see from the specialisation in the industry, the more you focus you better you get at one particular subject. You are able to understand your customers and that is why we decided to focus. There are a number of particular issues in this area of construction, the sheer scale of the projects, the speed at which they are required and the increasing planning difficulties to name just a few.”

Gazeley’s development of Magna Park’s across Europe shows perfectly the company’s capability. The development of its first location at Lutterworth began in 1987 and this park, covering seven million square feet, is still admired across Europe as a flagship development. “We’ve a two-pronged strategy,” explains John. “We have a number of Magna Parks throughout Europe in strategic locations and at the same time we’ve also got a very customer focused approach for our major customers, which are nearly all multi-national companies. We will build wherever they want us to build where we have the capability of delivering. I would say that one of our core competencies is being able to handle large-scale developments of warehouses in pretty much any European location. “A number of these locations have common features. They tend to be over 100 acres, and they are usually strategically located, where possible they’ve also got multi-modal transport access – rail, water and road,” he adds.

Looking specifically at the construction phase, Gazeley aims to build up long-term relationships with its main construction partners to ensure the same level of service, quality and customer experience is upheld wherever in Europe the company is developing. “I would say that it is absolutely essential to have that kind of trust in our partners and clearly it’s in everybody’s best interest to have the best people within the business. Where you’re having continuing, repeat business like us, and in many cases continuing business with the same big customers like Argos, VW and GMG, they don’t want a different experience every time they work with us. Therefore long-term contracting partnerships are absolutely crucial and allow us to improve quality, look at innovation, design, service, and costs. You can’t do that if you’re swapping around people every five minutes. We believe that we can’t deliver the service, quality, value and the right location unless our consultants and our contractors are integrated as part of what we refer to as our Virtual Team.”

John continues: “Developing and realising the potential of our employees and creating a great place to work is also vital, so we can attract and keep the best people. This tends to lead to higher performance by releasing creativity. A good quality working environment is vital because you can’t treat the customers properly if you don’t treat your suppliers and your people well.”

Gazeley’s G.Track concept represents another key differentiator for the company during the construction process. This offers build times of as little as ten weeks from initial commitment to a fully fitted and operational bespoke facility, which is significantly quicker than the faster traditional design and build options available elsewhere. “A big part of this concept is having Magna Parks, so we’ve got the planning permissions in place and we’re ready to go,” comments John.

With corporate social responsibility becoming an increasingly important factor for all businesses, the team at Gazeley has worked hard to ensure it can offer environmentally friendly options to clients. John feels that the industry is finally waking up to its responsibilities in this area: “Clearly life support systems and biodiversity are in decline, and I think people are beginning to realise that there is a real threat of climate change and global warming. On top of that we will see a 50 per cent increase in world population from six billion to nine billion by 2054, with rapid industrialisation, economic growth and increasing interdependence in countries like Brazil, Russia, India and China. This is going to lead quite naturally to a scarcity of natural resources such as water and oil. All of our economies are based on the underlying assumption of increasing supplies of cheap oil, and whichever way you look at it, it isn’t going to happen over the next 25 to 50 years.”

As a result of all this, many of the large companies and organisations that Gazeley works with are becoming increasingly concerned with addressing environmental issues. To offer a solution for these businesses, in 2004 Gazeley launched a template for developing environmentally and socially responsible warehousing at low cost across Europe – EcoTemplate.

The EcoTemplate is the result of two years of groundbreaking research conducted by Gazeley and its partners at a cost of more than one million euros. It suggests initiatives that – at a cost of just 50p more per sq ft on standard industry building costs – can achieve significant environmental improvements covering landscape issues, CO2 emissions, energy savings, water usage, recyclable and prefabricated materials.

EcoTemplate also sets out an outline timetable for increasing levels of improvements over time as technological advances and economies of scale increase availability.

This concept has allowed Gazeley to deliver significant environmental improvements to its Magna Park developments and a number of other projects. “Our first EcoTemplate project was in Bedford where we used solar power, wind turbines and a number of other steps, which allowed us to reduce carbon dioxide emissions by six per cent and water usage by 45 per cent. So we’re taking this very seriously and we’ve now come up with a generic spec for new schemes going forward. We’re looking at quantifying the negative impact of our activity and then putting together strategies to mitigate those impacts over a period time to achieve the best results for the money we spend.”

He adds: “In a sense we’ve been leading this industry for a very long time, we might not be the biggest but we were the first to work in partnership, we were the first to look at fast-track developments, and now we’re the first to put such emphasis on the environmental side. So we’ve got a reputation in the industry for innovating. I think it’s in our genes to be pioneers and leaders in this way.”

Currently holding a 12 per cent share of the UK distribution property market and also a sizeable portion of the European sector, Gazeley continues to grow rapidly as a business. John is keen for this trend to continue and has ambitious plans for the company over the next few years: “In terms of expanding the business further, long-term we have aspirations to go global. Shorter-term, we’d like to have 20 per cent of the European market within the next three or four years and I think we stand a very good chance of achieving that. In terms of expanding globally, we will certainly get Wal*Mart’s support in doing that providing we have a clear and sensible plan.

“The four economies that are most exciting are of course China, India, Brazil and Russia, there’s clearly challenges in all those countries at the moment but there’s no doubt about it, they’re going to have an economy the size of the G7 or the US, whichever one you want to look at, by 2025. They are already major markets and they are going to be increasingly important in global economics.”

Looking to the future, John feels that this area of the construction industry will change radically over the next ten to 20 years, with the environment becoming increasingly important within companies’ operations. “If you look at all the negative impacts in terms of energy, embodied energy, CO2 issues with regards to operations, and also in terms of what is done with the buildings when they are at the end of their useful lives, those are issues that the industry has not historically looked at.

“To address this, we will need to completely redesign the construction processes and the industrial processes that provide the materials, so we don’t have toxic substances in the materials and are making sure that we reduce our energy requirements and the CO2 emissions in the embodied energy. We have the technology available and all we’ve got to do is change the way we think about things, so we have a more systematic approach.” He continues: “I think that people are now waking up to the fact that we share the same world and we can’t operate in isolation in business without impacting on the quality of life for ourselves, our families and our children.

Having been with Gazeley for 17 years, seven of which as CEO, John is preparing to become the company’s chairman next year. With the business in such a strong position, he has no qualms about moving it this new role. “I’ve been running this business for a long time and I have a good team of people around me that have a lot of potential and have been working with me for many years. My successor, Pat McGillycuddy, who is currently finishing the AMP course at Harvard, is my chief operating officer and the plan is for him to become CEO by next March.” He concludes: “I’m confident that the leadership team will manage the business extremely well and I will continue to be responsible for the running of the board and also the long-term strategy of the business.” CT-E

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