Saturday 22nd Oct 2016 - Logistics Manager

Lonely road

Together, the Midlands and North West, which straddle the M6, have approximately 13 million sq ft of space in the 50,000 to 100,000 sq ft size band. Kevin Mofid, BNP Paribas Real Estate’s head researcher reckons: “this will put [the M6 corridor] in good stead, as it has a healthy supply of the size and grade of units that occupiers are demanding.”

Nationwide, 53 per cent of take-up has been in smaller units from 50,000 to 100,000 sq ft over the past year. And some three million sq ft of space was taken up along the M6 from Rugby to Preston – 53 per cent of which was in Birmingham and the wider Midlands region; 14 per cent was in Staffordshire and 32 per cent in the North West.

“The Midlands is the strongest area in terms of take-up,” says Mofid. “This is because a lot of companies are moving back to the core distribution areas.” There was a period in recent history when land, rent, and labour were cheap and, combined, outweighed the additional transport costs that came with being further out from the centre, he says. Spiralling transport prices have reversed this.

Another contributing factor is the burgeoning of online retail. BNP Paribas’ research report “The Impact of Online Shopping on Logistics”, sheds light on how this trend has led to a change in distribution and home delivery patterns.

Online sales go hand in hand with higher levels of reverse logistics as users return unwanted or faulty goods. As a result, the report concluded that retailers would need to operate from a network of smaller hubs located around major conurbations.

After a rather barren spell, there are now several deals in the pipeline for big sheds, according to Ranjit Gill of BNP Paribas, who describes current activity as a potential “light at the end of the tunnel”. He says more enquiries have sprung up in the past four to six weeks, and although these may not transform into immediate deals, what’s clear is that more companies are “testing the water” to see what deals they can get for 2010.

“If these deals materialise over the next two months, we will see a total of 1.5 million sq ft of brand new space taken up, stretching from Coventry to Staffordshire,” he adds.

Slight thaw

Cameron Mitchell of Jones Lang LaSalle agrees, saying that over the past few months there have been signs of a “slight thaw” stretching across the M6 corridor.

Developer ProLogis has come up with a string of incentives with which to seduce occupiers. In addition to offering flexible, short-term leases, it will also throw in generic fit-outs work, such as lighting, frost protection, roof level sprinklers, and fire alarms, as part of the deal.

Out of ProLogis’ stock there are two speculative units available at ProLogis Park Midpoint in Birmingham. The DC3 unit measures 237,134 sq ft and features 20 dock levellers, two level access doors, two-storey offices, 50m yard depth. The DC4 unit totals 313,771 sq ft and features 32 dock levellers, two level access doors, 50m yard depth, and 10,000 sq ft of office space. Jones Lang LaSalle, Savills and Gerald Eve are agents.

In these times, “it’s a brave landlord who turns down a deal,” says Mitchell, particularly with the crushing effect of empty rates legislation. However, the softness of the deals will vary on the landlord. Gill reckons that overall, the trend is approaching one to two months rent-free per year, and that rent profiles are some ten per cent off where they were at peak.

And land values have dropped by 40 to 50 per cent. British Car Auctions was quick to take advantage of this and has just bought a 20-acre site at Perry Barr in Birmingham. The site will be used as a multi-channel remarketing and logistics facility, supporting BCA’s physical and online auction services. Date for completion is autumn 2010, by which time BCA expects 200 new jobs to have been created.

A few years back, developers were paying big money in the race to secure land and development space, only to find these same schemes now a dead weight around their necks. The sums paid then are now regarded as massively overpriced.

When developer Chancerygate bought the six-acre, former HP Sauce site in Aston in 2007 it paid an eye-watering £800,000 per acre, only to flog it to East End Foods for half that price (£2.3m) earlier this year.

A good range of sustainable buildings are available along the M6 such as Gazeley’s £50 million G.Park Blue Planet at Chatterley Valley, which opened in May this year. Sustainable buildings have the added attraction of substantially lower operating costs, and it has been estimated that this 387,759 sq ft development will generate operating cost savings of up to £300,000 per year for occupiers. The site has earned a BREEAM “Outstanding” rating, placing it 40 years ahead of the government’s 60 per cent CO2 reduction target set for 2050.

There is also Goodman’s The Citadel at Junction 10 of the M6 motorway totalling 321,000 sq ft. Letting agents are Knight Frank and Jones Lang La salle quoting £5.25 per sq ft.