Sunday 23rd Oct 2016 - Logistics Manager

The great space race

One thing is clear in the West Midlands, deals are being done. In fact according to property pundits in the know there are, at present, distribution warehouse transactions amounting to some three million sq ft under offer or in solicitors’ hands right now.

According to CB Richard Ellis’ latest UK Logistics Market View, the West Midlands saw the highest proportion of activity in the UK, accounting for 26 per cent of all space let in 2009.

The latest deal secured is the sale of Opus Land’s Opus Axis scheme in Burton-on-Trent where chemist Boots has paid in the region of £50 per sq ft.

The refurbished cross-docked property has a 15m eaves height, 41 dock and six grade level doors, as well as three service yards of 62m, 56m and 35m depth.

Jones Lang LaSalle, BNP Paribas Real Estate and GVA Grimley advised Opus Land while Boots was represented by Lambert Smith Hampton.

Close by Ceva Logistics took Close and Wrenbridge’s Barton 150 building totalling 150,000 sq ft on a new lease. Ceva has now undertaken an extensive fit-out within the unit. M3 advised.

In another new deal Armstrong Logistics took developer Goodman’s Unit 3 warehouse on RD Park Hinckley in Leicestershire to service a retail supermarket contract.

The company secured the 96,500 sq ft facility on a 15-year lease at a rent of £5.50 per sq ft, some 45 pence per sq ft less than the £5.95 per sq ft quoting rent.

The warehouse has 10.5m eaves, eight dock and two level access doors, 14 lorry parking spaces and 96 car parking spaces, as well as a 40m service yard.

Effectively, phase one of RD Park Hinckley is now complete and planning is expected on a further 50 acres for employment and mixed use. It is located just one mile from the M69 motorway. North Rae Sanders and Savills advised.

Kevin Mofid of BNP Paribas Real Estate says: “The Midlands accounts for 30 per cent of all take up as occupiers start to head back to the Golden Triangle.” A sentiment that Carl Durrant of King Sturge, is happy to concur. Occupiers looking for space these days are opting, where they can, for prime locations, especially as there is a good chance to secure a deal on much improved terms than only a few years ago.

With so much space potentially off the market it begs the question: are there enough sheds? According to Ranjit Gill of BNP Paribas Real Estate, occupiers looking for warehousing facilities over 250,000 sq ft could find themselves with less choice than they thought, especially in the Golden Triangle.

Mark Fitzpatrick of GVA Grimley says: “There has been a relatively large number of bigger buildings let, pulling total availability levels down. There are a number of deals on smaller buildings from 10,000 – 100,000 sq ft still going on but there are also a considerable number of buildings, in that size range, that are still available. The market, therefore, is still competitive at this level. However, on buildings of 200,000 sq ft plus, the supply line is squeezed round Birmingham. On the other hand, those looking for 100,000 sq ft will have better luck. There are three or four options for speculative buildings that have never been occupied plus there are ones that are slightly older and are now back on the market.”

Modern available buildings over 200,000 sq ft in the region include Frogmore’s Rivet on the former Marconi site in Coventry. The 220,000 sq ft warehouse, close to Junction 3 of the M6 motorway is being marketed by King Sturge, Harris Lamb and CBRE at a quoting rent of £5.75 per sq ft on a new lease. The building has 10m eaves, 22 dock and six level access doors, a 45m deep yard and a 50kN/sq m floor loading. It has several environmental enhancements including a carbon neutral wall and roof cladding, solar hot water heating, a recycled grey water system, and energy efficient light in the offices. But most useful, says Durrant, is a large power supply which some logistics companies might find useful.

There is also Standard Life’s 300,000 sq ft The Duke on Wellington Road in Burton-on-Trent, built in conjunction with Anson Properties, boasting a 12m eaves height, 24 dock and four level access doors, a 50m deep yard and 15,000 sq ft of two-storey offices. It is being marketed by M3 and Knight Frank, who are quoting £5.25 per sq ft.

And there is developer Goodman’s The Citadel at Junction 10 of the M6 motorway totalling 321,000 sq ft. It has 12m eaves, two 50m yards as well as 28 dock and four level access doors and a 50kN/sq m floor loading. Letting agents are Knight Frank and Jones Lang LaSalle, quoting £5.25 per sq ft and offering to sell for £80 per sq ft.

Fitzpatrick adds: “Occupiers looking for a 100,000 sq ft warehouse round Leicester have only two existing options and that is it. Basically it varies from marketplace to marketplace.”

One of these buildings is developer Gazeley’s Solar warehouse at Magna Park near Lutterworth. The building totals 275,534 sq ft and boasts a 15m eaves height and 50kN/sq m floor loading.

It has 24 dock and two level access doors and is set on a 14-acre site. Joint letting agents are M3 and Burbage Realty.

Gazeley also has the largest speculative warehouse in the region with its 700,000 sq ft Flair unit at G.Park Rugeley. The huge cross-dock warehouse is set on a 40-acre site and boasts a clear internal height of 14.3m to underside of haunch and a floor loading of 50kN/sq m. It has 80 loading docks, eight level access doors and 260 HGV spaces. Letting agents are M3 and Burbage Realty.

The jewel in Gazeley’s crown must be the £50m G.Park Blue Planet at Chatterley Valley in Staffordshire. It is the first development in the world to achieve the new BREEAM (Building Research Establishment Environmental Assessment Method) “outstanding” rating (design stage). This is the highest sustainable accolade available in property development.

And if that is not impressive then perhaps the fact that the building could create cost savings in the region of £300,000 a year is.

On average G.Park Blue Planet scored 85.49 per cent, which classifies it as outstanding under the new tougher 2008 ratings for environmental performance introduced in June 2008. The development scored particularly well under the BREEAM rating in the management, health & well-being and water (all 100 per cent); energy (87.5 per cent); and waste (85.71 per cent).

This 387,762 ft facility is the UK’s first truly carbon positive logistics development, with its own biomass micro power station. What sets it apart is that 100 per cent of the energy and heat is supplied by renewable sources.

The warehouse has 15m eaves and 38 dock and two level access doors with a floor loading of 50kN/sq m. It is being marketed by joint agents M3, Bulleys and Lambert Smith Hampton at a quoting rent of £4.95 per sq ft.

One might think the developer would be concerned with some 1.375 million sq ft in the region, but as Nigel Dolan of Gazeley says: “Availability is reducing all the time and while there is a window of opportunity for occupiers to get competitive deals there is now no longer an endless supply of modern space.”

In fact there is competition for it with recycling companies joining the fray and because they can take, and indeed want to, secure long leases, landlords are only too happy to confer preferred status upon them essentially choosing recycling companies over and above logistics occupiers.

Mofid says that: “By 2015 the waste recycling industry will occupy 50 million sq ft of space nationwide.”

Although not strictly the West Midlands, waste-to-energy operator, Cyclamax, has secured a design and build for a 360,000 sq ft facility on a 25-year lease at Goodman’s 115-acre Derby Commercial Park in Raynesway. Latterly, waste management company Biffa agreed a 20-year lease on a new, 237,000 sq ft warehouse at ProLogis’ 65-acre ProLogis Park Midpoint scheme in the West Midlands.

Biffa will occupy the space in Building Three and will use it as a materials recycling facility for non-hazardous recyclable materials. Letting agents are Gerald Eve, Jones Lang LaSalle and Savills.

Mike Price of Knight Frank says: “These companies have to spend a lot of money on these facilities so the longer the lease the better.”

He adds that another recycling company ART has two requirements in the Birmingham region and indeed Biffa is also looking to secure more space in the region. ART is believed to have secured Altitude, a 148,915 sq ft modern warehouse on Deykin Avenue, Witton. The building has 12 dock loading and two level access doors, as well as a 16m eaves height, 24 lorry and 140 car parking spaces. Letting agent was King Sturge, Knight Frank advised ART.

Durrant says: “The recycling waste management sector is a growth market and some of these will be taking sites previously occupied by the logistics sector.”

It is believed that some local authorities will actively discriminate in favour of recycling companies when it comes to planning applications.

There is a sentiment that many of the deals done lately are returning space to the market. For instance luxury goods group WWRD, that owns and operates Waterford Crystal, Wedgwood and Royal Doulton and took developer ProLogis’s 128,000 sq ft DC2 warehouse at its ProLogis Park Stafford scheme on a 15-year lease at £5.25 per sq ft, came out of a 200,000 sq ft facility which is now back on the market. King Sturge acted for ProLogis.

Mofid comments: “A lot of the deals for new space have involved second-hand space coming back which could be re-let as distribution space.”

Indeed, according to the latest BNP Paribas Real Estate research, nearly 66 per cent of the warehouse space on the market in the Midlands as a whole is second-hand.

Indeed the same can be said of the letting of a 382,000 sq ft facility at ProLogis Park Stoke where Marks & Spencer has relocated. The company is moving from Radial Point. GVA Grimley, Lamonts and North Rae Sanders advised ProLogis and Cushman & Wakefield acted for Marks & Spencer.

Jason Keegan, head of general merchandise logistics at Marks & Spencer, says: “Our relocation to a new site in Stoke-on-Trent will give us even greater flexibility and efficiency in our supply chain operations. Our ongoing relationship with ProLogis enabled us to move quickly when the opportunity became available and we look forward to working with the company in Stoke-on-Trent.”

Robert Rae of North Rae Sanders says: “Where space has come back it has let well particularly on the bigger buildings.” 99p stores snapped up the former Woolworth’s warehouse in Rugby being marketed by GVA Grimley, and recently Sainsbury’s fought off stiff competition to land the ex-Woolworth’s warehouse in Bedford. Although this is not in the West Midlands, it is still considered close enough to act as a precedent – or at least that is what is hoped.

There are a lot of second-hand warehouses in the region. These include Royal Mail’s former 200,000 sq ft sorting centre in Coventry, which is available through Jones Lang LaSalle, as well as the 211,000 sq ft former Gist building in Rugby marketed by North Rae Sanders.

The property is available on assignment until 2014 although landlord Prudential could be flexible.

The property is fully racked and available on a flexible lease. It has heating, lighting and sprinklers and is effectively cross-docked with two yards. It can accommodate up to 17,000 pallet spaces.

Nick Waddington of M3 warns: “Supply is going down and you might see landlords start to harden their terms. There are going to be fewer buildings available although it is doubtful that developers will be talking about speculative development this year.”

The possibilities for rail freight in the West Midlands are being improved by work to increase the loading gauge on the line linking the region to the port of Southampton.

Gauge clearance work by Network Rail at the Southampton rail tunnel over Christmas is another step towards the creation of the W10 gauge, which allows the transport of high cube containers on standard rail wagons.

Rail Freight Group chairman Tony Berkeley says: “The Southampton Tunnel gauge enhancement is perhaps the most important of a number of structures that need altering to accommodate the modern W10 gauge on the Southampton to West Midlands route corridor. Three other bridges were dealt with during the same possessions, two on the Great Western Main Line between Didcot and Reading and one at St Denis near Southampton.

“The RFG has campaigned for many years for the line between Southampton and the West Midlands to be made capable of accepting 9ft 6in containers on standard wagons. We are very pleased to have witnessed such a successful start on site to this vital project. “

However, there are lots of other structures between Southampton and the West Midlands which will require work, either by lowering track or raising bridges. The complete route is scheduled to be cleared for 9ft 6in containers by early 2011.

Low carbon future for West Midlands
Business secretary Lord Mandelson has unveiled ambitious plans to make the West Midlands a leader in low carbon technologies which will have significant supply chain implications.

A key element is the creation of a Low Carbon Economic Area for Advanced Automotive Engineering. Advantage West Midlands, the regional development agency is investing £19.5 million in a Low Carbon Vehicles Technology (LCVT) programme, which will accelerate the development and introduction of next-generation low carbon vehicles through advances in key technology platforms in areas such as batteries, motors and aerodynamics.

Independent research on the LCVTP estimates it will create between 3,000 and 11,500 jobs in the UK by 2020, with the majority of those being in the West Midlands. At the same time, it will safeguard jobs in the supply chain as businesses switch to low carbon opportunities. Research estimates wealth creation of between £690m and £2.8bn.

Visiting the International Manufacturing Centre at the University of Warwick to launch the LCEA, Lord Mandelson said: “I want to see the Midlands help the UK to lead the global automotive industry in the transition from conventional to low carbon vehicle technologies.

“The move towards a low carbon economy presents huge opportunities. This new funding will help secure the Midlands’ 10,000 existing car industry jobs, by helping transform them into the green car jobs of the future.”

Partners in the LCVTP include Jaguar Land Rover, Tata Motors, Zytek, Ricardo, MIRA, WMG at the University of Warwick, and Coventry University. The project will also involve UK suppliers.

Mick Laverty, chief executive at Advantage West Midlands, said: “This is great news and reflects the real strengths of the West and East Midlands regions in automotive manufacturing. Becoming a Low Carbon Economic Area will reinforce our growing reputation as globally competitive regions, which continue to develop cutting-edge green technologies and high technology industries upon which the future prosperity of all UK regions will depend.