Thursday 27th Oct 2016 - Logistics Manager

Cracking deals, gromit

If there is one thing that holds true of the market in Yorkshire and the North East as an occupier, flexibility is going to be the key. For a while there may be plenty of available space in South Yorkshire; the same is not true of the rest of the region.

It doesn’t take a brain surgeon to note that if you don’t have to be in West Yorkshire or the North East then the deals to be had in the south of the region are going to be cracking.

According to Ed Norris of Lambert Smith Hampton, occupiers looking in the North West would have just three big sheds to choose from but in South Yorkshire there are currently 22 available, both new and second-hand.

Looking at modern new space that has never been occupied, Nick Baker of BNP Paribas Real Estate, says: “There are 13 buildings totalling 3.7 million sq ft of existing floor space in South Yorkshire, in fact you cannot drive past a motorway junction without at least one building being available.”

There are a number of occupiers currently looking to secure deals in the south of the region and there is a consensus of opinion that landlords there are very willing to oblige. Although headline rents have not shifted in most cases, incentive packages are generous. As Baker says: “Every landlord wants someone in their buildings…”

It has been the case that incentives offered have included up to a year of rent free on a five-year lease. Norris says: “Obviously each transaction is individual and the headline rent may be static, but probably the incentive package effectively takes it down somewhat through rent-free periods and flexibility in lease break options.

“On existing units occupiers can get up to two months free for every year of the lease taken, so a 15- year lease could produce up to nearly three years rent free – to a good covenant obviously.”

At present, headline rents are roughly at £4 to £4.50 per sq ft. However, there is always an exception to the rule. Developer ProLogis is believed to be willing to consider rents as low as £2.99 per sq ft for its Crossflow 530 facility in Barnsley, to the right occupier of course. At present it is marketing the property with a headline rent of £3.95 per sq ft through letting agents BNP Paribas Real Estate, Dove Haigh Phillips and Fisher Hargreaves Proctor.

The cross-dock facility, totalling 530,168 sq ft, is situated 20 miles north of Sheffield, close to Junction 36 of the M1 motorway and Junction 37 of the A1(M). It has 15m eaves and boasts 77 dock levellers and four level access doors, as well as 15 per cent roof lights. In addition, it has three-storey offices with double-glazing and a separate transport hub office. Outside it has a 50m deep yard as well as parking for 157 lorries and 392 cars.

Agents and developers alike agree that despite the vast quantity of space in South Yorkshire its time will come, especially in the light of a dearth of speculative development elsewhere in the country.

Baker says: “Agents in Birmingham are seeing a flurry of activity, and as space becomes short and rents rise some of that demand will find its way to South Yorkshire and anyone who does will find that it is a good option.”

Indeed Toby Vernon of M3 adds: “Occupiers will have to follow the opportunities round the country if they want immediately available space, and hopefully that will lead to more [distribution warehouses] going. All occupiers are opportunistic to a certain extent and there will be exceptional deals done.”

Andrew Gent of Gent Visick says: “There is about five years supply but no-one is building elsewhere, so hopefully that will work in South Yorkshire’s favour.”

Rob Oliver of GVA Grimley agrees: “The only reason that there is so much space is that it was all built at once, the fundamentals still hold true. The region has good infrastructure, a willing, plentiful and cheap labour supply and forward-looking local authorities.”

According to research by ProLogis, the hourly rate for employees working in storage and distribution in South Yorkshire is up to 16 per cent lower than the national average. Based on one employee per 1,000 sq ft this represents a saving of over £1.7 million a year on wages alone should an occupier take on Crossflow 530 at ProLogis Barnsley.

Properties available in South Yorkshire include Standard Life’s 930,000 sq ft First Point scheme in Doncaster, made up of V415 which totals 415,000 sq ft, and V246 and V277, consisting of 246,000 sq ft and 277,000 sq ft respectively. The properties boast a range of features including 14m eaves height, fully fitted offices with comfort cooling, as well as 50m deep secure yards and ample parking for both lorries and cars. Letting agents are GVA Grimley and Colliers CRE.

Then there is Evander Properties and Rockpoint’s Sherburn Distribution Park. Paul Mack of DTZ is marketing the four remaining buildings, which are available from 140,000 – 666,000 sq ft. Mack says the key feature “is that none of them have floors so it can be done bespoke to suit the loading capacity. In addition is the huge amount of power available – some 14mva.” Joint letting agents are M3 and CBRE.

There are two high bay distribution units of 334,781 sq ft and 291,143 sq ft available at HelioSlough’s 30-acre SIRFT (Sheffield International Rail Freight Terminal) development, which has two private rail sidings providing direct rail access to the Tinsley line. Each building has an integral two-storey office block and can be combined to provide a 647,000 sq ft facility.

Landlord CBRE Investors has recently secured planning permission for a change of use on the scheme. The original planning approval allowed for B8 storage and distribution within the units, which essentially allows the units to be used for warehousing purposes. The new approval, which is in response to the high level of interest from manufacturing-related industries, now includes additional B2 general industrial usage, which enables manufacturing operations to be carried out on the premises.

Toby Vernon of M3, who is joint agent on the scheme with GVA Grimley and King Sturge, says: “Widening the planning consent to include B2 will broaden our marketing scope to enable us to cater for these requirements.”

For those looking to secure space in West Yorkshire there is not that much to choose from in terms of big sheds over 100,000 sq ft. Richard Harris of King Sturge says: “There is 205,000 sq ft at Junction 31 of the M62 corridor known as Access 62 as well as Latitude 135, which is expected back on the market following a two year letting to Wincanton for an M&S contract. Wincanton will be running the contract out of Bradford where ProLogis is building a one million sq ft regional distribution centre for M&S.

Latitude 135 boasts 10m eaves, as well as 11 dock and three drive-in loading doors. It has a floor loading of 50kN/sq m and around 4,000 sq ft of office accommodation. Carter Towler and Lambert Smith Hampton are letting agents.

“There really is a limited supply [in West Yorkshire] and anyone looking will have to consider land rather than buildings.”

He adds: “There are six or seven sites that an occupier could get a building on quite quickly.” These include the old Pioneer site off Junction 31 at Wakefield Europort, totalling 36 acres, although this is more likely to be redeveloped. Then there is PPG Land’s Link 62, also at Junction J31, and land at Silkwood Park which could take a large unit.

Closer to Leeds there is Temple Green, a scheme by White Rose Developments; a joint venture between Evans of Leeds and Yorkshire Water. Muse Developments has got a site called Logic Leeds at Junction 45 of the M1 motorway and there is also Barwood’s Hawks Park at Junction 47 of the M1 motorway.

Despite the shortage of immediately available buildings in West Yorkshire, Nick Baker of BNP Paribas Real Estate says: “Developers are still reluctant to speculatively build.”

Design and build
Toby Vernon of M3 says even local occupiers, especially those looking for a more specialised building, will have no choice but to go down the D&B route. “Rents on those will have to be £5 per sq ft plus but occupiers will be willing to pay for the right building.”

Recently, medicinal company Sandvik secured a 120,000 sq ft D&B with JF Finnegan at Beighton Link where a rent of £5.10 per sq ft was struck. Vernon says the company could have gone to Doncaster and would have got a building for a lot less but it would not have been exactly what it wanted.

Availability of modern new space in Darlington, Durham and Newcastle follows a similar pattern to that of West Yorkshire – there isn’t much. Nick Atkinson of DTZ says: “Availability levels dropped by over one million sq ft from peaks in 2007, and there are only three new sheds over 100,000 sq ft and two between 50,000 – 100,000 sq ft.”

These include two units of 263,000 sq ft and 83,000 sq ft at Evander Properties’ Drum Park, a 63,000 sq ft warehouse at Follingsby, a 140,000 sq ft shed at Foxcover Flex and a 100,000 sq ft warehouse on Easter Development’s Cherry Blossom Way.

However, says Atkinson: “Where there are second- hand units exceptional deals can be done. Indeed there is an old 70,000 sq ft warehouse in Washington with all- inclusive rent equivalent to rates, service charge and insurance, ie a cost-neutral deal for the landlord.”

Paul Nicholson of BNP Paribas Real Estate says: “Rents in the region are about £4.50 per sq ft, competitive against the major hubs elsewhere in the UK.”

Again, it looks like those wishing to secure space will have to go down the D&B route; luckily there are a lot of sites with planning secured. Andrew Gent of Gent Visick says: “There is PPG and City Land’s Link 66 at Darlington totalling 100 acres, where we, Sanderson Weatheralls and Cart Jonas are joint agents. Then there is Buccleugh Properties’ 25-acre scheme known as Commerce Park at Scotch Corner, where a month ago outline consent for a single unit of 150,000 sq ft was secured, although we can go smaller.” Gent Visick and King Sturge are advising.

There is Merchant Place Developments’ Amazon Park at Newton Aycliffe, Co. Durham where there is outline permission for up to 1.4 million sq ft of space. The developer is actively seeking pre-lets through its agent, Cushman & Wakefield, on the scheme, which could include the largest distribution building ever seen in the North East, a one million sq ft structure with eaves up to 24m high.

Amazon Park is located just off Junction 59 of the A1M, which gives excellent access to several key conurbations as well as south to the M62 corridor and west to the M6 and M74 into Scotland. In addition to the one million sq ft warehouse facility, two other warehouses will be developed, one of 62,000 sq ft and the other over 330,000 sq ft.

Developer Highbridge has recently acquired the former Goodyear Dunlop site at Washington that had a pretty big unit on it – it has just put in for planning on a big shed there. GVA Grimley is advising. Then there is Turbine Business Park at Washington but the developer will not build anything out unless there is someone lined up.

Somewhat surprisingly there are still developers looking to secure planning permission for schemes in South Yorkshire. Both Gazeley and PPG Land are battling it out with local protestors to develop two distribution schemes in the region, which could provide up to 4,000 jobs.

The Council for the Protection of Rural England South Yorkshire branch has lent its support to Thorne Against Bradholme – a protest group concerned about the proposed development of a 2.05 million sq ft warehouse scheme at Bradholme Farm, near Thorne being put forward by PPG Land and Warmfield Group, and to ArmNOgeddon – a protest group against Gazeley’s proposed 115-acre development at Armthorpe near Doncaster.

Outline plans for the Gazeley scheme, being brought forward in conjunction with Blue Anchor Leisure, have recently been submitted to Doncaster Council.

The site, situated at Junction 4 of the M18 motorway, forms the natural extension to the existing West Moor Park development. Upon completion it is estimated that the total value of the scheme would be approximately £125m and provide some 1,700 jobs. Jones Lang LaSalle advised Gazeley while DTZ is advising Blue Anchor Leisure.

Don Morgan of Gazeley says: “The local planning authority has identified the site as potentially suitable for distribution as part of its Local Development Framework. Planning officers at Doncaster Council are recommending approval of our outline planning application, subject to a Section 106 agreement and reference to the government office as a departure from the current development plan.”