Tuesday 25th Oct 2016 - Logistics Manager

When one door closes another opens up…

You’re going to be lucky to secure big shed space in the Golden Triangle unless of course you opt for build to suit and accept that deal terms are going to be considerably more rigid than in previous years. So what are the options? Well there’s the North Midlands, taking in Staffordshire, Derbyshire and Nottinghamshire, and of course there is always South Yorkshire. Those looking for a more central location would be well-advised to get a move on, as space in the North Midlands is rapidly being taken up.
Mike Price of Knight Franks says: “Established Golden Triangle area requirements have to become more footloose. With stock drying up, demand is being driven further north, to the next best locations.”
Ranjit Gill of BNP Paribas Real Estate agrees: “Companies are looking at primary core distribution locations such as the M6 and M1 motorway corridors. However, that area is getting reduced in stock. In terms of availability in the Midlands there is sub two years’ worth of supply.”
The latest research by Jones Lang LaSalle shows that nearly 60 per cent of the total take up in the first quarter of this year was recorded in the Midlands. Deals include 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. Close by Ceva Logistics took Close and Wrenbridge’s Barton 150 building totalling 150,000 sq ft on a new lease. M3 advised.
Then there were two lettings at ProLogis Park Stafford where WWRD, which owns and operates Waterford Crystal, Wedgwood and Royal Doulton, took ProLogis 128,000 sq ft DC2 warehouse on a 15-year lease at £5.25 per sq ft, and where retailer Gap took the last remaining unit totalling 230,000 sq ft. Cushman & Wakefield advised Gap and King Sturge acted for ProLogis.
At ProLogis Park Stoke, Marks & Spencer secured a 382,000 sq ft facility. GVA Grimley, Lamonts and North Rae Sanders advised ProLogis and Cushman & Wakefield acted for Marks & Spencer. Feige subsidiary Techno Cargo has taken GE Real Estate’s 242,000 sq ft warehouse known as PE242 at Denby Hall Derbyshire. Letting agents were North Rae Sanders, Innes England and Savills. And in Swadlincote a 240,000 sq ft building was sold to MST Toiletries by Grant Thornton for £8.9m.
With such a plethora of deals done it is safe to say there are not many large modern units left in the region. Those that are include 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.
There is also Gazeley’s £50m G.Park Blue Planet at Chatterley Valley in Staffordshire which boasts being the first development in the world to achieve the new BREEAM Outstanding rating (design stage). 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. The 387,762 ft facility 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.
Sladen Estates has two further units of 80,000 and 120,000 sq ft at its Tetron Point development being marketed by North Rae Sanders, Innes England and M3. There is also Standard Life’s Langley 255 scheme available through North Rae Sanders and M3 at a quoting rent of £4.75 per sq ft.
Although there are not many immediately available big sheds to be had there are still deals to be brokered. Price says: “Incentives are hardening but it would be quite a brave landlord to start a trend demanding that tenants sign up for a 15-year deal. There is still an element of occupiers playing hardball.”
Growing occupier activity, combined with rising developer confidence and improving credit conditions, has led to developers starting on-site on a number of design-build distribution warehouses. At the end of the first quarter in 2010 around four million sq ft of new distribution warehousing space was under construction, 20 per cent more than three months ago.
Indeed there have been several build to suit deals secured recently in the North Midlands region including a deal recently done by Dunelm Mill for an extra 250,000 sq ft in ProLogis Stoke, Staffordshire.
Dunelm Mill will double its distribution capacity at Stoke, extending its current 250,000 sq ft facility to a total 500,000 sq ft. The existing property was developed by ProLogis in 2006. With this deal ProLogis completes the development of ProLogis Park Stoke.
Marks & Spencer has opted to pre-let a million sq ft distribution facility at the East Midlands Distribution Centre near Nottingham. It will be developed in a joint venture by First Industrial Developments and Clowes Developments. Lambert Smith Hampton advised M&S. Although not distribution, 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.
Avoid risk
While developers are keen to secure tenants they seem to prefer to avoid risk by pursuing pre-lets instead. Indeed such is the speed at which most developers can build a shed these days that it looks like there will not be any speculative development for quite some time.
According to Robert Rae of North Rae Sanders, Evans of Leeds has just put in a detailed planning application to Lichfield Council for a building to be known as Hercules totalling 430,000 sq ft with a 15m eaves height. Rae says the developer believes that it can put the building up within 26 weeks and is actively looking to secure a pre-let at a quoting rent of £4.95 per sq ft. Joint letting agents are North Rae Sanders and GVA Grimley.
Other developers are securing their positions and bringing forward planning applications to seduce occupiers with oven-ready sites and fast build times. Goodman is putting in place infrastructure at its Raynesway development known as Derby Commerce Park where it pre-let 300,000 sq ft to Cyclamax. Rae says: “This is the only site where a unit of up to 2 million sq ft has detailed consent.” Letting agents are North Rae Sanders, Innes England and CB Richard Ellis.
The only other site capable of an equally large single building is Gladman’s Vertical Park in Nottinghamshire. The developer has secured outline planning permission. Andy Hartwright of Gladman says: “We can offer a single building of up to 2 million sq ft, with an eaves height up to 30 metres [on the site]. While we have no current plans to speculatively build the scheme we are completely flexible on our disposal strategy, we are able to sell land, offer design build deals on a freehold or leasehold basis or offer deals on a phased or expansion basis.
“We are well down the line with infrastructure upgrades and have approvals in place on put a new estate road and scheme junction in and there are plans to improve the A1/Tywford Bridge junction.
The planning permission allows for up to 2.7 million sq ft of distribution space on the 200-acre site. Letting agents are DTZ and Lambert Smith Hampton.
For those not willing to wait there is only one option left, go north and that is what a number of retailers both mainstream and internet, are doing. ASOS (As seen on Screen) the internet clothing retailer was searching for space in Bedford but failing to get satisfaction opted to look further north. It is rumoured to have secured a deal with ProLogis to take its Crossflow 530 building at ProLogis Barnsley.
At present ProLogis 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. Since the building has been on the market for some time the deal struck is thought to be advantageous and could even include fit out as well as other incentives.
Roger Haworth of M3 says: “The Midlands market as a whole has been very successful and up to Junction 29 /30 of the M1 motorway at the boundary with South Yorkshire there is not much space available but one or two junctions north and there is a large amount of space.
“As an occupier one has to reason with only a certain amount of finite space available if [they] don’t take it, [they] will miss out. In certain regions [occupiers] have missed out on an opportunity and now have had to consider D&B with 15-year leases and very little rent free. The lack of [immediately available] supply in the North Midlands could make that very expensive or an occupier could try to capitalise on the market in South Yorkshire.”
Dave Cato of CB Richard Ellis says: “Landlords are offering deals which can secure between 2 to 2.5 years rent free on ten-year leases with up to 3 or 3.5 years on a 15-year lease. Therefore, occupiers who are in a position to act quickly can take advantage of the flexibility offered by landlords with excellent deals available. Once the available space starts to get taken up, landlords will begin to be less flexible and rein in their offers.”
Mike Baugh of DTZ agrees: “Deals can still be had but the window of opportunity is getting narrow. We are back to the basic economics of supply and demand and as supply reduces, deals are getting tighter. And landlords are starting to get less kind.” In Yorkshire there are currently at least 20 new build/modern properties over 100,000 sq ft available. In fact there are a number of buildings offering in excess of 400,000 sq ft. These being Sherburn Distribution Park (666,000 sq ft), Thornton Road in Bradford (750,000 sq ft), Nimbus in Doncaster (750,000 sq ft), SIRFT 1&2 (647,000 sq ft), Blade, G.Park in Sheffield (412,000 sq ft) and Vulcan, Firstpoint in Doncaster (415,000 sq ft).
Carving up space
There is also St Modwen’s Parkside Industrial Estate formerly known as Beast & Whopper where the developer is carving up 600,000 sq ft of space from 30,000 sq ft. DTZ is sole agent. Slightly smaller units include Nexus 36 totalling 205,000 sq ft at Junction 36 of the M1 motorway which was originally short-listed by Gap. It is being jointly marketed by DTZ and Knight Frank.
There is a lot of space in South Yorkshire and at this time this may be to the region’s advantage as occupiers flock to secure what remains of the best deals and of course the last remaining readily available big sheds in the country. Rob Oliver of GVA Grimley says: “Even within South Yorkshire if you can be footloose and flexible you can secure deals with rents at a substantial discount to those found in other areas.”