At first sight, it looks good for occupiers: research by Gerald Eve calculates the availability of standing stock of sheds over 50,000 sq ft in the Midlands at just over 25 million sq ft, with 16 million sq ft available in the West Midlands.
The problem is that the majority is second hand. In fact in the West Midlands, there was only 3.3 million sq ft of new and good quality space available in the third quarter of 2011, down from 4.2 million sq ft in the third quarter of 2010.
“Not only has availability of new space declined but second-hand space has also fallen,” says Sally Bruer of Gerald Eve. “As a result, the availability rate for the West Midlands has fallen from 19.1 per cent in the third quarter of 2010 to 15.5 per cent in the third quarter of 2011.”
As far as Ranjit Gill of BNP Paribas is concerned, logistics stock has fallen to historic low in the Midlands as the development pipeline disappears.
Gill says: “There has been an increasing polarisation in the market as the availability of brand new stock has rapidly dwindled and what we are now seeing is a large amount of older and smaller stock available in the Midlands. The total supply in the region totals 23.8 million sq ft – which is 16 per cent of all UK stock – while the proportion of second hand is now up to 74 per cent.”
Take-up has remained strong. According to Guy Grantham of Colliers: “In the West Midlands take-up has already outstripped the levels recorded in 2010. Eighteen deals over 100,000 sq ft were recorded in 2010 and the same number have been transacted in 2011 [as at November].”
In fact CBRE’s latest report on the West Midlands estimates that the amount of warehouse space under offer at the end of the third quarter in 2011 stood just shy of 1.25 million sq ft in units over 100,000 sq ft.
However not all the demand is from the logistics sector. Tom Hughes of Strutt & Parker says: “The key driver in the West Midlands is the manufacturing sector, with over two million sq ft of space under offer in the region to manufacturers – all of which are design and build deals. There is also a significant amount of unsatisfied demand which means there has been a genuine shift in the West Midlands market to B2 use.”
Indeed, Robert Rae of North Rae Sanders says: “Manufacturing enquiries are 30 per cent up from 10 per cent last year primarily on the back of the Jaguar Land Rover deal.”
Jaguar Land Rover took a 30 acre site at i54 near Wolverhampton for the development of a new plant. Other automotive deals include Aston Martin taking 80,000 sq ft at Bilsdale Properties’ Chase Point in Coventry where it intends to build its new city car. BNP Paribas and North Rae Sanders advised the landlord while Knight Frank acted for Aston Martin.
Hughes adds: “One of the most significant deals to have taken place in the West Midlands is the sale of the 24 acre site at Birmingham Business Park to Aero Engine Control, who plan to develop a R&D/ manufacturing facility on the site.” Strutt & Parker acted on behalf of Goodman on the sale.
Figures released by the Midlands Advisory Service West Midlands noted that manufacturers created more than 1,500 jobs and attracted £1 billion of new investment in the West Midlands in 2011.
With so many car manufacturers investing in the region it is hardly surprising that suppliers are queuing up as well to take space to provide components. Indeed Jaguar Land Rover supplier Plastic Omnium snapped up a 129,000 q ft warehouse at Hams Hall from ProLogis and an 115,000 sq ft shed at SEGRO’s Meteor Park in Birmingham is also under offer to an automotive component supplier.
David Binks of Cushman & Wakefield notes: “We are aware of 23 separate enquiries for automotive led companies looking for space totalling 2.5 million sq ft.”
Not everyone though is enamoured of the sector. Coventry Council turned down Peugeot’s plans for a 300,000 sq ft parts supply warehouse at developer Goodman’s Lyons Park scheme just off the A45 with the loss of up to 300 jobs. The council decided the warehouse jobs were not of a high enough calibre despite there being a one in nine unemployment rate in the area. Peugeot are rumoured to be looking to secure space at ProLogis Park Ryton down the road in Rugby.
With so much pent up demand it is hardly surprising that space is being snapped up. Robert Rae of North Rae Sanders says: “Speculative stock which has been overhanging the market is now going across the board. Indeed, the number of options for those searching for warehouse space of 50,000 sq ft or more have decreased dramatically in last three months.”
Simon Lloyd of DTZ agrees: “What is happening is that the supply of good quality Grade A buildings is going to manufacturing and being taken out of supply for logistics. Choice is reduced and occupiers are being forced to compromise on quality, time scale and cost or even a combination of all three. Grade A space is at an all-time low.”
Rae continues: “The general feeling is that stock which is modern and sensibly priced will now go within 12 months. We may start seeing competition for units due to a lack of stock.”
With that in mind Jonathan Green of St Modwen says: “Rental levels have remained robust over the last year and with headline rents for new stock at £5 per square foot and for secondary stock at £2 per square foot. Lease lengths have also remained longer than might be expected.
“Terms have not changed in the last few months, although with the shortage of stock this is likely to change going forward.”
Richard Ludlow of Gerald Eve says: “We have now seen the better quality new or nearly new stock go especially in the 150,000 – 200,000 sq ft plus range; deals will harden.”
But what space is available? Of the modern Grade A buildings there is Standard Life’s 302,693 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 4 level access doors, a 50m deep yard and 15,000 sq ft of two-storey offices. It is being marketed by CBRE and GVA.
Then there is Gazeley’s G.Park Blue Planet at Chatterley Valley in Staffordshire. The 387,762 sq ft warehouse has 15m eaves and 38 dock and two level access doors with a floor loading of 50kn/sqm. Joint agents are CBRE and Lambert Smith Hampton.
Developer Goodman has 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 4 level access doors and a 50kn/sqm floor loading. Letting agents are Bulleys, Knight Frank and Jones Lang LaSalle.
The developer also has a 213,240 sq ft warehouse in Burton known as First Point, which is being marketed by Jones Lang LaSalle, Savills and BNP Paribas. The property has a 12m eaves height, 18 dock levellers and two 2 level access doors, a 50m yard depth as well as external landscaping with 274 car spaces.
In Coventry there is Frogmore’s Rivet. The 222,958 sq ft warehouse is being marketed by Jones Lang LaSalle, Harris Lamb and CBRE. The building has 10m eaves, 22 dock and six level access doors, a 45m deep yard and a 50kN/sq m floor loading.
In Birmingham there is PRUPIM’s The Hub totalling 120,150 sq ft which has a 12m eaves height, 50kn/sqm floor loading capacity, 10 dock and two level entry access doors, a 50 metre deep concrete service yard as well as 27 HGV and 99 car parking spaces close to Junction 6 of the M6 Motorway. Joint agents are Knight Frank and CBRE.
At Fradley Park there is The Eagle a warehouse totalling 104,014 sq ft. It has a 12m eaves height, eight dock and four level access doors and a secure service yard with a depth of 50.5m. It is being marketed by CBRE, Kingston and GVA.
One of the largest modern buildings available in the West Midlands is Alto415 in Newcastle-under-Lyme. The 415,000 sq ft warehouse boasts 15.6m eaves, 36 dock and 2 level access doors, 56 HGV and 205 car parking spaces on a 20.4 acre secure site. Letting agents are Moriarty & Co, CBRE and Jones Lang LaSalle.
Second hand sheds offer more scope but any that are of good quality are quickly being snapped up. Ludlow is marketing the 603,000 sq ft Peugeot facility known as Coventry DC and already has strong interest even though Peugeot are not moving until the Autumn. He is quoting £2.75 – £3.50 per sq ft.
The same can be said of the 165,000 sq ft former iForce unit at The Fort. The property being marketed by BNP Paribas and Cushman & Wakefield is likely to go under offer before it even comes to the market in February.
North Rae Sanders is marketing one the largest second hand buildings in the country the 594,000 sq ft former Focus warehouse in Tamworth on behalf of London & Stamford.
The building has had a £6m fit out and is fully racked with 50,000 pallet spaces. It has 10.4m eaves as well as 64 dock and 10 scissor lifts and boasts a 60m yard and parking for over 100 trailers and currently being refurbished to bring it up to standard. Joint agents are Dowley Turner Real Estate. Quoting rent is £5.25 per sq ft on a 10 year lease.
Another large second hand unit is the former Co-op building at Valley Central in Rugby totalling 334,000 sq ft. It has 12m eaves, 30 docks and a quoting rent of £5.25 per sq ft. Letting agents GVA and Savills say the lease length can be flexible.
Carl Durrant of Jones Lang LaSalle warns: “Although there is still space available it is being whittled away. No one is building speculative stock or at least nothing of anything significance and that will be the outlook for the foreseeable future.
“Occupiers must realise this and will have to move swiftly or opt to go down the D&B route having to commit to 15 year leases and robust rents,” says Durrant.
Gill agrees: ‘This lack of new product is leaving larger occupiers with little choice but to go down the design and build route.”
With that in mind Bruce Topley of developer Gazeley says: “The outlook for 2012 is a positive one especially on the build to suit market.”
Gazeley has several sites in the West Midlands including G.Park Stoke that could take 562,000 sq ft; G.Park Tamworth which could accommodate an 80,000 sq ft unit on a 4 acre site and G.Park Ashby which could accommodate up to 850,000 sq ft on a 60 acre rail connected site.
ProLogis’ Alan Sarjant is also anticipating movement on the build-to-suit front. “Clearly one of the characteristics of the market is that no one has built anything since 2007 and everything is naturally dwindling. There is definitely going to be a shortage of supply.”
ProLogis Park Ryton totalling 60 acres has planning for three units of 300,000 sq ft, 375,000 q ft and 500,000 sq ft while ProLogis Midpoint can take up to 450,000 sq ft. Letting agents at Ryton are North Rae Sanders, Jones Lang LaSalle and Gerald Eve while Savills, Gerald Eve and Jones Lang LaSalle are marketing Midpoint.
“If a customer can move as quickly as us,” says Sarjant, “they could be in [a warehouse] in six to nine months on any of our sites.”
ProLogis Park Sideway can take a cross dock unit of 530,000 sq ft and its plot at Fradley Park known as ProLogis Park Lichfield can take a building of up to 800,000 sq ft.
Not to be left out Opus Land and new development partner St Francis Group are surging ahead with infrastructure works at their Blueprint scheme at Junction 9 of the M6 Motorway.
There is planning for a 474,500 sq ft facility on the 22 acre site. Letting agents are Jones Lang LaSalle, Cushman & Wakefield and DTZ.
Mike Price of Knight Frank says: “There are sites which are oven ready but not many that can accommodate a nine month development process.”
Although there may not be many immediately available that can move that fast Durrant says there are plenty waiting in the wings. “There are a number of large sites in prime locations ready and waiting to hit the design and build market.”
For example Bericote Four Ashes at Junction 12 of the M6 motorway totalling 53 acres that could accommodate a million sq ft in a single unit. Jones Lang LaSalle and Dowley Turner Real Estate are letting agents. Then there is First Industrial’s Prime 10 scheme at Junction 10 which could take units over 400,000 sq ft.
It is being marketed by Jones Lang LaSalle and Leighton High. IM Properties could accommodate up to 600,000 sq ft on its Birch Coppice scheme through letting agents CBRE and Colliers.
St Modwen also has a number of sites in the region which Green says: “St Modwen is able to finance construction directly without the need to seek external funding.” There are sites at Longbridge, Coventry; Barton near Burton upon Trent, Hilton, Swadlincote, Worcester and Washwood Heath.
Liza Helps is Logistics Manager’s Contributing Editor, Property
Logistics Manager, January 2012