Monday 24th Oct 2016 - Logistics Manager

East Midlands: Triangle of opportunity

With almost 90 per cent of the country just four hours’ truck drive away from the triangle formed by the M1, M6 and M69 motorways, it’s hardly surprising it’s a hit with logistics companies. The goods news is that there are still good opportunities to be had.

The availability of standing stock in the Midlands is just over 25 million sq ft (of sheds over 50,000 sq ft), with just under nine million sq ft is available in the East Midlands, according to Sally Bruer of Gerald Eve.

“The availability of standing stock across the country is overwhelmingly second hand and the situation in the Midlands is no different: 79 per cent of stock available as at Q3 2011 is second hand totalling almost 20 million sq ft (of sheds over 50,000 sq ft).

“Just over five million sq ft of new and good quality space is available in the Midlands. However, this represents a decline in available space from a year ago (Q3 2010) when just over seven million sq ft of new and good quality space was available. “The East Midlands has seen the sharpest decline in the availability good quality space between the two periods (from just under 3 million sq ft in Q3 2010 to just under 2 million sq ft in Q3 2011).”

It is hardly surprising then that CBRE notes: “The East Midlands benefited from the surge in demand in 2010, being the first choice location for many requirements, but there has been a lack of supply in the region in 2011, meaning more requirements have been fulfilled in the West Midlands.”

Tom Hughes of Strutt & Parker points out that there is a particular shortage along the M1 corridor in the region. “There is a current lack of supply along the M1 corridor due to the considerable levels of take-up in the last half of 2010; supply now stands at 3.8 million sq ft.”

Sally Bruer says: “Of course, the primary reason for the falling availability of good quality space is the lack of new delivery. There has been no supply of speculative development space of sheds over 50,000 sq ft in the Midlands since early 2009.”

She goes on: “Availability has of course also been affected by demand as well as the lack of supply of newly built space. Demand has maintained relatively healthy levels in the West Midlands, for the nine months to end Q3 2011, take-up of sheds over 50,000 sq ft totalled 3.2 million sq ft, up on the same period in 2010 (2.7 million sq ft for Q1-Q3 2010) and only marginally off from the 4.1 million sq ft in both the Q1-Q3 2009 and Q1-Q3 2008 periods.

“However, in the East Midlands, for the nine months to end Q3 2011, take-up of sheds over 50,000 sq ft totalled just 1.1 million sq ft compared to the 4.8 million sq ft for Q1-Q3 2010.

“A lack of available new and good quality space appears to be constraining take-up as demand for space in the region will be largely unsatisfied by the available space.

Guy Grantham of Colliers agrees: “The Midlands has seen a divide in terms of take-up in 2011 to date. While in the West Midlands take-up has already outstripped the levels recorded in 2010 and will be close to the total achieved in 2009, the East Midlands has seen levels fall significantly in 2011. The East Midlands recorded take-up of close to 13 million sq ft in 2010 but projected year end take-up is likely to be circa 40 per cent down on that figure.

“A shortage of activity in the ‘big sheds’ market is the single overriding cause of reduction in transaction levels in the East Midlands. Units over 100,000 sq ft accounted for nearly 50 per cent of take-up in 2010 (6.4 million sq ft). In 2011 that total to date is just 1.9 million sq ft or 28 per cent of total take-up. In 2010 deals with Tesco and Marks & Spencer accounted for 1.7 million sq ft alone. The largest deal to date in 2011 has been Co-op’s D&B deal for 477,000 sq ft, at Castlewood Business Park, which was concluded on a 20 year lease off a rent of £4.60 per sq ft. In 2010 the East Midlands saw 19 deals over 100,000 sq ft compared to just eight in 2011 to the end of Q3.”

Of the deals done in the last year Hughes notes: “The majority of these are being undertaken by 3PLs, which is a significant change from [2010] when retailers dominated the market.”

The key deals have included the letting of DC139 at ProLogis Park Pineham in Northamptonshire to distribution company Deepak.

The building which will be completed in the Spring, boasts a pallet capacity of 22,000 spaces, 12 dock level doors, 12.5m eaves as well as a host of eco-friendly initiatives that will reduce running costs such as rainwater harvesting, solar shading and 15 per cent sky lights to allow natural light into the building.

The deal was done on a 10 year lease at £5.50 per sq ft. Letting agents were Burbage Realty & Readings Hope & Mann.

Larger than life 3PL Eddie Stobart decided to snap up Gazeley’s Solar building at Magna Park after turning down the opportunity for a build-to-suit.

The building totals 275,534 sq ft and boasts a 15m eaves height and 50kn/sqm floor loading. It has 24 dock and two level access doors and is set on a 14-acre site. Joint letting agents are CBRE and Burbage Realty. The property was sold at a price in the region of £55 per sq ft.

In yet another deal, distribution and e-commerce provider POS Direct acquired the 70,000 sq ft Unit Three warehouse on Radar Road, Leicester.

The 70,110 sq ft building has a secure service yard, single level access, five dock loading doors and offices. POS Direct, which has five other facilities in the Leicester area, is expanding to accommodate anticipated growth in the next few years. The landlord was advised by Burbage Realty and Colliers CRE while Lambert Smith Hampton acted for POS.

Finally The Core, a 167,000 sq ft warehouse near Chesterfield, was let to East Anglia–based privately owned marketing and logistics services company, ProLog on a ten year lease with five year break at a rent around £4.25 per sq ft, a little less than the original quoting rent of £4.75 per sq ft.

The building, built by Langham Developments, boasts 12.5m eaves, 15 dock and two level access doors, a 50kn/sqm floor loading as well as up to 2MVa power availability. Letting agents are Fisher Hargreaves Proctor and Lambert Smith Hampton.

Hardly surprising

With such a lot of take-up it is hardly surprising that there is a shortage of modern space available. There is Miller Birch and Standard Life’s Langley 255 warehouse, totalling 255,000 sq ft, at @ccess 26, Langley Mill, Derbyshire, the firm’s 30-acre industrial and distribution development. It is five minutes from Junction 26 of the M1. The warehouse boasts 12 m eaves, 20 dock and four level access doors, fitted offices with comfort cooling and raised floors as well as 68 lorry parking bays and 163 car parking spaces.

The building has been on the market since it was completed 2006. Letting agents are North Rae Sanders, CBRE and Innes England.

ProLogis has a 123,000 sq ft unit at ProLogis Park Kettering available at £4.95 per sq ft. It boasts 12 m eaves, 12 dock and two level access doors a 50kn/sqm floor loading and two-storey offices. Letting agents are Budworth Hardcastle and Burbage Realty.

Then there is AXA REIM’s Arrow building in Worksop totalling 330,418 sq ft and boasting 32 dock and four level access doors. Letting agents are GVA and Knight Frank.

David Binks of Cushman & Wakefield says: “Looking around you get a picture of dwindling existing building supply. Occupiers will have to look at second hand space.”

Luckily there is a reasonable amount, though how much is of a reasonable quality will depend on circumstances such as how desperately an existing building is required.

Good quality second hand buildings include the Crackerjack warehouse in Corby totalling 528,108 sq ft.

The cross dock facility has 50 dock levellers and four level access doors as well as a 15m eaves height. It is being marketed by GVA and CBRE.

There is also the 422,784 sq ft Hydro unit at Magna Park in Lutterworth. The building has 15m eaves as well as 36 dock level doors and a large secure yard up to 92m deep. It is an eco- friendly building with reduced running costs, one of the first in the country to incorporate Gazeley’s Eco Template in 2005. The property was originally let to TNT/Primark at a rent of £5.25 per sq ft.

However, it is now being offered through the receivers. The warehouse has been vacant since Primark went to Thrapston in 2010. The company that owns the building is in receivership. The joint agents, acting on behalf of the receivers are Knight Frank and Burbage Realty. They are seeking a letting at £5.25 per sq ft or to sell it at £60 per sq ft.

Andrew Jackson of North Rae Sanders explains: “The receivers are taking a fairly bold view [on the price]. They are looking at the lack of supply and holding out to get a reasonable rent or price for the freehold.

“With supply dwindled so much those looking will have to pay a reasonable amount for it.”

Helen Longstaffe of DTZ says: “Occupiers really want to be round the Golden Triangle but choices are limited and it is becoming more likely that occupiers will have to go down the D&B route to get what they want.”

Andrew Jackson of North Rae Sanders agrees: “An increasing number of occupiers are going to have to look to D&B. There are sites available but there is not an abundant supply in the prime locations a few good sized deals would quickly mop them up.”

Some of the larger D&B schemes in the region include Gazeley’s G.Park Newark where it can accommodate up to 750,000 sq ft. Letting agents Jones Lang LaSalle, Colliers International and Fisher Hargreaves Proctor are quoting £4.50 per sq ft.

There is Plot 2110 at Magna Park Lutterworth which could take 104,000 sq ft. A further 100 acres is going through the planning process to make Phase III of the flagship development.

Then there is the 95 acre G.Park Crick scheme where the developer has secured planning for up to 1.1 million sq ft in a single building. The building will be designed as a cross dock on a D&B basis only with rents at £5.95 per sq ft. Letting agents are CBRE and Dowley Turner.

Developer Goodman has 100 acres at Derby Commercial Park, where the developer has permission for a 1.2 million sq ft unit. Letting agents are North Rae Sanders, CBRE and Innes England.

Another site which could take such a large facility is Gladman’s Vertical Park on the site of the former Bevercotes colliery, near Nottingham. The developer has secured outline planning for up to 2.7 million sq ft of space with outline consent for a single facility of 2 million sq ft with a 30m eaves height.

The total site extends over 200 acres. Developer Gladman can accommodate enquiries from 200,000 sq ft upwards. Letting agents are Lambert Smith Hampton and DTZ.

Grafton Gate has a joint venture agreement with Harworth Estates on a 70 acre site near Ellistown in Leicestershire where there is a resolution to grant planning for up to 570,000 sq ft in two phases subject to a Section 106 agreement.

Alan Sarjant of ProLogis says the developer has land at Daventry Phase III which could take up to 730,000 sq ft in three building as well as a plot at Zone 2 on Phase II at DIRFT which could take a single building of 400,000 sq ft.

The final phase at DIRFT could take a further 6 million sq ft but still has a long way to go before it is brought forward.

The developer still has its Eurohub Main site in Corby which could accommodate 2.5 million sq ft as well as its 49 acre ProLogis Park Mansfield scheme which is fully serviced and ready to go accommodating building from 20,000 – 500,000 sq ft.

Evander has its 18 acre Grange Park scheme in Northampton at Junction 15 of the M1 motorway which it will bring forward in conjunction with BA Pension Fund. The site could accommodate up to 360,000 sq ft. Letting agents are Dowley Turner and Budworth Hardcastle.

Warwickshire-based IM Properties has recently secured a 45 acre development site off the M1 in Eastwood, Nottingham where it intends to implement works to provide the site infrastructure to deliver a bespoke building within 12 months. It is thought the site could accommodate up to 800,000 sq ft of space. Letting agents are Fisher Hargreaves Proctor

Roxhill also has a number of sites in the region including Gateway Park in Peterborough, which has consent for 5 million sq ft of development next to the A1(M); Brackmills Point in Northampton, which can accommodate up to 420,000 sq ft of warehouses; Warth Park in Raunds, Northamptonshire, which includes a 70 acre distribution element; Geddington Park in Corby, a joint proposal with Legal & General for a single warehouse of 880,000 sq ft and Windmill Park in Kettering, a 90 acre site at junction 10 of the A14.