The pressure is on to find delivery depots for online shopping. But, says Liza Helps, shortage of space means looking at design and build.
The growth in internet shopping and the need to support deliveries in London is driving demand for warehouses of 50 – 100,000 sq ft, but increasingly companies are having to go down the design and build route in the face of the shortage of space on the eastern side of London.
Paul Mussi of Knight Frank says: “There seems to be an acute lack of space and it’s meant that occupiers that have requirements for existing buildings are having to opt for pre-lets because they cannot find what they want, where they want.”
In particular this has hit the parcel couriers hardest. With a massive growth in on-line shopping there is a correspondent boost in demand from parcel courier companies to service the growth especially around London.
Amazon is looking for five satellite distribution depots round London while GeoPost, City Link and Hermes are all thought to have outstanding requirements ranging from 40,000 sq ft to 100,000 sq ft.
Mark Coxon of Caxtons says: “You will find parcel company enquiries on most schedules looking for space both north and south of the river. It is certainly fuelling the market.
James Haestier of Colliers agrees: “What we are finding is that there is a great call for warehouses in the region of 50 – 100,000 sq ft from parcel operators as a direct result of the growth in internet shopping and an increasing need to deliver in London.”
It’s not just parcel companies looking at sheds in this size range – there is strong demand for dot-com fulfilment centres from the supermarket retailers as they expand to satisfy customer demand.
Tesco has just taken its sixth e-fulfilment centre round London at Bericote’s Crossdox scheme in Erith, while Waitrose is seeking space in Croydon.
Parcelforce has struck lucky securing two existing premises of 100,000 sq ft in Beckton and Crayford but says Chip Mitton of Altus Edwin Hill: “Any standing stock is severely limited.”
Jonjo Lyles of BNP Paribas Real Estate adds: “There is reportedly only one year of standing stock across the whole of the South East and with more than 30 enquiries, tenants trying to find buildings are in a grim position. There is little or nothing available, only recently a 30,000 sq ft building went to best bids.”
Buildings that are available include Evander Properties rebranded DDC160 Dartford Distribution Centre on Sandpit Road, just off the A206 University Way which provides a direct dual carriageway link to Junction 1A of the M25 motorway and the QE2 Bridge Dartford River Crossing.
The facility totals 160,552 sq ft with 15,653 sq ft of two-storey fitted offices. The warehouse has 12m clear internal height with high bay lighting as well as loading on two elevations with 15 dock and five level access doors. It also benefits from 40m deep service yards and has parking for 198 cars.
Joint letting agents Altus Edwin Hill, CBRE and GVA are quoting £6.95 per sq ft.
DC142, a 142,000 sq ft warehouse facility built on the site of the former Iron Mountain building. The facility includes approximately 16,500 sq ft of comfort-cooled office accommodation over two floors while the warehouse benefits from 12.5m eaves height, 12 docks and four level access doors, a 50kN/sq m floor loading and 1,000 KVA power transformer.
The property is held on a 15-year lease from 16th September 2002, expiring on 15th September 2017 and is available by way of an assignment or a sub-letting, subject to terms. The passing rent is believed to be in the region of £8.50 per sq ft. Letting agents are Savills and Doherty Baines.
Another new secondhand unit onto the market is the former Royal Mail building in Bow. Capita Symonds and DTZ have jointly been appointed as letting agents on the 185,000 sq ft warehouse which is held on a lease which expires in 2022, and has a passing rent of more than £1.5m (£8.10 per sq ft). The building was constructed in 2002, and has the capacity to be extended to provide up to an additional 40,000 sq ft.
For those looking at slightly larger buildings, Lambert Smith Hampton has the 200,000 sq ft Portside building at Fortress Distribution Park in Tilbury. The space provides 10m eaves height, dock and ground level loading facilities and is adjacent to the Port of Tilbury Dock gate offering an occupier the potential to use rail connections for freight movements.
Isis Reach, the former Office Depot distribution warehouse was built in 2001; the cross dock warehouse extends to 320,825 sq ft and has 14 dock and seven ground level doors with covered van docks with 40 bays. It has a 2400kva incoming power supply and boasts 13.3m eaves. The passing rent is £6.46 per sq ft and the lease has 14 years remaining. Joint letting agents are Jones Lang LaSalle, Altus Edwin Hill and Cronin & Co.
There is also the former Comet building known as DC380, on Edinburgh Way, Harlow totalling 380,464 sq ft which is being marketed by Savills and CBRE. The building boasts 12 m eaves, 24 dock and eight level access doors as well as a 50kN/sqm floor loading.
Tim Johnson of Jones Lang LaSalle points out: “Looking around the market and looking at the volume of space available, there will be pressure on rents and incentives. The supply is reducing, as in other areas, but there isn’t a huge amount of land immediately deliverable for development.”
Mitton adds: “Rents are going up and incentives are not quite so generous.”
There are even indications that rent levels are increasing with that in mind there are some who think that speculative development is on the cards.
Johnson says: “We will see some spec development at select key sites but only on sites where the developers and landowners don’t need to have recourse to funding.”
Mussi agrees: “Developers are not keen to do speculative development. They are talking about it and courting with it but no one is actually biting the bullet. While there is an acute shortage of space which gives us ammunition, the level of demand and take up is still relatively weak and finance is still too risky.”
That isn’t stopping developers from progressing sites or indeed from acquiring them either. Indeed many developers are looking to secure sites through joint ventures. Only recently Roxhill teamed up with Forth Ports to develop the London Distribution Park on a 70-acre site just outside the port’s gates.
Roxhill purchased a 50 per cent share in the development scheme from Forth Ports, and the two companies will work closely together in the delivery of the logistics park, which has outline permission for up to 940,000 sq ft of space. It is being marketed by Lambert Smith Hampton and Knight Frank.
Infrastructure works are due to start shortly and buildings will be available on either a pre-let or pre-sale turnkey basis, with occupation possible by the end of the year.
Roxhill has also teamed up with AXA to bring forward Orion Park in Dagenham, a 22.7 acre scheme offering units from 15,000 sq ft to 125,000 sq ft on a design and build basis. The scheme is being marketed by Knight Frank and Capita Symonds.
Meanwhile Graftongate is working with L&G on the 7.6 acre Hardcase2 scheme in West Thurrock that could deliver 162,508 sq ft on a D&B basis. Letting agents are GVA, CBRE and Altus Edwin Hill.
And Bericote is working with Blackrock on Tower Thurrock just off the Oliver Road in West Thurrock. The joint venture is proposing a 14 acre distribution scheme with units from around 100,000 sq ft up to 325,000 sq ft. Outline consent exists for up to 325,000 sq ft of B1,B2 and B8. The scheme boasts that it can accommodate units with eaves heights up to 24m. Letting agents are CBRE and Altus Edwin Hill.
Goodman has been pushing forward a variety of schemes in the wider region and has just secured detailed planning permission to develop three prime warehouse units at New Hythe Commercial Park in Aylesford, Kent.
The three units total 232,000 sq ft and are located at Junction 4 of the M20 motorway with good links to the Kent ports and the wider national motorway network. CBRE and Altus Edwin Hill are agents.
The developer is also progressing its 115 acre Kingsnorth Commercial Park in Medway, Kent. It has submitted planning for 1.2 million sq ft in a single unit. Letting agents are CBRE, Colliers and Caxtons. In total the site could accommodate up to 2 million sq ft.
Not to be outdone Prologis has secured planning approval for a 260,000 sq ft warehouse scheme in Basildon, Essex. The scheme proposes warehouses from 72,500 up to 254,000 sq ft with the largest incorporating a 21,800 sq ft three-storey office building. Letting agents are Glenny and CBRE.
One of the biggest developments has to be DP World’s London Gateway scheme which as well as providing a deep water port will also have a port-centric logistics park of up to 10,118,400 sq ft. The logistics park will be able to handle build to suit facilities of up to around 1 million sq ft. In total, London Gateway incorporates over 1,800 acres, this includes the port and park and areas for environmental mitigation. The current infrastructure will serve an initial Phase I of development with roads connecting to the A13 and Junction 20 of the M25 motorway as well as the port. The facility is also rail connected. Sole agent is Jones Lang LaSalle.
Bericote Properties’ Crossdox scheme in Erith has planning permission for 640,000 sq ft of space including a single unit of 423,900 sq ft, the only one of its size within the M25. It would boast 17m eaves, 30 dock and eight level access doors, as well as a 50kN/sq m floor loading. Letting agents are Altus Edwin Hill, Jones Lang LaSalle and Dowley Turner Real Estate. Bericote purchased the 38-acre site for £800,000 per acre in 2007.
The other strategic site in the region is Prologis’ RFI Howbury rail freight interchange scheme in Erith just off Junction 1A of the M25 motorway. The 156-acre distribution park could accommodate up to 2.1 million sq ft of rail-connected space in four units from 145,000 sq ft to 1.1 million sq ft. The £80 million project is expected to take hundreds of lorries off the roads and according to Prologis save 35,000 tonnes of carbon emissions a year and create up to 2,500 new jobs. Letting agents are Savills and BNP Paribas Real Estate.
Other sites primed for build-to-suit include Standard Life and Ravenbourne’s 17 acre Thames Gateway Park in Dagenham which could accommodate up to 300,000 sq ft. Letting agents are GVA and Altus Edwin Hill.
Prologis has its 14 acre Prologis Park Littlebrook in Dartford that could accommodate a single shed of up to 273,885 sq ft. The warehouse would benefit from 26 dock and two level access doors as well as having a 12.5m eaves height. Colliers and CBRE are joint letting agents.
In Enfield there are a number of sites including Gazeley’s G.Park Enfield where the developer has a single 5 acre site left capable of accommodating a 120,000 sq ft warehouse. The building would benefit from 34 dock levellers, have a 15m eaves height and a floor loading of 50kN/sqm. Letting agents are Jones Lang LaSalle, CBRE and Lambert Smith Hampton.
Gazeley also has its remaining 30 acres of land at G.Park Sittingbourne which could accommodate up to 540,000 sq ft. It is being marketed by Savills, GVA and CBRE.
Rent levels for D&B like most other rents in the region are on the way up says Mitton. “The rock bottom deal market has moved on.”
Accordingly rents for D&B around Thurrock are expected to be in the region of £7.50 – £7.75 per sq ft, in Basildon £6.50 – £6.75 per sq ft and in Dagenham £7.50 – £8.25 per sq ft depending on size and how bespoke it is.