Sunday 4th Dec 2016 - Logistics Manager

Price pressure

Rents have hardened, incentives are reducing and lease lengths are increasing in the East Midlands. Good deals are getting hard to find, says Liza Helps.

Property pundits agree the shortage of good quality space in the East Midlands is getting critical with occupiers being advised to look further afield and if necessary out of the region to secure the space they need.

Indeed parcel group Hermes was originally looking to take a space in Peterborough until it was withdrawn leaving the company to scramble for space in the West Midlands. It eventually took 336,000 sq ft at Tamworth594, on a five year lease at a rent of £5.25 per sq ft. Lambert Smith Hampton advised Hermes. Dowley Turner Real Estate and North Rae Sanders acted for the landlord.

With such shortages CBRE notes that the majority of good, modern, existing units are now attracting strong interest from occupiers, in many cases from multiple parties. Nick Waddington of BNP Paribas notes: “It’s not just Grade A stock that is being snapped up. Such is the lack of supply that occupiers are having to look at older stock.”

He cites Storm 18, a 330,000sq ft warehouse in Crick, which was bought by developers for redevelopment but before that was even considered, potential occupiers were seeking to lease it. It was not long before it was let to Norbert Dentressangle on a ten year lease.

The shortage is hampering take-up, says Sally Bruer of Gerald Eve who says availability in the East Midlands is at an all-time low. “Availability rates for the East Midlands are just 7.5 per cent, the lowest out of all the regions in the country. This has been an on-going issue for some years with the availability rate for the region being the lowest or one of the lowest of all regions since 2006,” she says. “However, at 7.5 per cent, this is the lowest the availability rate has been since 2007, falling from a high of 12.5 per cent in 2009.

“The low level of availability in the region is in part as a result of little development in the region, all of it purpose-built for the past four years.”

Jon Ryan-Gill of Knight Frank notes: “For the first half of the year there was 5.1 million sq ft available in the East Midlands in units of 50,000 sq ft upwards; of that Grade A space accounts for just 1.25 million sq ft in four buildings.”

These include Miller Birch and Standard Life’s Langley255 warehouse, totalling 255,000 sq ft at @ccess 26, Langley Mill, Derbyshire, a 30-acre industrial and distribution development near Junction 26 of the M1 motorway.

The warehouse boasts 12m 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 in 2006. Letting agents are North Rae Sanders, CBRE and Innes England.

Then there is the Arrow building near Worksop, which was forward sold to AXA REIM and built by Gazeley. The 330,418 sq ft high bay distribution facility boasts four level access doors, 32 dock level doors, 220 car parking spaces, 91 HGV or trailer parking spaces, 15,600 sq ft of offices on two floors, 312,000 sq ft of warehousing, security fencing and a 300 sq ft gatehouse. Letting agents are GVA and Knight Frank.

Biggest available

The biggest of the available buildings is Moorfield and SEGRO’s LPP Corby (formerly known as Crackerjack). The 525,000 sq ft cross-docked warehouse has a 15m eaves height as well as 50 dock and four level access doors. It has capacity to store 77,000 pallets. The building has two service yards and parking for 98 HGVs and 336 cars. Letting agents are Burbage Realty, CBRE and GVA.

There is also PRUPIM and Stoford’s Measham 142 warehouse in Leicestershire. The facility totals 142,358 sq ft and is thought to be under offer to Wolseley. It has 12m eaves as well as 12 dock and two level access doors with 50m of hard standing and a 50kn/sqm floor loading. Letting agent Colliers was asking £4.75 per sq ft or £60 per sq ft freehold.

There is more second hand space available including some three million sq ft in 14 buildings which include Max500 in Corby totalling 511,214 sq ft which is being vacated by Wincanton. It is available on a sublease or assignment through Savills and Cushman & Wakefield.

The cross dock facility has 16m eaves as well as 55 dock and seven level access doors with two 50m yards. It has racking for 55,000 pallet positions as well as heating lighting and an in-rack sprinkler system. It has a three storey office attached as well.

Then there is Goodman’s 275,867 sq ft Unit B warehouse at Royal Oak in Daventry which is being marketed by North Rae Sanders and Colliers.

The warehouse has 9.4m eaves, 15 dock levellers and level access doors which could be extended, as well as heating, lighting and sprinkler provision. It is being marketed at a rent of £4 per sq ft.

For those looking for smaller space there is Aviva’s Black Swan warehouse in Swan Valley, Northamptonshire which was previously occupied by Blacks Leisure and is now on the market through Jones Lang LaSalle, CBRE and North Rae Sanders.

The building totals 189,663 sq ft and boasts 12m eaves as well as 17 dock and three level access doors. Like many second hand units the facility comes with a host of extras such as heating, lighting and sprinklers as well as narrow aisle pallet racking (17,000 positions), a floor wire guidance system and three mezzanine floor levels.

In addition there is a 133,239 sq ft unit owned by IGNIS Fund at Magna Park Lutterworth being marketed at £5.75 per sq ft through BNP Paribas and North Rae Sanders. The property includes 6,871 sq ft of office space as well as a 10 m eaves height and six dock an four level access doors.

At Brackmills in Northamptonshire, there is the former Debenhams building known as Mercury 111, which is being marketed by CBRE, Burbage Realty and Moriarty & Co. The property is located on Mercury Drive approximately 2.5 miles from junction 15 of the M1 motorway.

The fully fitted cross dock distribution warehouse totals 111,485 sq ft and has 9 m eaves, 12 dock and five level access doors as well as a two storey mezzanine floor – currently fitted with a garment handling system, heating, lighting, and a staff canteen and welfare facilities.

With shortages come harder terms, says Andrew Jackson of North Rae Sanders: “Rents have hardened, and incentives are reducing, and lease lengths have gone out. The East Midlands is no longer the place where tenants can get good deals. They have to pay what the landlord is quoting.

“There are other opportunities in the more outlying locations and tenants will look at these more seriously.”

David Binks of Cushman & Wakefield says: “Landowners and developers will move their prices and terms up as demand increases and supply gets tighter. Occupiers may well look to relocate in areas such as along the A14 corridor in places such as Wellingborough and Kettering.”

“Occupiers seeking space are having to focus on design and build options due to the lack of good quality existing sheds,” says James Keeton of Jones Lang LaSalle.

Geoff Gibson of Lambert Smith Hampton agrees: “With no speculative development on the horizon, and continued occupier demand for prime industrial space, the distinct lack of supply continues to impact on the East Midlands’ industrial and logistics market. Occupiers are increasingly moving towards build to suit solutions, with numerous opportunities on offer in the region.”

D&B deals

There have already been a number of D&B deals this year including John Lewis agreeing to a 675,000 sq ft facility at Gazeley’s 200 acre Magna Park Milton Keynes scheme. The warehouse will be built adjacent to the retailer’s existing 650,000 sq ft distribution centre, which Gazeley completed in August 2007.

Gazeley has planning for up to 3.4 million sq ft in units from 100,000 sq ft to 1 million sq ft on the site which is being marketed by Savills, Jones Lang LaSalle and Burbage Realty.

Goodman has secured two design and build lettings. The first is to GeoPost subsidiary DPD for a £100 million 330,000 sq ft warehouse at Hinckley Commercial Park. The cross dock shed is to be developed on a 35 acre plot. SBH advised GeoPost while Savills and NRS acted for Goodman.

The second design and build deal sees Kuehne & Nagel securing a £45 million warehouse at Goodman’s Derby Commercial Park just off Raynesway, to the north of the A6 Alvaston Bypass in Derbyshire.

The 632,285 sq ft distribution centre will help service a contract the company has with Heineken.

Derby Commercial Park is being marketed by joint agents CBRE, Innes England and North Rae Sanders. There is room for a further 550,000 sq ft cross dock facility at the scheme as well as smaller warehouses. Kuehne & Nagel was advised by David Clews.

Goodman is currently involved in another major warehousing development planned for Derbyshire. The firm has partnered with Shepherd Group to deliver a massive rail freight depot on 619 acres of land between Etwall and Egginton, on behalf of the landowner, Severn Trent. The plans involve creating five million sq ft of manufacturing and distribution space.

Another developer making headway in the region is Roxhill which has launched its 240 acre distribution and manufacturing park Gateway Peterborough.

The scheme which could accommodate up to five million sq ft is expected to create up to 8,000 jobs. Detailed planning permission at Peterborough Gateway has been obtained for 1.8 million sq ft of B1, B2 and B8 uses with no operational restrictions. The remaining land benefits from outline planning consent for the same uses.

The park is accessed at Junction 1 of the Fletton Parkway adjacent to Junction 17 of the A1 (M) motorway. The first phase of building work includes a dual carriageway to provide access to the park, along with several roads through it.

Buildings on offer will range from 95,000 sq ft to a massive 1.3 million sq ft. Joint letting agents are North Rae Sanders, Bidwells and Burbage Realty.

The developer also has sites at Warth Park, Raunds where it has outline planning for two to three buildings up to 350,000 sq ft. Letting agents are CBRE, NRS and Lambert Smith Hampton. Then there is CIRFT in Corby (formerly known as COR!) where there is permission for an 880,000 sq ft rail connected warehouse.

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

Then there is Gladman’s Vertical Park on the site of the former Bevercotes colliery, near Nottingham where there is planning for outline consent for a single facility of two million sq ft with a 30m eaves height. Letting agents are Lambert Smith Hampton and DTZ.

Joint venture

Grafton Gate has a joint venture agreement with UK Coal on a 70 acre site near Ellistown in Leicestershire where units up to 320,000 sq ft can be accommodated. The sole agent is North Rae Sanders.

Prologis has the final phase at DIRFT known as DIRFT III which could take a further six 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.

It has just secured outline planning on land in Wellingborough for a new £150 million logistics park at Appleby Lodge. The site will provide two million sq ft of employment space and has the potential to create up to 2,500 jobs.

Evander has its 18 acre Grange Park scheme in Northampton at J15 of the M1 motorway which it will bring forward 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 teamed up with First Industrial to develop its 45 acre site off the M1 in Eastwood, Nottingham known as Nottingham 26, where it intends to implement works to provide the site infrastructure to enable it to deliver a bespoke building within 12 months. It is thought the site could accommodate up to 900,000 sq ft of space. Letting agents are Fisher Hargreaves Proctor, North Rae Sanders and Dove Haigh Philips.

Colliers is marketing West Hallam Park in Nottinghamshire which could take up to a million sq ft.