Tuesday 27th Sep 2016 - Logistics Manager

Spec on the horizon

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There is a growing debate over the need for a return to speculative development to meet demand in the North West. Liza Helps reports.

Glancing at the availability statistics one would be forgiven for thinking there’s not much of a problem in the North West, but says Andrew Aherne of Lambert Smith Hampton the situation is overstated.

“Looking at hard figures supply looks very good but because of the legacy of old mills and big manufacturing premises of 250,000 sq ft plus on the market you will find there is not much that is fit for modern day usage.”

Julien Kenny Levick of Colliers agrees: “The lack of supply of large sheds in the North West is a real concern for agents and their occupier clients. In reality there are only three quality facilities available in the region offering modern accommodation of in excess of 350,000 sq ft. These are XL Skelmersdale, Onyx Runcorn and Lancashire Business Park.

“The likelihood of one of these units being let in the short term is high with the likes of Northwood Paper and Hut Group actively looking at present. Once these units go then occupiers will have no option but to look at older properties – but even this list of potential options is small.”

There are 21 buildings of between 70,000 – 470,000 sq ft available in the North West says Steve Johnson of B8 Real Estate. “Of that only 800,000 sq ft is Grade A.”

These include Liberty Properties’ 102,029 sq ft Matrix Court warehouse in Chester, which is being marketed by Legat Owen, Bolton Birch and Lamont.

The Grade A property has 10m eaves, ten dock and two level loading doors, a 40m deep service yard and generous on-site car parking. It is being marketed at a reduced rent of £3 per sq ft.

Then there are two more units at Lancashire Business Park comprising a 336,646 sq ft speculative scheme by Lancashire County Developments. The two adjoining 168,000 sq ft units can be linked to create one 336,646 sq ft facility or can be subdivided from 76,500 sq ft.

Lambert Smith Hampton and Jones Lang LaSalle are joint letting agents and are quoting £4.75 per sq ft.

The warehouses boast 12m eaves as well as a 50 kN/sq m floor loading. They are fully sprinklered and lit. It is thought that the buildings will soon be let. Aherne says: “Terms are already out to one party on a part of a building, while there have been expressions of interest from a further five parties chasing a single 300,000 sq ft contract. It is early days yet.”

Credible

There are second hand units available, but, says Kenny-Levick, not all of these are credible. Units include Crewe 2 owned by JTI that totals 92,890 sq ft where Knight Frank is sole agent. The building boasts 13.81m eaves as well as eight dock and one level access door, offices, heating lighting and racking currently set for 17,000 pallet spaces.

Slightly larger is Axa’s Maximus warehouse at Winsford totalling 105,000 sq ft. The property is on the market through B8, Jones Lang LaSalle and Lamonts. Bigger still is Prologis’ MW180 at Midpoint 18 near Middlewich, just two miles off Junction 18 of the M6 motorway. The 185,449 sq ft property has 12m eaves, 18 docks including 6 double deck docks and 3 drive in doors and expansion land capable of an increase in size to 238,000 sq ft or to provide Cross Dock Configuration on a 10.6 acre site. It is being marketed through Lambert Smith Hampton at £4.25 per sq ft.

There is also Property Alliance Group’s MW300 at Stakehill Park totalling 300,000 sq ft boasting 53 dock and three level access doors. It is being marketed by Lambert Smith Hampton.

One other of note is Logicor’s Onyx 350 building. The 343,000 sq ft former Hager Meyer warehouse in Runcorn is being let through Cushman & Wakefield, B8 and Moriarty & Co. The property has 32 dock levellers and is fully fitted and boasts expansion land for up to 130,000 sq ft.

Largest of them all is the XL Building on Statham Lane in Skelmersdale formerly occupied by Comet. The 471,698 sq ft facility, constructed in 2003, boasts 12.75m eaves with 63 dock level, drive in and scissor lift loading doors. It is sprinklered, heated and lit, and is only one mile from Junction 4 of the M58 motorway. Letting agent is Jones Lang LaSalle.

The one building that is causing quite a stir is the soon-to-be former Biffa unit on Trafford Park. Stuart Murray of Savills, which is sole agent, says: “We had it out to five parties within 24 hours – there is pent up demand for good quality space in the right location.”

The warehouse was built speculatively by Legal & General and occupied five years ago by Biffa. There is 16 years remaining on the lease at a current rent of £4.75 per sq ft. The building has 15m eaves and is currently under full refurbishment by Biffa.

Off-market deal

Another Trafford Park building is set to come on the market and it too is already being offered to interested parties. Jason Print of Cushman & Wakefield says: “Demand is so strong that it is like the old days when all you had to do was look at your enquiry list – potentially you could do an off-market deal depending on the location and quality of the building.”

It is rumoured that CBRE is set to market Kuehne + Nagel’s 133,000 sq ft building at Trafford Park, and that already three interested parties are lined up before a brochure has even been made. No parties were able to confirm.

With so little availability and such strong demand it is no wonder that build-to-suit has been so popular, but is the market strong enough to see more speculative development?

Daniel Burn of Jones Lang LaSalle certainly thinks so: “With supply lagging far behind demand for property of all sizes, the market has been anticipating the return of speculative development for some time. Murmurs about it being on the cusp are not uncommon but there’s now a genuine sense that appraisals are being dusted off.

“The lack of existing stock is now driving up values, prompting renewed interest in the region from investors. Likewise, we’ve also seen increased appetites for strategic land buying from developers and institutions.”

But even with all these fundamentals in place Kenny-Levick does not hold out that much hope. “The question is – will developers step in to provide much needed stock? The answer is no, at least in the short term. Any speculative development will be confined to prime areas only and in the mid-size ranges of say under 50,000 sq ft which does not address this shortage issue.”

For occupiers unable to wait for the re-emergence of a speculative market there are plenty of build-to-suit options but not all of these are necessarily oven ready. Luckily there are developers who, while not actively speculatively developing, at least are getting their sites in order with planning and infrastructure if not already in place soon to be in place.

Those first out of the starting blocks are reaping the benefits.

Print says Praxis Real Estate Management hopes to start infrastructure works at its 1 million sq ft The Airfield scheme in Deeside in the New Year. The site close to the M56 motorway is being marketed by Cushman & Wakefield and Burbage Realty.

Meanwhile Mike Walker of CBRE says that MAG will also be starting with road infrastructure at its £800 million Airport City scheme in the New Year, following on from the news that it has secured Beijing Construction Engineer Group as a joint venture partner and has secured a pre-let for a 45,000 sq ft cross dock parcel delivery centre.

Airport City South has outline planning for up to 1.4 million sq ft of airport related logistics space. Joint letting agents are Jones Lang LaSalle and CBRE.

Other sites where infrastructure is being put in place include Omega South in Warrington, the second phase of Omega Warrington’s (OWL) 575 acre Omega scheme. Asda has just secured planning for a £100 million facility totalling 600,000 sq ft on the site next to junction 8 of the M62. The developer is looking to adjust the planning consent to provide more logistics space. It is thought the site could take up to two million sq ft. Joint letting agents are Jones Lang LaSalle, GVA and Addleshaw Goddard.

Harworth Estates has submitted plans for a 4 million sq ft of distribution and manufacturing space at its Logistics North site near Bolton. If successful, infrastructure works will commence in spring 2014.

Aldi has secured a site on the scheme for a 450,000 sq ft warehouse and there are rumours that a further deal for a 60,000 sq ft facility is to be struck soon.

The Logistics North site, located at the former Cutacre open cast coal mine site will be able to provide buildings ranging in size from 161,000 sq ft to 1 million sq ft.

Other oven ready or at least soon to be oven ready schemes include DTZ Investment Managers, Canmoor and Strathclyde Pension Fund’s 6 Sixty One site in Bolton, which can take a 530,000 sq ft warehouse with full infrastructure as well as a 2000KVA power supply. Sole letting agent is Savills.

Then there is Gazeley’s G.Park Liverpool that could deliver up to 425,000 sq ft. It is being marketed by CBRE, Colliers and Jones Lang LaSalle, Marshall and CDP’s 14 acre Gemini 8 site in Warrington could hold up to 250,000 sq ft, while the daddy of them all Kingsway could take 350,000 sq ft.

In Widnes there is Stobart Park which has planning for a 1 million sq ft warehouse with 40m eaves on the second phase of the development which is available on a build-to-suit basis through letting agents Jones Lang LaSalle and Cushman & Wakefield.

Stobart Park is part of a larger development in conjunction with Halton Council known as the Mersey Multi Modal Gateway (3MG) that could see the development of up to 3.5 million sq ft of warehousing, 5,000 new jobs and the reclamation of 200 acres of contaminated land.

Prologis has submitted revised plans for a 1 million sq ft plus warehouse on an adjacent 79 acre plot but infrastructure works seem a long way off.

Rob Taylor of Knight Frank says: “Well located sites are likely to be snapped up fast.” Indeed, he is marketing a site in Trafford Park which already has interest even though plans have only just been submitted.

The proposal by Canmoor will see development of  up to 300,000 sq ft on a 17 acre site known as Trafford Point. Knight Frank and B8 Real estate are letting agents.

While there are larger sites available for development, options are slim. Kenny Levick says: “It is time for landowners with functionally obsolete units to realise that their buildings are not going to suit most decent end users and to be brave and knock down these dinosaurs and facilitate a modern solution and the benefits will follow.”

Indeed developer Barwood and joint venture partner Legal & General have taken the lead. They secured the 31 acre former Georgia Pacific site located on Lockett Road in South Lancashire Industrial Estate, near Wigan.

The joint venture immediately secured planning for up to 625,000 sq ft of space on the site now known as M6Epic, as well as funding infrastructure works so that it could be marketed as an oven ready site.

In just a few months after launch it has already secured a 62,000 sq ft pre-let off a 20-year lease to DoleFresh for a banana ripening facility. The site can still accommodate up to 500,000 sq ft in plots from 5 acres upwards. Letting agents are CBRE, B8 and Moriarty & Co.

With such success at hand Taylor says: “Landlords of secondary or tertiary shed sites should look at demolition and creating development sites that way. It has been done at Heywood and no doubt there will be other situations where that will happen as well moving forward.”