Sunday 25th Sep 2016 - Logistics Manager

Green shoots in the South East

Occupiers can breathe a sigh of relief, speculative development is back – or is it? Liza Helps reports.

The green shoots of property development are forcing their way through in the region with five speculative schemes being brought forward or else thought to be imminent.

Developer Roxhill and joint venture partner LaSalle Asset Management have announced that they will pursue two schemes in Basildon and Aylesford, while SEGRO has broken ground on a speculative scheme in Enfield. Rumours abound that Wrenbridge and Palmer Capital are considering speculatively developing at Circular Point in Chingford and that Standard Life and Ravenbourne could bring forward Phase Three of Thames Gateway Park in Dagenham.

Why the sudden splurge in speculative development? Richard Evans of Jones Lang LaSalle says: “There is fundamentally a lack of stock coupled with the fact there is more money in the market for industrial investment but the funds are struggling to find Grade A buildings which are good value for money.

Michael Alderton of Jones Lang LaSalle explains: “Over the past year yields have sharpened making it more expensive to buy [industrial property] as an investment and still get a good return hence an increased interest in speculative development. It’s more the driver from the money side.

“The only way they can get into the market is by accepting more risk and buying more cheaply through development and particularly speculative development.”

Paul Mussi of Knight Frank says there is an air of anticipation: “There has been a number of land purchases and there has been the odd developer who bought land and is watching to see when the time is right – you will see more speculative schemes coming forward.”

Standard Life bought Thames Gateway Park Dagenham 15 years ago and speculatively developed a scheme. The third phase has planning for units totalling 300,000 sq ft. Letting agents are GVA and Altus Edwin Hill.

Mussi says; “It doesn’t matter what unit size [is built] there is hardly anything available. The conditions are right to speculatively develop.”

Over in Chingford at Circular Point, Wrenbridge and Palmer Capital have planning for two warehouses of 26,965 sq ft and 30,000 sq ft as well as trade counter units form 4,000 sq ft to 235,000 sq ft. Letting agents are CBRE and Glenny.

SEGRO broke ground on its 84,150 sq ft speculative warehouse scheme on Advent Way, Enfield in September. The scheme is due for completion in August 2014.

While Roxhill and LaSalle Asset Management are speculatively developing two units of approximately 100,000 sq ft and 70,000 sq ft at Basildon and three units of approximately 40,000, 60,000 and 90,000 sq ft at Aylesford. The two schemes, which are part of the existing Roxhill land bank, are the 8.4 acre Gateway Basildon site in Essex and 10 acre Invicta, Aylesford site in Kent.

Jason Dalby of Roxhill says: “This joint venture provides a fantastic opportunity to build new industrial buildings in areas where supply is limited but demand is growing.”

Chris Fry, director at LaSalle Investment Management, adds: “We perceive there to be a gap in the market for mid-sized industrial units. This will create prime south-east multi-let industrial investments for our pension fund client”.

Construction of both projects is due to start in January with completion expected in early summer of 2014.

CBRE advised the joint venture. Letting agents for the schemes are Jones Lang LaSalle and Altus Edwin Hill for Basildon and Montague Evans and Altus Edwin Hill for Aylesford.

For those occupiers who cannot wait for the speculative bonanza, the market is challenging. Jonjo Lyles of BNP Paribas Real Estate says starkly: “Everything is let.”

Indeed Alderton notes: “In the last 12 months stock has dwindled to pretty much nothing.” Chip Mitton of Altus Edwin Hill agrees: “You can count the number of good quality buildings with one hand.”

Looking at availability south of the River Thames, Greg Cooper of Cushman & Wakefield says: “Really in this neck of the woods the only building standing is DDC160 – it’s the only building of any quality.”

Evander Properties DDC160 Dartford Distribution Centre on Sandpit Road, just off the A206 University Way, 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 are Altus Edwin Hill, CBRE and GVA.

North of the River Thames there are a number of second hand Grade A units from 50 – 75,000 sq ft including Unit C1 at Zenith Industrial Park in Basildon totalling 50,114 sq ft which is being marketed at £6.25 per sq ft through letting agents Colliers. There is also Port Centric House on Thurrock Park Way in Tilbury Essex providing up to 69,750 sq ft with a two acre yard through Colliers and Frankis Porter at a rent of £5.50 per sq ft.

Slightly larger is Central Avenue Unit 1 in West Thurrock offering 110,771 sq ft of space but planning has just been obtained for a data centre and it is likely that the owners will seek a higher value user.

With such a dearth of good quality space it is no wonder that the sale of vacant warehouses at Goresbrook has attracted a lot of attention.

Primed for potential

The rail-connected investment site comprises 28 acres of land and 487,243 sq ft of warehousing facilities including cold store and is located just off the A13 giving great access to Central London. According to reports in the press the site sold for around £20.5 million and will be worth an awful lot more when the properties on it are re-let.

Two of the warehouses on the site are over 100,000 sq ft and represent the only warehouses of this size within the North West M25 that are immediately available.

Savills acted for the buyers; BNP Paribas Real Estate represented seller Aberdeen Asset Management.

While not all developers are expecting to speculatively develop, they are certainly getting sites primed for design and build which is expected to continue to be the preferred route to securing space in 2014.

Dominic Whitfield of Savills notes: “Everyone is getting sites oven ready.”

Mitton agrees: “Developers are lining up and getting their land primed; many have got planning and are poised for design and build.”

As well as the sites it expects to speculatively develop in the region Roxhill also has its joint venture with Forth Ports to bring forward the 70 acre London Distribution Park at the Port of Tilbury.

Roxhill purchased a 50 per cent share in the development scheme from Forth Ports last year, and the two companies are working together on 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 underway and buildings will be available on a either a pre-let or pre-sale turnkey basis.

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. It has already pre-let a 60,000 sq ft cross dock warehouse on a 6.5 acre site to Kuehne & Nagel.

Phase 2 to the east of the new service road being constructed has the potential to provide a single unit of up to 300,000 sq ft. Pre-lets/pre-sales from 50,000 sq ft or more are being sought.

Capita Symonds and Knight Frank acted for AXA Real Estate and Roxhill. CBRE represented Kuehne + Nagel.

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 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 secured 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.

It has already secured a £200 million deal with retailer M&S for a 900,000 sq ft port centric distribution centre.

The logistics park is 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 from Apollo/Astral in 2007.

Strategic schemes

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. Letting agents are Savills and BNP Paribas Real Estate.

It must be noted that considerable infrastructure works are required on this site to bring it to oven ready condition.

Prologis has other schemes in the region these include 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 five 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.

While there is obviously considerable scope of design and build in the region, occupiers, warns James Haestier of Colliers, “need to be aware that deals available 12 months ago are not available now. It is a landlords’ market and rent free and other incentives are not there now. Occupiers do not have a huge choice anymore and need to be aware of a lack of stock and plan ahead for moving.”

With this in mind Chris Knight of Jones Lang LaSalle says: “In locations where there is a complete lack of supply rents are moving on now.”