A lack of space is pushing occupiers down the design and build route, but is it the only way forward? Liza Helps reports.
The small number of transactions in the region would suggest that there is little demand from occupiers for space in the South West but the opposite is in fact the case. Agents say there is a huge demand for space – upwards of 4m sq ft – and the only reason there is so little take-up is the fact that there is so little good quality space available.
“There is growing evidence to suggest that a lack of choice in the market is starting to blunt levels of take-up in the region,” says Russell Crofts of Knight Frank. Across the South West, take-up for units above 50,000 sq ft in the second half of 2013 was 613,000 sq ft, its lowest half year total since 2011 and comprised of only four second hand deals which included KBR leasing 236,664 sq ft at the Oxford Building, Europa Trade Park in Swindon.
“The modest levels of take up across the region more accurately reflect the critical shortage of existing supply,” he says. “The market continues to lack good quality units in the 50,000 to 250,000 sq ft bracket, which is where the lion’s share of the demand is coming from in the region.”
Paul Hobbs of GVA agrees but adds that this is inevitable: “Nothing speculative has been built for over six years in the region so it is unsurprising that there are stock shortages.”
Indeed according to Lambert Smith Hampton’s latest Industrial & Distribution report Grade A stock represents only 3.7 months supply in the South West. For those looking for space over 50,000 sq ft in South Wales Rob Ladd of DTZ has only bad news: “Occupiers will struggle, there is simply not the stock available.”
Chris Sutton of JLL agrees. “There are clear signs of an increase in occupier confidence, which has led to increased take up in Wales but there is now a specific shortage of new and modern stock in Grade A building on the M4 corridor.”
Buildings that are available include GE Capital Real Estate’s 338,330 sq ft Block B at Crossflow in Cabot Park Bristol. Agents are Knight Frank, JLL and Savills.
There are also a number of second hand units, from the 4015,512 sq ft Brabazon building on the West Way north of Bristol through CBRE to the 170,896 sq ft Steel Point unit off Badmington Road in Yate through GVA and JLL. In Chepstow, Wales there is the 291,886 sq ft former Sainsbury’s warehouse at Newhouse Farm through Lambert Smith Hampton. As a result of the shortage of space occupiers are now squaring up to take the plunge into design and build to get space. “Luckily there is a lot of land available,” says Phil Cranstone of DTZ.
The latest to follow this route is frozen food specialist Farmfoods which has agreed a design and build solution to its requirement for a 175,000 sq ft temperature controlled distribution centre in the South West with Delta Properties and Roxhill at their 600 acre Central Park scheme in Severnside, Bristol. GVA and Knight Frank acted for Delta Properties and Roxhill. Hobbs says: “Timing and certainty is crucial in the provision of new facilities for occupiers.” Those schemes with planning and infrastructure fully integrated will be in the best position to take advantage of demand.
At Central Park two phases are being brought forward and have already secured master planning meaning that as soon as a deal is secured development can take place immediately. A 3km road is in place as well as other services. The scheme could accommodate up to 1.3m sq ft in a single unit and the first phases have planning for a total of 4.4m sq ft. The whole site could accommodate up to 10m sq ft in total.
Hobbs continues: “At this stage in the cycle there is not sufficient commitment from the applicants to justify generic spec build, but a raft of D&B projects are in discussion as there is limited standing stock, and what is available is over ten years old. Given, however, the acknowledgement that the area economy is set to grow rapidly, and investment funds’ desperation to buy anything prime in the region, 2015 could be the year for project starts in Bristol or Swindon.”
Other sites in the region include two schemes in Swindon each of which could accommodate up to 400,000 sq ft, Graftongate and ING’s 30 acre Ecco scheme and the remaining land at Gazeley’s G.Park Swindon. In addition there is some 150 acres near the junction of the A420/A419 which although not even zoned for employment yet could ease demand in the future.
Developer Bericote has the 62 acre ex-Rhodia site known as Bericote Portside, which could accommodate up to 1.1m sq ft. Indeed the developer has planning permission for a single unit of up to 1m sq ft on the site. Units are available from 100,000 sq ft. Local agents Hartnell Taylor Cook and London-based Dowley Turner Real Estate have been retained. There is also Avlon Park at Severnside, Bristol where there is planning for 1.3m sq ft. Units are available on a D&B basis from 60,000 sq ft to a single cross docking facility of in excess of 1,000,000 sq ft. Agents are David Skinner, Dowley Turner Real Estate and Colliers International.
St Modwen also has a number of sites in the region including the remaining 32 acres at its Access 18 scheme, which is being marketed by Alder King and Knight Frank. The scheme could accommodate up to 550,000 sq ft in total with a single unit of up to biggest 480,000 sq ft. There are still two plots at Gazeley’s G.Park Bristol which could take 96,317 sq ft and 250,128 sq ft.
Finally there is the 296 acre Westgate site in Servernside, which is being brought forward by Harrow Estates and Robert Hitchins. The scheme will total some 4m sq ft and can accommodate a single unit of 1m sq ft. Agents are JLL, Hartnell Taylor Cook and DTZ.