Sunday 23rd Oct 2016 - Logistics Manager

Could everybody be proved wrong?

For many years the North-east has been very much looked upon as a self-contained entity with its own perceived local economy, culture and dedicated workforce. Media coverage over the past decade tends to play down the area with redundancies and business closures subconsciously tarnishing the regional economy.

Nevertheless, other areas of the property market, retail, office and residential, have seen good growth, and have proved a worthy and rewarding market to invest within.

In simplistic terms the North-east market is serviced from two main arterial routes – the A1 and the A19, with the latter being favoured and consequently seeing the best returns. Dedicated industrial estates have expanded over the years next to these routes both North and South of the Tyne.

Like the British rowers there are some success stories. Team Valley is the premier industrial ‘catchment’ offering a good mix of new build and secondary opportunities reaching rents of circa £5.00 per sq ft and above. Further North at Newburn Riverside Business Park there has been the first phase of speculative product by UK Land Estates which will eventually see 92 hectares of land regenerated for commercial development. Current deals have achieved rental levels of £5.00 to £5.50 per sq ft, which has only previously been seen within Enterprise Zones.

Further South on the A1(M) the new Angel Park development (City & Northern) is achieving rents at circa £4.75 per sq ft and this is being reinforced by a new scheme, Cathedral Park at Belmont Industrial Estate. Northern Trust has also built a selection of units at Maple Way, Newton Aycliffe.

Cramlington is seeing an emergence of activity with the construction of Arcot Drive, Easter Developments’ latest scheme, which provides industrial units totalling 6,510sq m (70,000sq ft) available for lease or sale.

The A19 has seen slightly less activity over recent years; however this is expected to improve once the new Tyne Tunnels are constructed in 2008. The Tyne Tunnel Trading Estate at North Shields has seen new life being pumped into a dated design with a selection of developers building new industrial and trade counter units. Further South, across the river Tyne, Monkton Business Park at Hebburn and Boldon Business Park have both seen rents of £4.50 / £4.75 per sq ft. The established and successful Follingsby Industrial Park, developed by Evans of Leeds, is progressing its next phase of development which is expected to reach rents of £4.50 per sq ft.

Both Sunderland and Washington have seen limited industrial developments being undertaken, but strong second-hand take up levels have been encouraging. Locations past Sunderland such as Seaham and Peterlee are suffering with large volumes of new stock still available within Enterprise Zones.

As expected, the industrial market is still very much freehold driven with second-hand units achieving strong values through all size ranges and quality spectrums. At present the market lacks mid-range stock of circa 1,860sq m to 4,650sq m ((20,000 – 50,000sq ft) that accommodate businesses natural progression through ‘starter units’ to larger accommodation. It is not uncommon to see local businesses out-bidding each other to secure the right property.

As a distribution location the region has suffered from the perception and reality of poor infrastructure compared to other UK conurbations. The further upgrading of the A1 has been in discussions for many years with little positive comfort being given. Consequently, large distribution depots are located within Leeds and Glasgow with smaller satellite depots being used to service local areas.

Whilst larger specialist units are not plentiful in the North-east, there is a reasonable selection of opportunities which should satisfy most business requirements.

Sanderson Weatherall is currently marketing circa 88,350sq m (950,000sq ft) divided between three units located on the A1 corridor, these being the LG Electronics facility at Washington, Belmont Industrial Estate, Durham and the Rothmans Business Centre, Spennymoor.

A majority of the large units on the market are dated, and have been purchased to be sub-divided into smaller self-contained units which is perhaps indicative of a lack of large enquires.

Hopefully the proposed new 68,820sq m (740,000sq ft) distribution depot for Argos Direct at Faverdale East Business Park in Darlington will change the view of other logistics operators and prove that the North-east can provide competitive and efficient options.

With various small pockets of development taking place throughout the region it is becoming more recognised as a place to relocate business, which is being strengthened by the skilled workforce and reasonably competitive land values.

The principal problem within the region is the general lack of future industrial sites available for development in the better locations over the medium to long term. A changing economic market and more aggressive development taking place have resulted in numerous industrial sites becoming redeveloped for alternative uses, such as residential, leisure or retail.

This has consequently reduced the amount of land available within the market place which has directly pushed land values up dramatically over the past couple of years. Local Councils still want to see high employment uses breathed back into the redundant buildings and sites, and therefore are reluctant to see ‘B8’ users which clearly do not offer a high level of staffing requirements.

James Pain is associate director at Sanderson Weatherall’s Newcastle office. Tel: 0191 261 2681.