According to DTZ’s annual South West Sheds Review, which examines all aspects of warehousing property in the South-west of England, it is true to say that the area has faired much better than other regions with a strong level of take-up over the course of 2003. More importantly we saw yet another rise in take-up during 2003 for the third consecutive year within the South-west region’s capital, Bristol.
Although the supply of industrial space has increased (6.3%), this is below the 6.7% national average over the same period.
Why has the South-west faired better than most other regions? It is because the region is a lot less exposed to the manufacturing sector, which has been hardest hit by the downturn in the economy, and dominated by the distribution market which has performed substantially better thanks to continuing strong retail sales growth.
The only two centres in the South-west which tend to be more manufacturing orientated are Swindon and Plymouth. As a result of the ailing manufacturing sector, these centres have suffered in the past 12 months, however, there are signs suggesting that we are beginning to witness a turnaround in fortunes.
Being one of the only cities in the South-west with a high level of manufacturing and a boom/bust town mentality, Swindon witnessed very poor take up in 2003. Supply levels have now reached more than 302,250sq m, which is six times the average levels of take-up, and is due to the mass exodus of manufacturers from the city. However, the supply is made up of a number of very large buildings and one or two large deals would substantially turn around its fortunes.
We anticipate this will happen in 2004! The major distribution park known as Keypoint, which benefits from a rail freight facility, is witnessing strong demand from distribution and logistics companies, and with the Renault building (Spectrum – 35,340sq m) also under offer this is a real plus sign for Swindon. It is also rumoured that Gazeley is purchasing the Triangle site, so we could potentially witness the first major distribution shed in the South-west being built in ten weeks’ time.
Here, we have also witnessed take-up levels averaging approximately 279,000sq m which has remained constant for the past five years, with slight growth each year. Uncharacteristically, Bristol witnessed an unprecedented number of purpose-built facilities in 2003, these were for the likes of Courage, DFDS, UPS, Next and Knorr-Bremse.
We foresee that this will continue in 2004, as the majority of existing stock does not satisfy the requirements of modern day distributions and logistics operators, due to their low eaves height and lack of yard area. Also, due to the fact that within the Greater Bristol area there is a severe lack of land, if any logistics companies are seeking purpose-built facilities they will have to go to one of the major parks in Avonmouth or Severnside, like Western Approach.
The city has seen a continued increase in demand and take-up over the course of the past year has steadily increased, reducing the supply of available space on the market due to the demand and a fall in the number of new speculative developments in the city. There is now likely to be very little readily available new space in the market in 2004.
One of the largest industrial properties in the Exeter area to come to the market in recent times came to the market in late summer, namely the circa 4,370sq m Jourdans unit at Sowton where as the largest deal completed last year in the Exeter area was the circa 2,371sq m Falcon House also on the Sowton Industrial Estate.
Following a fire, which destroyed Merriot House, around 2,790sq m of new space is under construction on the site. The city has also seen a rise in demand for larger requirements although most of these have failed to land due to the lack of available buildings and suitable sites. Larger requirements looking for new build really only have the choice of Matford Park or the Sky Park schemes. Last year was a year of mixed fortunes for Plymouth following the previous year’s announcements of a number of high profile closures. This has been added to by the announcement of the closure of GSK’s 12,090sq m Stafford Miller factory, currently being marketed by DTZ, and the closure of Acterna and Cooper Standard Automotive, with the loss of 600 to 700 jobs in total.
This takes the total level of second hand supply to nearly 139,500sq m in Plymouth, almost three times higher than only three years ago. However, many of the vacated factories are deemed not suitable for occupation by new occupiers due to age and layout, with demand shifting away from manufacturing to distribution and warehousing.
Despite the above there appears to be a revival at the lower end of the market, with a significant increase in activity on 2002 figures. The outlook for 2004 suggests a continued gradual improvement in the South-west property market compared to other regions. The inherent strengths of the commercial property market, the lack of speculative development, and stable level of demand; are likely to stand it in good stead. Despite the further interest rate rises expected during 2004, the still relatively low interest rate levels are expected to see the continued favourable prospects for freehold properties.
Despite continued economic uncertainty, and the prospect of further interest rate rises, the overall prospects for the South West region’s industrial/distribution markets suggest a degree of optimism for the coming year. n
Rob Russell is a director at DTZ Debenham Tie Leung.
Tel: 0117 900 4300.