Wednesday 26th Oct 2016 - Logistics Manager

Bridging the gap

You are a successful developer who has identified a gap in the market for a new distribution unit. You have an idea of the build cost and the revenue you need to make it viable, but the pressure is on; you need to find the right location and sign a lease agreement with a tenant before you can persuade the bank to fund the scheme. There is also the issue of construction – you do not have time to oversee a nine-month build… Step in the middle men – the project managers and agents who bridge the gap between developers, contractors and tenants, managing the entire process from sourcing the ideal site, through planning to construction and final delivery. And with the process becoming ever more complicated, the need to enlist their professional advice is important.

Layne Mercer, of GVA Grimley’s national Building Project Management and Consultancy unit, explains: “We come in from the outset on a new build project. We’ll assess the market demand for a scheme, looking at geography, demographics and the local transport infrastructure. When a decision is made on a viable site, we’ll assemble a design team and draw up a relevant specification.”

With construction due to start the necessary paperwork must be put into place. “It is vital that the correct forms of contract are in place prior to work commencing. If the relevant legal procedures are fulfilled at the outset, the entire process runs much more smoothly,” says Mercer.

For a developer using a design and build contract, the key is getting the ‘Employers Requirements’ documentation right – issued at the tender stage to prospective contractors it outlines the exact build specification, time-scales and accountability for issues arising on site. Responsibility for the design team, including warranties for their work and any defects, is also covered.

Once a purchaser or tenant is in place, a Development Agreement or Agreement to Lease is drawn up confirming the build details, timings and the pricing policy for any changes the tenant wants to make. One recent scheme entailed £1.5M of purchaser changes during build and it was vital that both parties knew where the cost responsibility fell. When the paperwork is finalised, work can start and though the responsibility for the build lies with the contractor, the entire process is overseen by the building consultant.

Mercer’s job ranges from legal advisor to contract manager, financial consultant and sounding board. “On average I spend around 60% of my time out of the office and can be working on four large schemes at once. Good organisation and communication skills are vital – I can be dealing with the intricacies of an insurance warranty, advising a fund on purchasing a 250,000sq ft unit or helping a contractor to assess the impact of some spreading Japanese Knot Weed. And there are always time pressures. I’m simply the person in the middle who listens to both parties and tells them when their demands are unreasonable.” And just when he’s got everything in place, something comes along to change it – new environmental legislation, or modifications to insurance liabilities.

Land availability

The industrial agent’s role is to find a tenant, or if the tenant is looking to move – to find a new home. Andrew Pexton (above), partner with GVA Grimley’s national Industrial team, is appointed for either party: “If you’re a tenant, we’ll agree a specification and provide a list of available properties. We’ll usually begin looking around six to 12 months prior to the end of your current lease.”

The location must satisfy labour needs, taking into account wage costs, land availability for trailer parking, transport access and trunking costs. Perception and reality often become the key decision makers. “It’s important for us to tour sites with our clients. They may have a specification in mind which we satisfy to the letter, but as soon as they begin to look at properties this can change entirely,” Pexton says. “There are some footloose enquiries out there from companies who already have their own agents looking for a property. When their needs match up with our clients’ scheme, it makes the job much easier. A lot of the time, we have to do our homework and research companies whose leases are nearly up, or are expanding rapidly and likely to be moving soon. It’s a case of trying to get in to see them and put our scheme on their radar.”

Agents also have to keep up with the latest market trends. Says Pexton: “We’ll advise the building consultants on the hot spots and the types of schemes that our tenant clients are looking for; knowledge which is vital to them when they’re developing a speculative scheme. In exchange they provide us with details of cost, deliverability and any issues that our client needs to be aware of, which then allows us to work to a reasonable timescale.”

However, he concedes: “When you know that there is a perfect fit between the tenant and the product and the deal is just right, it gives you a great sense of satisfaction.”