Sunday 23rd Oct 2016 - Logistics Manager

Challenging landscape

Is it a chicken and egg situation? Because there is a dearth of available sites for distribution development in the traditional core Midlands area, occupiers, developers and investors are having to look at alternative locations.

Ian Muxlow of Savills explains: “The established distribution ‘golden triangle’ around Northampton/M69/M1 is now being fiercely challenged by economic and employment restraints. High land values coupled with rising wage costs has led to occupiers looking elsewhere for new accessible locations with the key focus on the availability of labour at reasonable costs, becoming more of an important factor.

“The result has been a growing interest in the north of the region [Nottinghamshire] which is evidenced by major employers such as B&Q due to open in Worksop close to Wilkinson’s HQ on the A57, hot on the heels of Soccer World at Shirebrook, which opened at the beginning of 2005.”

Further developments in this area include Gazeley’s speculative 30,657 sq m (330,000 sq ft) warehouse at its new development site in Worksop, Nottinghamshire to be known as G.Park Worksop. Letting agents CG2 and Colliers CRE are quoting rents in the region of £59.20 per sq m (£4.75 per sq ft).

There is also Wilson Bowden’s the rail connected 56.66ha (140-acre) East Midlands Distribution Centre which will house the new East Midlands Rail Freight terminal near Nottingham East Midlands Airport, which offers substantial distribution opportunities.

But it is not just Nottinghamshire that has benefited; Cris Maxim of Lambert Smith Hampton says that Worcestershire is becoming a bit of a hot spot as well. “Market confidence in Worcestershire has gone up markedly in the past three months on the back of some strong lettings and developer acquisitions, and we expect this to continue. The M5 provides a good strong link to the South West, as well as to locations throughout the Midlands, and into Birmingham.”

He cites as evidence Hortons’ Estate successes at Cursley Distribution Park. The developer is now speculatively building a further 18,580 sq m (200,000 sq ft) of industrial space at Area 7 following several lettings on the existing 22,804.9 sq m (245,469 sq ft) warehouse complex.

According to Mr Maxim, the strength of the Worcestershire industrial market is further underscored by the extraordinarily high interest in 9.45ha (23.4 acres) of development land at a former rail goods yard, at Tolladine Road, less than one mile from the centre of Worcester, which Lambert Smith Hampton is marketing.

Other developers in the area include AJ Mucklow, which plans to refurbish the 10,776.4 sq m (116,000 sq ft) former Cosworth Technology warehouse complex and Evesham Estates, a joint venture between Barberry and Cirrus Properties, which plans to development up to 74,320 sq m (800,000 sq ft) of space, possibly in one building, at Vale Business Park near Evesham. GVA Grimley and Alder King are joint letting agents.

Both Ranjit Gill of NAI Fuller Peiser and Richard Smith of Opus Land champion development to the North of Birmingham. Mr Gill says: “The demand for distribution space is now more evident in Staffordshire and the Black Country where rents are increasing, and where the introduction of the M6 Toll is helping heavy goods vehicles to move more freely.”

Mr Smith agrees: “Current trends suggest that demand for industrial and distribution space is shifting towards new locations north of the Birmingham conurbation. This is at least in part due to the introduction of the M6 toll road and the resulting decrease in traffic volume on the M6, allowing heavy goods vehicles to move more freely.”

Opus Land is developing a 10.12ha (25-acre) site called Opus 9 just off Junction 9 of the M6 motorway that will provide some 41,805 sq m (450,000 sq ft) of production, warehousing and distribution facilities as well as a 100-bedroom budget hotel.

Funded by clients of Arlington Property Investors, the £45 million scheme is fast taking shape, with site infrastructure well advanced and work commencing on a speculatively built B2/B8 unit of 8,825.5 sq m (95,000 sq ft) to be called ‘Point 1’ which is scheduled for completion in the summer.

Mr Smith said: “Demand is so buoyant in the region, that we expect this first unit to be taken long before it is finished.”

Developers are also involved in two negotiations for pre-lets on a further two phases on the site. It is understood discussions are underway with manufacturing and logistics firms, which have sizeable requirements for over 9,290 sq m (100,000 sq ft) each. Joint agents for Opus 9 are King Sturge and DTZ. Architects are Crouch Butler Savage.

There are several large developments in the region and it is believed that two sites in Staffordshire recently attracted in the region of 20 bids apiece such is demand from developers and occupiers. ProLogis beat stiff competition to secure the 25.9 ha (64 acre) former Sideway colliery in Stoke-on-Trent from Advantage West Midlands for a rumoured £10m.

The ProLogis proposal incorporates plans for both warehouse distribution units and development space for small to medium sized enterprises, creating around 900 jobs by 2010. A single building of up to 46,500 sq m (500,000 sq ft) is supposed to be in the offing. Agent is North Rae Sanders.

Carl Durrant of King Sturge says: “Pent-up demand for good quality industrial and distribution/warehouse space in the West Midlands is sparking off an upsurge in speculative development.

“Some occupiers just don’t seem to be able to afford the time to wait for projects to come out of the ground. They want good quality accommodation – and they want it right now.”

In particular, many of the companies within the logistics sector which continue to target the West Midlands as a base because of its easy access to the motorway network, are increasingly seeking “big shed” schemes – those offering more than 33,700 sq m (362,612 sq ft) of space. And the one place to get the land for these scheme seems to be in the north of the region.

In addition to its recent acquisition, ProLogis is constructing a 68,750 sq m (739,750 sq ft) facility in Stafford, currently the largest spec scheme in the West Midlands. Also in the region Sladen is speculatively building a 17,000.7 sq m (183,000 sq ft) shed. M3, North Rae Sanders and Lamont are the letting agents. Gladman Developments, another leading spec developer, has a 27,800 sq m (299,128 sq ft) warehouse under construction in Newcastle-under- Lyme. And Evans Property Group is getting in on the act with plans to develop a further 148,640 sq m (1.6 million sq ft) of warehousing at its 121.41ha (300 acre) Fradley Park scheme on the A38 near the M6 (Toll) motorway.

A 39,947 sq m (430,000 sq ft) high bay warehouse with detailed planning consent to be built speculatively and units of up to 92,900 sq m (1 million sq ft) with the ability to cross dock are being to be offered on a pre-let basis are planned in the next phase of development.

Joint letting agent Robert Rae of North Rae Sanders says: “Fradley is responding to the needs of occupiers for space with a large speculative unit and detached plans for a single 87,790.5 sq m (945,000 sq ft) cross-dock facility with a 5,109.5 sq m (55,000 sq ft) servicing unit.” The other joint letting agents are GVA Grimley and Kingston & Partners.

To strengthen the argument IM Properties has recently announced a plethora of deals at its 161ha (400 acre) Birch Coppice Business Park. Bristan, the UK’s largest supplier of bathroom taps, showers and accessories, is to take a 18,580 sq m (220,000 sq ft) purpose built headquarters and distribution centre on a 4.04ha (10 acre) plot while Roadways Container Logistics is to develop Birmingham Intermodal Rail Terminal on a 14ha (35 acre) plot. When completed this year, the multi-million pound terminal will receive up to eight containerised rail freight consignments per day. A further deal involving a 9.7ha (24 acre) plot is to be announced shortly.

Despite a lot of activity being done outside the “Golden Triangle” there are still schemes around in this most prestigious of areas.

Eden Park and joint venture partner Shepherd Developments are moving ahead with their £30 million industrial and distribution park and business complex at Grange Park in Northampton. Infrastructure works are due to be completed by the spring for the B2 and B8 element of the 22 acre development and earthworks to the whole site which is set to house approximately 27,870 sq m (300,000 sq ft) of units for B1, B2 and B8 use. The precise allocation will be dictated by market demand.

The industrial park, Qubit 3, and the office element known as Qubit Office Park, are part of the 52.61ha (130 acre) Grange Park warehouse and residential development at junction 15 of the M1. Industrial and distribution units will be between 998 sq m (10,750 sq ft) and 5,574 sq m (60,000 sq ft). Marriott Hardcastle and Bidwells Drake represent Eden Park and Shepherd Developments.

In addition Gazeley has announced that it is developing two units speculatively at its Magna Park scheme in Lutterworth, Leicestershire with joint venture partner MetLife.

The buildings totalling 42,274 sq m (455,045 sq ft) will be built on the developer’s EcoTemplate. The eco-initiatives featured at the units – Thermo 16,710 sq m (179,880 sq ft) and Solar 25,563 sq m (275,165 sq ft) – are fitted at no extra rental cost to the potential occupier (100 per cent funded by the developer).

Joint letting agents M3 and Burbage Realty are quoting rents in the region of £5.25 per sq ft (£56.51 per sq m).

As well as these developments there are still three substantial schemes within Birmingham. Firstly there is a 92,900 sq m (1 million sq ft) distribution/industrial park to be created in central Birmingham by Key Property Investments, St Modwen Properties’ joint venture with Salhia Real Estate Co of Kuwait, on the former Alstom site.

The 22.66ha (56-acre) Washwood Heath site, visible from the M6, is known as Heartlands Park and will fill the current distribution space supply gap in central Birmingham and be one of the few city locations able to offer logistics firms the opportunity of having a 46,450 sq m (500,000 sq ft) distribution hub on a rail-connected site.

John Dodds of St Modwen says: “The early marketing signs are very positive. We’re already talking to a couple of potential occupiers about design and build packages totalling up to 32,515 sq m (350,000 sq ft) of distribution space.”

The park will offer units from 929 sq m (10,000 sq ft) to 46,450 sq m (500,000 sq ft). The Washwood Heath site is part of the £113 million portfolio of 19 Alstom sites totalling 202.35ha (500 acres), which Key Property acquired in 2002.

Secondly there is Severn Trent Property’s 117,054 sq m (1.26 million sq ft) Midpoint 2 development being marketed by Jones Lang La Salle and Savills. Nigel Dolan of Jones Lang LaSalle says: “This is the first time for a long time that Birmingham has been able to offer a prime site which will be embraced by the national distribution market.

“In recent years, Birmingham has not been able to take advantage of the prolific demand for large scale distribution centres.”

The 25.5ha (63-acre) site strategically located with quick access to three motorways, will add to the first phase, Midpoint Park, which totals more than 92,900 sq m (1 million sq ft) which includes such occupiers as Cadburys’, Hozelock and Kuehne & Nagel. Development of Midpoint 2 is scheduled to get underway this year.

Mr Dolan says: “Recent lettings justify the demand for a product like Midpoint 2. There have been a number of key transactions in Birmingham and the surrounding area and along the M6 corridor.”

Finally there is Opus Land and Frontier estate’s £150m The Hub scheme, which is set to provide a total of 185,800 sq m (2 million sq ft) of distribution and manufacturing space. Joint agents are Knight Frank and M3.

Such is the demand for space in the region that land prices have been rocketing. Mr Gill says: “Strong appetite for sites from developers and institutions is driving land values to new heights in and around Birmingham. Prime site values have increased by up to 20 per cent in the past 12 months.

“Before the opening of the M6 Toll, for instance, land at Kingswood’s Lakeside, Cannock, was £370,650 per ha (£150,000 an acre). The first deal concluded after its opening amounted to £840,140 per ha (£340,000 an acre). It is rumoured that the Delta site in Birmingham has been acquired by Slough Estates at circa £1,235,500 per ha (£500,000 an acre). At Ravensbank, Redditch, a land sale is also understood to be £1,235,500 per ha (£500,000 an acre), whereas 12 months ago land values in this area were £803,075 to £864,850 per ha ( £325,000 -£350,000 an acre).”