Thursday 20th Oct 2016 - Logistics Manager

Choking the life out of the market

Phil Wade of DTZ Debenham Tie Leung puts the problem in a nutshell: “There is no new stock coming forward or likely to come forward in any of the major centres.”

And why is this? Wade explains: “This is a result of a general lack of development land in the area, and a lack of land allocated for industrial uses in the local plan. Local plans all talk of sustainable mixed use in new developments – mixed use sites coming forward are regularly on old industrial sites, however mixed use in this sense means mixed use; just providing it doesn’t include industrial!

“What makes this worse, is land is then not allocated for industrial elsewhere in the same area. The result is medium sized industrial occupiers are being unfairly discriminated against and forced out!”

In addition, says Adam Booth of NAI Fuller Peiser: “There is also the recurring problem of industrial development land and second hand stock being turned for higher value uses for example residential and office use. This exacerbates the problem of lack of development land and redevelopment opportunities.”

Booth says repeated pleas from the agents to the local authorities to release more employment land, especially around the northern fringe of Bristol and stop relying on this pent-up demand being naturally satisfied by Avonmouth/ Severnside are seemingly ignored.

Adrian Rowley of Alder King agrees. He warns that the concentration of employment land into a limited number of strategic motorway locations across the South West and South Wales is causing stagnation in activity and frustration in the industrial market throughout the region, and at the same time resulting in rising prices.

Rowley says: “The allocation and availability of employment sites tends to be in large tranches of land controlled by a small number of land owners or property companies. The release of this land is controlled in such a way that the availability of smaller plots for purchase and development are very rare and very expensive. “Furthermore occupiers in traditional locations away from the M4 and M5 corridors have fewer opportunities to buy land to expand their business as it is rarely available. When it is, prices are at a premium. Operating companies are thus faced with the frustration of staying where they are or moving elsewhere and potentially losing their valuable workforce.”

Rowley highlights the ongoing trend for existing employment sites and buildings to be lost to the employment sector by virtue of their redevelopment potential for alternative higher value uses. In recent years this has been predominantly for residential redevelopment, although offices and out of town retail are now commonly constructing on what was traditionally industrial land.

He adds: “Rising prices and a lack of availability in these locations have been particularly hard felt in respect of the provision of secondary buildings and sites which traditionally have been an important sector of the industrial and warehouse market. Occupiers want choice and competition within any given location as well as availability at a viable price. Clearly at this point in time market factors are not necessarily delivering these opportunities throughout the region and unless action is taken to redress this imbalance we will continue to face a severe shortage of land suitable for traditional industrial uses in these locations.”

And what does all this mean for occupiers – well, for starters there will be increased competition and hence a rise in prices for some units. Wade says: “The situation regarding land for industrial development remains dire with no significant chunks of land available in the greater Bristol area. This has led to a 12.5 per cent reduction in the total supply of available existing buildings in the greater Bristol area in the last 12 months alone. This is leading to increased competition for units.”

Secondly occupiers will have to extend their search criteria. Indeed a lot of occupiers have done just that. Booth says: “Occupiers with larger requirements of +18,580 sq m ( +200,000 sq ft) are not necessarily homing in on Bristol itself – due to the problems of lack of supply and development opportunities – but over a wider area (150,000 mile radius), principally within the so-called golden triangle of Gloucester to Swindon to Bridgwater. This partly explains the success of these other centres, at the expense of Bristol. For example Bridgwater where Gerber Foods took c. 37,160 sq m (400,000 sq ft) – another example of how a readily available labour supply influenced a property decision – at Express Park; the NHS also took space there. The Gloucester Business Park welcomed Direct Wines, which took around 13,935 sq m (150,000 sq ft). Indeed Tewkesbury has also seen an influx of new occupiers and to the east Swindon has seen a resurgence over the past 12 months.

Although there is little space available there is a strong demand for buildings; this in itself is likely to push up rents in some areas and on some buildings. Paul Hobbs of GVA Grimley says: “A lot of existing [buildings] are rapidly becoming limited especially those over 1,858 sq m (20,000 sq ft) in this region – the £21.53 – £32.23 per sq m (£2/£3 per sq ft) rent is starting to become a rare commodity.”

But as the local authority in Bristol is focusing on keeping sheds in Severnside rents are likely to fall here – it can be a very confusing market.

There is a hive of activity in this area, says Booth. The arrival of Gazeley and Rosemound, together with St Modwen, Redrow and Burford, all promise large-scale speculative development in the not too distant future. Planning is awaited for a variety of warehouse units ranging from 27,870 – 46,450 sq m (300,000 to 500,000 sq ft).

Hobbs says that there are four competing big shed schemes within this area – Cabot Park, RD Park, G.Park, and Access 18. Each project could stand a unit in excess of 18,580 sq m (200,000 sq ft) and in the case of Cabot and RD Park over 69,675 sq m (750,000 sq ft).

Rosemound, which owns RD Park, purchased 22.26ha (55-acres) on a plot within Burford’s Cabot Park known as Merebank. It has applied for 120,770 sq m (1.3 million sq ft) scheme, which would include a single building totalling 74,320 sq m (800,000 sq ft). Both Gazeley, with its G.Park, and Rosemound are planning to bring forward speculative buildings of more than 27,870 sq m (300,000 sq ft).

Indeed, it is thought that a move by Superdrug to take a 1,858 sq m (20,000 sq ft) unit at Rosemound’s RD Park will jump start a speculative building here. There is certainly a planning application in the pipeline. However, until the deal can be firmed up, no one in the know is saying anything.

At Burford’s Cabot Park there is 26.3ha (65 acres) left; the developer is focusing on land sales for development and is quoting £741,300 per ha (£300,000 an acre). It is important to point out that “oven-ready” sites such as these are going for a premium as land becomes scarcer explains Hobbs.

Rob Russell of DTZ Debenham Tie Leung says that Gazeley is awaiting planning permission for two units at G.Park Bristol, a 22.26ha (55-acre) site it acquired from Redrow at Western Approach last year. The buildings are expected to total 31,586 sq m (340,000 sq ft) and a 46,450 sq m (500,000 sq ft) unit. “Gazeley is still deliberating what they will speculatively build and there is no doubt that they will spec.”

“There is demand in the market from distribution companies for RDCs of this size and we are witnessing strong demand for units of 9,290 sq m (100,000 sq ft) plus. The past five years have been very quiet and no one has speculatively built anything over 9,290 sq m (100,000 sq ft).”

In other centres there has been more activity. Swindon boasts one of the regions biggest speculative warehouses ProLogis’ 27,870 sq m (300,000 sq ft) unit at South Marston.

And, in addition, Gazeley is just about to start construction of its 130,060 sq m (1.4 million sq ft) G.Park scheme which totals 40.47ha (100 acres) according to Steve Williams of letting agent NAI Fuller Peiser.


“We have had a number of 92,900 sq m (1m sq ft) inquiries which is quite encouraging on the basis of not having a brochure; just by word of mouth we are already speaking to two parties for nearly 74,320 sq m (800,000 sq ft).”

The three buildings will be cross-docked and there is no restriction on eaves height although it is likely to be standard around 12-15m standard.

Looking at other centres, Russell says that in Gloucester there are two major sites that could accommodate a big shed: St Modwen’s Quedgeley scheme, and Slough Estate’s Javelin Park.

St Modwen Development’s Quedgeley West secured detailed planning consent for an 8,732 sq m (94,000 sq ft) manufacturing complex for Prestoplan. This is the first phase of redevelopment of the 32-acre former MoD depot at Junction 12, M5, on which St Modwen plan the creation of up to 49,237 sq m (530,000 sq ft) of industrial and distribution buildings.

Manufacturing closures have tended to outrun the new acquisitions in Wales, according to Paul Hobbs of GVA Grimley. Usually in these cases the units transfer over to distribution use. “However there is some doubt that this will continue except where retailers expand their store network and as Hobbs points out there is only a limited number of locations where they can expand.”

Owen Young of GVA Grimley’s Cardiff office reports a string of manufacturing closures in the region. “Recently we have seen the demise of Sony (72,835 sq m), Kraft Foods (15,979 sq m) and Christie Tyler (11,427 sq m). With other closures including D&P Plastics, Walkers Crisps and Imperial Tobacco, over 100,000 sq m of industrial floor space has suddenly become available with Bridgend suffering the brunt of the highest profile closures.

“However, we have seen an increase in demand for the distribution sector but this has not been enough to offset the downturn in industrial output in 2005 for South Wales. As long as there are no other big business closures we would expect this to plateau at the beginning of 2006 as economic growth begins to catch up with the rest of the UK. This can only be helped by recent announcements such as Quinn Radiators purchasing 65,000 sq m at the former LG site in Newport, creating up to 500 new jobs, as well as the new £300 million Dragon International Studios (Valleywood) on 120 hectares (300 acres) at Llanilid, near Bridgend.

As a result of driver shortages, increasing congestion, rising fuel prices, the working time directive and the possibility of road charging, retailers and their third party logistic operators are looking to set up regional distribution centres. Examples include Lidl’s RDC at Bridgend (27,870 sq m), Aldi’s RDC at Wentloog in Cardiff (37,161 sq m) and Dixons acquiring a seven acre site at Hawtin Park.

It is not only demand from the distribution sector that has kept the amount of industrial floorspace from spiralling. Experienced and well funded property speculators are purchasing and refurbishing large second-hand warehouses, which has had a knock on effect for new development, especially as rising steel prices have increased new build costs.

There is also a trend for industrial premises being sold for alternative, higher value uses, for example residential. Although local authorities would usually show concern with loss of employment, older units are often deemed redundant and surrounding residential areas make redevelopment far more viable. This is reinforced by the recent amendment to Section 42A of Planning Policy Guidance Note 3 to encourage a more rigorous examination of the need for existing employment sites. Examples include the former Aeroquip factory in Llanishen, Pirelli in Newport, Arjo Wiggins in Cardiff and Whitehead Steelworks in Newport.

There is still a general shortage of immediately available development sites in close proximity to the M4 corridor. This has had a ripple effect, evidenced by speculative development in places such a Merthyr (B&P Properties – 5,200 sq m).