Thursday 27th Oct 2016 - Logistics Manager

Never as simple as it looks

The amount of industrial space available in the West Midlands has increased by 17 per cent according to King Sturge’s latest Industrial Floorspace Survey. This is the largest increase recorded in any UK region.

The report reveals that the total now stands at 32.46 million sq ft – with new floorspace at 4.21 million sq ft equating to just over 13 per cent of the region’s overall total.

Carl Durrant of King Sturge says: “Although the West Midlands still recorded strong levels of speculative development there had been a decrease in levels over the last six months. This was due to a number of schemes involving large distribution units having finally been completed. However, 11 speculative schemes totalling 1,672,602 sq ft still remain under construction.”

This is excellent news for occupiers but how long it will last is another question. There have been some notable deals since the report was published and with a consensus view that if demand continues to be strong the amount of space readily available will soon diminish.

Joint venture partners Stoford Developments and Terrace Hill have just announced the letting of their 237,444 sq ft speculative warehouse development at Ravensbank Business Park in Redditch, known as Redd 42.

The building incorporates a 12 metre clear working height, 18 dock level loading doors, four level access loading doors, fitted offices, 223 car parking spaces and 38 lorry parking spaces with 50 metre yard depths.

It has now been let to iForce to service a contract with John Lewis. iForce signed a 10-year lease on terms close to the asking rent of £5.75 per sq ft. North Rae Sanders, GVA Grimley and Savills represented Stoford Developments and Terrace Hill Group while Knight Frank represented iForce.

In another deal KN Drinks Logistics, a wholly-owned subsidiary of Kuehne + Nagel in the UK, has expanded its network with the opening of a new 168,700 sq ft regional distribution centre at Hams Hall near Coventry.

The new facility, which will operate on a shared-user basis, has been constructed on a design and build basis and comprises a 154,176 sq ft warehouse and 12, 400 sq ft of office space.

Developer Wrenbridge let the facility on a 10-year lease and co-ordinated a £1.5 million fit out that completed two weeks ahead of schedule.

KN Drinks Logistics expects to handle an average throughput of 19,000 pallets per month at the new site, rising to 28,000 pallets per month during peak seasons. Clewes & Co advised Kuehne + Nagel.

Most recently, Barberry Developments and GE Real Estate have let their 157, 500 sq ft building, known as Barberry 157 in Burton-upon-Trent, to Unipart Logistics which has just cornered a 10-year contract with bookseller Waterstone’s.

The £15 million development benefits from 12m clear working height, 15 dock level doors, two level access doors, 152 car park spaces (and 38 overflow spaces), 17 lorry spaces together with high specification offices all within a secure landscaped environment on a 10.5-acre site.

It is located within the 200-acre mixed-use scheme Centrum 100 Business Park, and has access to the A38 dual carriageway from a roundabout junction on Parkway.

Several hundred jobs will be created when the warehousing and distribution facility for Waterstone’s complete product range, comes into operation next May. In the meantime, a £5 million fit-out is to be undertaken which includes the installation of a highly mechanised book sorting system to aid stores stocking shelves. It is believed that the number of jobs could rise over a period of time to 500. Atisreal and Rushton Hickman are joint letting agents.

These three deals in as many weeks see some 563,000 sq ft of space taken off the market. “Generally speaking, market demand for large distribution units remains strong and stable,” says Durrant. “Certainly, over the next half-year, we are expecting that demand for property associated with the logistics and retail sectors will continue to hold up.”

Gareth Williams of Opus Land remarks: “It won’t take much market activity for the space to be filled and there will be a time lag for new ones to come through. Occupiers looking in 12 – 18 months time won’t have the same options.

“A truly footloose occupier will still have a very good choice but most are not as footloose as that and if one throws a line round a general location options get limited fast.”

In its recent M42 market report Knight Frank comments: “Although there is a considerable amount of speculative development, it has taken some considerable time to deliver sites such as The Hub and Meteor Park to the market. The amount of time taken in delivering schemes is becoming an important factor in the market.

“Of the schemes in the development pipeline there are only four that have full planning permission granted in excess of 100,000 sq ft, the largest of which is Phase 2 at the Hub which is being developed by Prudential at Witton.”

In addition, Cris Maxim of King Sturge says that there is a great deal of uncertainty in the market following the credit crunch. “There is still confidence in the market and where they [developers] are committed they are going ahead all guns blazing but where they haven’t committed themselves there could be a bit of hesitation.”

Caroline Mills of Knight Frank says: “Developers such as ProLogis are continuing to plough ahead with speculative schemes such as ProLogis Park Midpoint.”

ProLogis Park Midpoint comprises 65 acres of prime distribution land close to the M6, M6 Toll and M42 motorways. The site was bought from Severn Trent last year. The company is looking at providing units from 120,000 – 500,000 sq ft on the site. Letting agents are Jones Lang LaSalle, Savills and Gerald Eve.

The developer also has five other schemes in the region that are being prepared or are under construction. These include ProLogis Park Crewe, which will total 350,000 sq ft; the 60 acre ProLogis Park Chatterley Valley; ProLogis Park Stoke where there are two units proposed of 122,000 sq ft and 383,000 sq ft; ProLogis Park Sideway with an eco unit of 533,571 sq ft and ProLogis Park Coventry where the developer is constructing a 104,000 sq ft warehouse.

ProLogis also has three units currently available at ProLogis Park Stafford. These total 70,270 sq ft, 127,845 sq ft and 230,247 sq ft.

Many of the schemes coming forward or at least planned are in the Staffordshire region clustering around the A38 corridor.

InStaffs, the inward investment agency for Stoke-on-Trent and Staffordshire, believes this latest news is further indication of the area’s growing popularity with domestic and international firms and, once occupied, could create in excess of 1500 jobs.

The facilities, which straddle the A38 corridor at Centrum 100, Centre 38, Wellington Road and Fradley Park, benefit from a wide variety of sizes and ‘arguably’ some of the best logistical links currently available in the UK.

“This is a fantastic opportunity for Burton upon Trent and Lichfield to capitalise on widespread interest, creating thousands of jobs in the process,” explains John de Kanter, chief executive of InStaffs.

“The M6 Toll Road has had a major influence and improved access to the M6, A50, M42 and even the M1. This means that distribution companies – keen to reduce journey times – can be in Nottingham and Birmingham within 40 minutes, Stoke-on-Trent and the Black Country in 50 minutes and Derby in 20.”

He continued: “This is an ideal location and this has been reflected in the level of commitment from property developers, who continue to pour millions of pounds into new buildings.”

The biggest concentration of units is on Centrum 100 in Burton upon Trent with four facilities- ranging from the ex-Dunelm 100,000 sq ft building to the 460,000 sq ft Opus Axis – providing a total of 927,000 sq ft of space.

Elsewhere in the town, the 150,000 sq ft Cumulus building on Centre 38 is available, while Avro Business Park on Wellington Road will soon see a 300,000 sq ft unit under construction.

“Fradley Park in Lichfield has always been a magnet for distribution companies, with Hellmann, Caterpillar Logistics and Amethyst already based on the scheme and Tesco soon to follow with its high-profile 850,000 sq ft distribution unit set to create close on 900 jobs.”

Tesco will use the warehouse to distribute products around the region. It is set to pay around £4.50 per sq ft on a 15-year lease. The rent is lower than the park’s quoted figure of £5.25 per sq ft because of the unit’s vast size.

North Rae Sanders, GVA Grimley and Kingston are the letting agents at Fradley Park. Lambert Smith Hampton is advising Tesco.

The pre-let was subject to planning permission being granted for the property, which will include 50,000 sq ft of ancillary offices, although ground works for the building have already commenced. The developer can also accommodate units up to 1.15 million sq ft. It has consent for a 430,000 sq ft unit to be known as Hercules and is proposing five further units from 50,000 sq ft to 350,000 sq ft.

Goodman has the 215,000 sq ft First Point Distribution building at the Centrum 100 Business Park where joint agents are Savills and Atisreal. In the area there is also Barton 150 a 150,000 sq ft industrial unit on Centre 38. A further 58,800 sq ft – part of a new high quality distribution unit is also available. Letting agent is Atisreal. Some 4.5 acres of land remains available. Opus Developments’ Opus Axis will be available in February 2008. Planning consent has just been granted for the 23.5 acre Opus Axis development.

Opus Land obtained the 300,000 sq ft former Littlewoods distribution centre at Centrum 100 Business Park on the A38, close to its intersection with the A50, for £22.6m at the end of last year.

With planning in place, Opus has already started extending the existing space by a further 160,000 sq ft. The unit will have a 15m eaves height, 41 dock and six grade level doors as well as three service yards of 62m, 56m and 35m depth. Letting agents are Jones Lang LaSalle, GVA Grimley and North Rae Sanders.

Other schemes under construction or newly completed include: Arrow 3 in Redditch, which is being marketed by King Sturge and North Rae Sanders. It totals 140,493 sq ft and boasts 12m eaves, 14 dock and two level access loading doors, a 50kn/sqm floor loading as well as parking for 47 HGVs and 170 cars. It has 50m deep yard areas and a gatehouse.

Off J1 of the M54, and directly across the road from Hilton Cross, Scottish developer Kilmartin has acquired a former truck-stop and is to build a total of 244,000 sq ft of industrial/warehouse space across four units from 27,000 – 108,000 sq ft with leasehold and possible freehold options. The scheme is branded Wolverhampton Point and is being jointly marketed by M3 and Strutt & Parker.

Gazeley has now won planning approval for 695,000 sq ft distribution centre on Towers Business Park. The developer amended an original approval to reflect changes in the market place and introduce some sustainability features as occupiers increasingly look to demonstrate their corporate eco-credentials. Construction on a speculatively built unit is expected to commence before the end of 2007.

St Modwen now has outline planning approval to redevelop the former 80-acre Meaford Power Station site, near Stone, and is proposing to build 1.2m sq ft of B1/B2/B8. First stage remediation works have already been completed and infrastructure works are now underway.

Again in the northern part of the region HelioSlough with CBRE Investors has 415 @ Lymedale Cross, close to J15/16 of the M6 motorway. The building, totalling 415,000 sq ft, boasts 15.8m eaves as well as 36 dock and two level access doors. Letting agents are Lamont, M3 and King Sturge are quoting £4.75 per sq ft.

Then there is Astral Development’s and Kenmore Properties Tetron Point scheme in Swadlincote totalling 240,441 sq ft on the market through CB Richard Ellis and Knight Frank.

In Wednesbury Opus Land has Point One at its Opus 9 scheme, which totals 105,000 sq ft. It boasts 12m eaves, eight loading docks and a floor loading of 50kn/sqm. There is also land, which could deliver a building of 450,000 sq ft. Joint letting agents King Sturge and DTZ Debenham Tie Leung are quoting £5.50 per sq ft.

Jeff Wilson of Wrenbridge Land says: “Our development at Kingswood Lakeside is scheduled for completion in December. It totals 127,000 sq ft, has an eaves height of 12m as well as ten dock and two level access doors. It has a 50m deep yard parking for 37 lorries and 126 cars on a secure yard on its own site. North Rae Sanders and King Sturge are letting agents quoting £5.50 per sq ft.”

In the south of the region in Birmingham there is Prupim’s The Hub scheme where it has Unit 1 totalling 120,250 sq ft. The warehouse has 12m eaves, 10 dock and two level access doors, a 50m deep yard and parking for 27 HGVs. Letting agents are Knight Frank and M3. The fund also has Express Point totalling 105,332 sq ft. In Coventry there is Frogmore’s Rivet, totalling 220,000 sq ft, being marketed by CB Richard Ellis.

There are a number of schemes that are on the cards but the developers have yet to start to build speculatively. These include Wilson Bowden’s Omega Park near Junction 5 of the M6 motorway and Evans Property Group’s Fradley Park.

Looking at second hand availability there is CollosusM6 at Stafford totalling 366,000 sq ft through agents North Rae Sanders and Savills as well as Force 10 on the Lichfield Road industrial estate at Tamworth, which offers 161,458 sq ft.

Wrenbridge has completed the refurbishment of a purpose-built unit at Stafford Park 7 in Telford that totals 70,176 sq ft of warehousing space.

Located on the prominent Stafford Park Estate, the unit is available on either a freehold or leasehold basis.

The detached two-bay warehouse has an excellent working height to underside of haunch of approximately 8.23m. The property also includes refurbished ground and first floor office accommodation, with a separate external yard and car parking area. Joint marketing agents are DTZ and Bulleys.

With all this space one would have thought that rents would be relatively stable but that just does not seem to be the case.

John Sambrooks of DTZ says: “Increasing appetite for well-positioned, high quality industrial and distribution facilities has been driving speculative development across the region.”

This has given rise to some markedly high prices being paid for the privilege. Andrew Jackson of North Rae Sanders comments: “The end prices have been very steamy reflecting the keen demand from developers to purchase sites and the very limited supply. Land values in Birmingham are now £700,000 plus per acre and similar levels are being secured in Coventry. The outward movement in yields is, however, likely to lead to these land figures stabilising and possibly falling back. This supposes that rents do not move forward and while there will be more pressure from developers to raise rents this will only happen if occupier demand remains strong.”

It is this belief that has given rise to a plethora of quoting rents above the £6 per sq ft mark.

SEGRO is expecting to break the £6 per sq ft rent barrier with the first speculative phase of its Meteor Park development in Aston, Birmingham.

Phase 1 of Meteor Park is made up of two units – the first offers 22,235 sq ft of space and the second 37,042 sq ft. DTZ and joint letting agent Knight Frank are quoting £6.25 per sq ft while a following phase totalling 115,067 sq ft is being marketed at a rent of £6 per sq ft.

In addition, Mark Fitzpatrick of GVA Grimley says developer Catesby is looking for a £6 per sq ft rent for two units of 55,000 sq ft and 65,000 sq ft at its Vantage Point scheme near Fort Dunlop in Birmingham. Letting agents are GVA Grimley and King Sturge.

Catesby Property Group says there is strong demand for medium sized distribution centres close to cities. Carl Durrant of King Sturge, the letting agents on Vantage Point, said: “The site lies in the industrial hot spot of Birmingham between junctions 5 and 6 of the M6. This area is very established and has already attracted some of the biggest occupiers including Dunlop/Goodyear, Hays Distribution, TDG, Pickfords, and more recently Target Express.”

Mike Eagleton of Eagleton & Co is quoting a rent of £6.25 for the 55,000 sq ft unit on the latest phase of IM Properties’ 400-acre Birch Coppice scheme. The developer has one other speculative unit totalling 256,000 sq ft, which is being marketed at £5.75 per sq ft.

The larger of the two units has 20 dock levellers and four level access service doors; a service area with 24m turning circle and parking for up to 250 cars and up to 27 lorries. Office accommodation is 3,000 sq ft and 12,000 sq ft respectively. Specification of both units includes the facility of a driver’s amenity block.

The reasons for the shift towards higher rents are twofold. Caroline Mills of Knight Frank says: “Developers are paying a lot more for land and therefore need a lot more in return.”

Maxim says the reason why rents have not previously risen is due to yields but there is increasing financial pressure for the loss in capital value to be made up by increasing rents. Gareth Williams of Opus Land says: “The £6 per sq ft mark has yet to be breached and there will be a lag between yield correction and rental uplift. What will sustain land values will be rents breaking through £6 per sq ft – once there it is likely to be over £6.25 per sq ft quite quickly.”