Tuesday 25th Oct 2016 - Logistics Manager

Hot spot: sweet spot

Paul Hobbs of GVA Grimley says: “There is a notable cluster of the national shed developers quietly gathering in the South West. ProLogis, Goodman, Gazeley, Graftongate have all recognised that the area is emerging as a hot spot for RDCs, particularly where the occupier is seeking to cover the UK from two or more locations.”

Russell Crofts of Knight Frank agrees: “It’s no accident they arrived at the same time [the region] is the next link in the supply chain. You can get to the South West and South and West Wales from there in one shift of four hours.”

Recent RDC deals include the Constellation agreement with Goodman where the drinks company has pre-let an 870,000 sq ft building in Bristol, which will house a new distribution and bottling facility increasing warehousing capacity by 80,000 pallets – or approximately 53 million bottles of wine or other products. The facility will be able to fill around 120 million bottles of wine every year. The depot is due to be operational during 2009.

Two other major transactions have taken place in South Wales. Firstly, Amazon announced it would create up to 1,200 jobs over the next five years with a new purpose built distribution centre in Swansea, Wales.

The 800,000 sq ft centre – approximately the size of ten football pitches – is to be built on a 33 acre site formerly owned by the Welsh Assembly Government at Jersey Marine, in the Neath Port Talbot County Borough Council area. The centre will distribute a wide range of items available from Amazon’s web site and also provides extra capacity for an ever-increasing selection of products.

Hot on the heels of that is the news that Home Retail Group is tipped to create a massive regional distribution centre at Gwent Europarc in Newport.

The company has submitted a planning application to Newport City Council and Monmouthshire Council to create a 750,000 sq ft distribution centre at the AWG Property scheme to service its Argos and Homebase stores.

If approved, the centre will become the Home Retail Group’s fourth regional distribution centre for its home delivery business, serving Wales and the South West of England.

The application comes on the back of the recent expansion AWG developed for Gwent Euro Park tenant Wilkinson. It expanded its facility from 800,000 sq ft to over one million sq ft to accommodate its fleet of lorries.

AWG’s Tony Donnelly says: “The proposals at Gwent Euro Park for a new 750,000 sq ft distribution centre for Argos have the potential to bring over 700 new jobs to the area.

“Gwent Euro Park has been a real success story for us, with tenants such as Wilkinson showing their desire to expand on their existing site rather than seek to move elsewhere. This illustrates the attractiveness of this location and its flexibility to meet individual business requirements.”

Mr Hobbs says: “Faith in the region is being matched by speculative building with over one million sq ft under construction in Avonmouth (Junction 18, M5) alone.”

Russell Crofts of Knight Frank agrees: “There has been an explosion of speculative development. ProLogis has 660,000 sq ft in two buildings – one of which is Crossflow550, a 550,000 sq ft unit – and there is a smaller unit of 115,000 sq ft. Crossflow550 is due to complete in February 2008 with the other in March.

“Gazeley has 325,000 sq ft in two buildings due to be finished this month and St Modwen is speculatively building an 85,000 sq ft scheme of several buildings.

“On top of that, in South Wales it would be fair to say there is more speculative development than ever. Over 500,000 sq ft in 11 schemes including the Frontier scheme in Chepstow which totals 180,000 sq ft and the 60,000 sq ft DAFEN Midas Building at Midas Raglan Energy Park.”

Basically all looks rosy but, and there is always a ‘but’, there are problems.

Mr Hobbs explains: “Speculative development in the region has been sparse during the last 10 years and as void rates, brownfield housing development and an increase in out of town office development impact, a lot of stock is being lost.

“Very few of the authorities desire warehousing development – there are even examples of positive policies to restrict spread in urban areas where vehicles may impact on residential areas. Such policies continue to display a view that warehouse jobs are a poor relation, despite our research to the contrary. We are looking at some real growth in the region but there are significant challenges.”

So it seems as if the planning authorities have been caught on the hop. Mr Crofts notes: “South Gloucestershire has land but Bristol city has not. It is currently going through its LDP and the industry view is that they have misjudged it with an allocation of 20 hectares until 2028.”

The Industrial Agents Society and leading developers and business groups are currently consulting with the council to remedy matters. Despite the two huge job making deals in South Wales creating employment for nearly 2000 in the logistics sector, one of Wales’ leading property developers is supporting a report which claims local authority planners are damaging the Welsh economy by restricting logistics property development in favour of other industrial uses.

Mike Davies, of Chepstow-based Broadhall, argues local planning authorities should be more supportive of logistics property development in Wales.

He backed findings produced in a report issued by property consultancy Atisreal, entitled ‘Challenging perceptions of logistics property’, which examined local planning authorities attitudes towards logistics property. The report found one in four planners restricts its development, with over half believing logistics doesn’t provide enough quality jobs.

Mr Davies says: “It is certainly my experience that very few local planning authorities welcome logistics property development with open arms. There is a perception that distribution doesn’t create the jobs other types of industrial property uses can. However, I have found the reverse is true. Gwent Euro Park is home to retail giants Tesco and Wilkinson, which collectively have created nearly 1,800 jobs at the park with close to 2 m sq ft of distribution units being occupied by two operators only.”

In Wales, the model produced by Atisreal estimated that logistics property would generate 40 per cent more wage contribution (£32 million) than light industrial space (£26 million), and more than double that generated by general industrial space (£15 million).