Occupiers could have a field day in Yorkshire and the North East based purely on the fact that there is a lot of space in the region up for grabs.
Nick Cook of Gazeley says: “There was a bit of market congestion when a lot [of space] got delivered at the same time.”
Dave Robinson of Jones Lang LaSalle agrees: “An influx of speculative development over the last two years has produced a large amount of vacant new build product in Yorkshire. Some occupiers who find themselves with the pick of several properties in their size range may be able to secure better incentive packages with landlords, who could be under some pressure, competing against each other.”
Commenting on the opportunities for occupiers, Paul Mack of DTZ Debenham Tie Leung says: “It may well be an occupiers’ market for a while. They will be able to drive deals especially on the back of the abolition of empty rates in April.”
Roger Haworth of M3 Agency agrees: “If you are an occupier – head north. There is quite a choice across all size ranges with four or five sheds in the 100,000 – 200,000 sq ft range as well as in the bigger category up to 500,000 sq ft. With great choice there is a better deal to be had.
“However,” he warns, “developers funds and landlords can only offer so much to an occupier but they know they are in competition so they know that such and such logistics company will be looking at the others [in the same bracket] and what it means is that the owners will effectively put their best foot forward straight away.
“There is a point that they will not or cannot pass otherwise they will lose money and at that point they will be less likely to barter. They will not have as much in the pot later in the year as the longer they have a property on the market the less money they have to offer and so they are probably more likely to be aggressive in terms of incentive and lease terms now than in three months time.”
Rob Oliver of GVA Grimley says that occupiers will also have to remember that much of the available stock is new and at the higher end of the cost range and therefore is not fitted out, and that has to be a consideration especially when trying to negotiate a three or five year term when time is of the essence. “It takes quite a while to fit out a new building, it is not as if you can flick a switch and all the lights come on.”
He says: “There are not many second hand buildings available to satisfy that type of demand.” When Canpack was looking it short-listed only three possibilities. These included Opus Land’s Opus Maximus in Scunthorpe.
The can manufacturer paid in the region of £9m for Opus Maximus, which is located on the Skippingdale Industrial Estate in the North Lincolnshire town. The building was formerly a factory for furniture retailer MFI.
The facility extended to approximately 450,000 sq ft and boasted 7.5m eaves as well as surface and dock loading. It also boasted an 8000kVa power supply, which became the deciding factor for the company to secure the site. Joint letting agents were Knight Frank and Gent Visick.
The other short-listed properties included a warehouse at Sherburn Distribution Park, Sherburn-in-Elmet built by developer Gladman and now owned by US fund manager Rockpoint. The scheme is asset managed by Evander Properties. The other property was at J34 Industrial Park in Rotherham. The J34 unit provides 300,000 sq ft of modern warehouse accommodation with 36 dock level doors and two ground level doors. It is of steel portal frame construction externally clad with profile metal sheeting and benefits from 8.7 metre eaves, high bay sodium lighting units and a 3.83 acre secured lorry park. Knight Frank is letting agent.
Good second hand stock is currently being marketed for around £3.25 per sq ft compared to £4.75 per sq ft for new build, although there are new units in more remote locations being offered at £4.25 per sq ft.
Despite there being plenty of opportunity for occupiers at present in the region, there is a downside. Robinson says: “We will see little new speculative development in the region in 2008. The impact of the credit crunch, coupled with the current levels of vacant stock, means developers are reluctant to commit to new, larger units. We do however expect another strong year in terms of take-up, which will naturally lower the levels of vacant stock.”
He continues: “While on paper, six million sq ft of vacant distribution space may seem an alarming figure, 2007 has been a record year in terms of occupier take-up of new space, with almost 3.5 million sq ft of space acquired over the last 12 months. We have also found that enquiry levels are as good as they ever have been.”
Recent deals include the letting of HelioSlough’s 750,000 sq ft speculative cross dock scheme Nimbus near Doncaster to furniture retailer MFI on a ten year lease, the letting of RREEF’s 305,000 sq ft warehouse in Harworth to DHL on a ten year lease at a rent of £4.30 per sq ft, and the 125,000 sq ft letting to fresh fish and seafood product company Cumbrian Holdings at Grantside’s Foxcover Industrial Estate at Seaham in County Durham at a rent of £4.75 per sq ft.
In addition to these deals there have been a number of large D&B deals secured, which although they do not take up space already in the market, they do take up large tracts of land thus diminishing the amount available for future speculative development. These deals include the Tesco facility at Sterling Capitol’s Capitol Park scheme in Goole where the retailer has recently opened an 850,000 sq ft warehouse. The scheme totals some 310 acres near Junction 36 of the M62 motorway. Letting agent Owen Holder of Knight Frank says: “Following on from the Tesco deal there are 200 acres remaining with full outline planning permission that could accommodate a further 1.2 million sq ft of space.
“However, the developer is submitting a detailed planning application for a one million sq ft warehouse on the site. As far as I know this will be the only million sq ft shed in the country with detailed planning permission.”
The biggest D&B deal recently announced is that for Marks & Spencer in Bradford. The retailer hopes to build a one million sq ft distribution centre on land owned by developer ProLogis at the former West Bowling Golf Club, which has been earmarked by Bradford Council as premier employment land.
A planning application is currently being prepared and due for submission shortly. Subject to gaining planning permission, ProLogis would expect to start work on preparing the 90-acre site off Rooley Lane as soon as possible.
The site will be built in phases, with the Marks & Spencer facility forming phase 1. This would take around 18 months to complete and Marks & Spencer would expect the unit to be fully operational by 2010. Dove Haigh Philips is advising ProLogis.
Another D&B deal has been secured at ProLogis’ Glasshoughton site where the developer has secured a pre-let for a 260,000 sq ft headquarters and distribution centre for pharmaceutical company TEVA on a 15 year lease at a rent in excess of £6 per sq ft for both the 200,000 sq ft warehouse and 60,000 sq ft office.
With so many enquiries and the strength of the D&B market, a number of developers are securing sites and bringing these forward through the planning process. Indeed Nick Cook of Gazeley says: “We have optioned an 86 acre site to the south at Junction 4 of M18.
“This is as good as it gets, an established location that ticks all the right boxes. The local authority identified five opportunities under the local development framework, which were suitable for large scale development – this is one. Some of the others require infrastructure work.
“We are hoping to get planning in the Spring for some 1.4m sq ft. The current master plan shows three buildings in a range of sizes from 200,000 – 650,000 sq ft both single sided and cross-docked. Jones Lang LaSalle is advising while the landowner is being represented by DTZ, and we will retain both as joint marketing agents going forward.”
The scheme will include a variety of eco-initiatives, which seem to feature high on the list of priorities for potential occupiers. Both Haworth and Oliver state that there has been a surge of interest in the units at HelioSlough’s SIRFT (Sheffield International Rail Freight Terminal) scheme.
“There has been a solid number of enquiries for units with rail connectivity. Occupiers have to tick boxes that prove they are trying to reduce their company’s carbon footprints and that coupled with the perceived growth in road congestion, occupiers like to have the ability to be able to use it.”
There are two units available at SIRFT. Unit one totalling 330,000 sq ft and unit two of 290,000 sq ft both buildings can be combined lengthways to create a single building totalling 640,000 sq ft. Joint letting agents are M3, GVA Grimley and King Sturge.
Next to SIRFT there is Gazeley’s Blade scheme being marketed by Atisreal, M3 and Knight Frank. The 415,000 sq ft building has a variety of eco-initiatives resulting in a saving of £11,797 a year on running costs. It has a 35 kwp solar photovoltaic system, a 20 kwp wind turbine (installed in January 2007), 13.5 per cent roof lights and a solar thermal water heating system.
Steve Tonkin of CBRE says: “ProLogis has speculatively built a 530,000 sq ft national/regional distribution centre on 36 acres in the Dearne Valley acquired from UK Coal. It is available to let at a highly competitive rental of £3.95 per sq ft.”
It is known as ProLogis Barnsley Crossflow 530 and is the only spec-build cross-dock facility available in the area.