Tuesday 27th Sep 2016 - Logistics Manager

East Midlands: Speculatively speaking

With demand growing, calls for more development and a huge shortage in available space; speculative development looks ripe. Liza Helps reports.

First published in Logistics Manager, May 2015.

First published in Logistics Manager, May 2015.

Around 1.425 million acres of land is needed by 2036 to fulfil the demand for logistics space in the East Midlands region. According to David Binks of Cushman & Wakefield: “In 2014 alone there was a huge increase in demand for industrial properties across the board, with the volume of enquiries increasing by 5.5 per cent compared to 2013 and the overall space required increasing by ten per cent.

“The improvement in total take-up, volume of enquiries and overall space required witnessed in 2014 is a clear indication that confidence continues to grow in the industrial sector among occupiers.

“The improving economic conditions continue to encourage business growth leading to increased demand to accommodate both expansion and relocation requirements.”

The findings came to light in the Leicester and Leicestershire Strategic Distribution Study for the Leicester and Leicestershire Housing Planning and Infrastructure Group (HPIG) that was carried out by MDS Transmodal, in association with Savills.

The study concluded that to address the challenge of increasing competition from neighbouring areas for logistics activity, Leicestershire alone needs to continue to develop new commercially attractive strategic sites, a significant proportion of which will need to be directly rail-served.

The land use forecasts produced during the study suggest that around 284 acres of new land at rail-served sites and around 378 acres of new land at non rail-served sites will need to be brought forward by 2036 in Leicestershire once existing consents and pipeline sites are accounted for.

Between 3,500 and 7,500 full-time equivalent jobs would be lost from Leicestershire if the county was unable to bring forward the new sites in-line with the land use forecasts. This would result in a reduction in LLEP Gross Value Added of between £274 million and £548 million.

With those sorts of figures brought to the limelight it is hardly surprising to see renewed activity among developers bringing forward sites in the region.

Goodman has partnered with Shepherd Group to deliver a massive rail freight depot next to the Toyota car plan near Burnaston in Derbyshire.

The 619 acre site lies between land between Etwall and Egginton, and is owned by Severn Trent. The £250 million scheme to be known as the East Midlands Intermodal Park will include six million sq ft of warehousing in units from 235,000 sq ft to one million sq ft. Subject to all approvals it could be up and running by 2018.

Roxhill is also bringing forward a rail related scheme to be known as East Midlands Gateway. The 250-acre site to the north of the East Midlands Airport will see the development of an intermodal freight terminal accommodating up to 16 trains per day, with trains up to 775 metres long supported by six million sq ft of co-located warehousing. The planning inspectorate has accepted the application and a decision is expected around Christmas 2015.

Prologis has already received planning approval for its rail related scheme DIRFT III, which will provide the scheme with co-located warehousing totalling 7.86 million sq ft. Robin Woodbridge of Prologis says the developer is already in talks with potential occupiers.

The developer still has its Prologis Park Corby site in Northamptonshire, which could accommodate 2.5 million sq ft and it has secured outline planning on land in Wellingborough for a new £150 million logistics park at Appleby Lodge. The site will provide two million sq ft of employment space.

In addition it has secured an 80-acre extension to its Prologis Pineham scheme that could accommodate a further one million sq ft.

 

Demand

Developer Roxhill has a variety of sites in the region including Warth Park, Raunds where it has outlined planning for two to three buildings up to 350,000 sq ft. Letting agents are CBRE, NRS and Lambert Smith Hampton. Then there is CIRFT in Corby (formerly known as COR!) where there is permission for an 880,000 sq ft rail connected warehouse. It also has a 65-acre site in Burton Latimer that could accommodate up to 1.2 million sq ft.

Demand for logistics space is so strong that developer IDI Gazeley is looking to extend its hugely successful Magna Park scheme in Lutterworth.

IDI Gazeley are looking to increase Magna Park Lutterworth by 500 acres to the north accommodating up to six million sq ft. In a separate proposal developer Barwood has confirmed to the local press that it is going for a 200-acre expansion of the Magna Park site to the south. Depending on the amount of developable land and occupation densities the two sites together could provide upwards of ten million sq ft of warehousing space.

Ranjit Gill of Savills says: “The Midlands is the dominant region in the UK [for logistics space], accounting for 44 per cent of the total market share in England in 2014. This is a two per cent increase from 2013 and it highlights the notion that the Midlands is the UK’s premier destination for 500,000 sq ft plus warehouses.

Furthermore, the East Midlands accounted for 50 per cent of all transactions [in 2014] that were above 500,000 sq ft. Examples of this include Primark letting 1.03 m sq ft in Northampton and Norbert Dentressangle – for Amazon – letting 996,000 sq ft in Daventry.”

A number of developers are identifying this trend and offer the ability for mega sheds on their sites. Mount Park Developments is pursuing its 1.3 million sq ft site at Bardon where it can accommodate up to one million sq ft in a single building. Gladman’s Vertical Park on the site of the former Bevercotes colliery, in Nottinghamshire has outline consent for a single facility of two million sq ft with a 30m eaves height. Letting agents are Lambert Smith Hampton and DTZ.

IDI Gazeley still has space for an 850,000 sq ft unit at G.Park Ashby in Ashby-de-la-Zouch. The property would have 15m eaves as well as 60 dock and nine level access doors and 529 parking spaces. Letting agents are Knight Frank and BNP Paribas Real Estate.

Warwickshire-based IM Properties with First Industrial can accommodate a 450,000 sq ft plus unit on its 45-acre site off the M1 in Eastwood, Nottingham known as Nottingham 26. Letting agents are Fisher Hargreaves Proctor, North Rae Sanders and Dove Haigh Philips.

Sladen Estates snapped up Prologis’s former 45 acre site in Mansfield and is now promoting Summit Park which could provide up to 900,000 sq ft of space in units from 5,000 – 350,000 sq ft. Letting agents are Commercial Property Partnership, North Rae Sanders and Lambert Smith Hampton.

Over at the Nailstone Colliery in Leicestershire just of Junction 22 of the M1 motorway Curtis Hall is pushing a one million sq ft development opportunity known as Midas22. Sole agents are DTZ.

“Such is the commercial environment at present, developers are also considering redevelopment,” says Simon Lloyd of DTZ. He cites Graftongate and Blackrock’s decision to demolish the buildings on the 43-acre former British Shoe Corporation site at Sunningdale Business Park in Leicester. The redevelopment of the site could provide 962,788 sq ft of industrial and office floor space.

It is quite obvious that there is plenty of sites to choose from for build-to-suit enquiries but for those not able to wait for quite so long there is good news; the East Midlands is also a hot bed for speculative development and more is expected.

Gill notes: “The Midlands accounts for 50 per cent of the total sq ft of speculative development in the UK; a total of 2.15 million sq ft is currently being developed in the Midlands. The largest scheme is Wilson Bowden’s Optimus Park in Glenfield, Leicestershire, in conjunction with M&G, where 480,800 sq ft is currently being developed and expected to be complete in Q4 2015. Letting agents are Burbage Realty and North Rae Sanders.

 

Support

Property investor Hamdon Gate has its speculatively developed 112,000 sq ft warehouse known as Brackmills 112. The warehouse built by developer Roxhill is being marketed by JLL, North Rae Sanders and Burbage Realty off a quoting rent of £5.75 per sq ft. It is thought this is under offer.

However, Prologis has its 341,025 sq ft speculative warehouse known as DC7 at Grange Park in Northampton. The building, will have 15,225 sq ft of three storey offices while the 320,800 sq ft warehouse will boast 12.5m eaves as well as 34 dock and two level access doors and a 50kN/m FM2 floor loading. It will have 94 trailer spaces and 264 car parking spaces. Letting agents on the scheme are Dowley Turner Real Estate and Budworth Hardcastle. The quoting rent is £6.25 per sq ft.

Goodman is also quoting £6.25 per sq ft for its two speculative warehouses also in Grange Park. The developer acquired 22 acres at Grange Park in Northampton from RBS Real Estate Asset Management and is developing two logistics facilities one unit of 304,000 sq ft and one unit of 162,000 sq ft.

Nigel Dolan of Goodman says: “Where you have got prime land like this and with market characteristics as they are; it does support speculative development.”

Goodman is also planning to speculatively develop a 323,000 sq ft unit in conjunction with Anglesea Capitol at Derby Commercial Park near Derby. The scheme also has detailed planning for a 550,000 sq ft cross-dock warehouse. Joint agents CBRE, Innes England and North Rae Sanders for the site while CBRE, DTRE and Moriarty & Co are marketing the speculative unit.

Stuart Waite of Innes England says: “There’s a lack of standing stock, so supply and demand dictates that it is the right time to build and Goodman has decided to position itself ahead of the competition.”

There is also talk of IDI Gazeley speculatively developing its last remaining site at Magna Park Lutterworth. The site already has planning for a 133,329 sq ft unit with 10m eaves, six dock and four level access doors. Letting agents are Burbage Realty and BNP Paribas Real Estate.

In addition Henry Boot Developments is thought to be considering speculative development at its Markham Vale scheme in Derbyshire. Joint letting agents are JLL and Burbage Realty.

There are some second hand units still available these include the Arrow building near Worksop, which was forward sold to AXA REIM and built by Gazeley. The 330,418 sq ft high bay distribution facility boasts four level access doors, 32 dock level doors, 220 car parking spaces, 91 HGV or trailer parking spaces, 15,600 sq ft of offices on two floors, 312,000 sq ft of warehousing, security fencing and a 300 sq ft gatehouse. Letting agents are GVA and Knight Frank.

 

Shortage

Then there is the Sabre Industrial Park in Nottingham that can provide two units totalling 212,000 sq ft; one of 98,866 sq ft and one of 106,317 sq ft with eaves varying from 8.25 to 15.6m through joint letting agents Cushman & Wakefield and Innes England.

With general short supply of immediately available space, it is unsurprising that rents are rising. Simon Lloyd of DTZ says: “Rents have had a step change and increased five to ten per cent as construction costs have increased. Luckily, these have been countered by sharp investment yield, holding rent levels back for the time being on new build.”

Jon Ryan Gill of Knight Frank agrees: “Rents are increasing and rent review surveyors are in strong position to turn screw on occupiers. On new leases rent free and other incentives are coming down and now even break clauses are being extended to no than ten years plus if landlords can get it.”

Stuart Waite of Innes England says: “In general occupiers will need to plan further ahead than perhaps they are used to, factoring in lead in times for site identification, planning and construction to meet their requirements.”

Andrew Jackson of North Rae Sanders agrees: “Occupiers cannot do too much research and are advised to commence searches early as it can be a more challenging task than expected; need to look at all options and are going to have to think D&B, which can take 18 months from start to finish including search.”