Monday 26th Sep 2016 - Logistics Manager

East Midlands: Surging demand

A shortage of immediately available properties and a surge in demand has seen rent levels reaching pre-recession highs. Liza Helps reports.

Quoting rents for new speculative industrial space have surpassed pre-recession heights, according to Colliers International’s latest research.

This article was published in the December 2015 issue of Logistics Manager.

This article was published in the December 2015 issue of Logistics Manager.

The Midlands was one of the first regions to see a significant jump in rents, with deals on speculative space at the start of the year breaching the £6 mark with IM Properties’ 152,000 sq ft Plot 2 unit at Birch Coppice in Tamworth achieving £6.15 per sq ft when let to UPS.

Buoyed by this news, several developers are pushing forward with speculative development plans with quoting rents thought to be between £6.25 and £6.50 per sq ft – a significant increase when compared to the £5.75 per sq ft quoted in the 2008 pre-recession market.

Simon Norton of Colliers International says: “The general supply of existing buildings and indeed “oven-ready” distribution sites in the Midlands is in short supply. In fact, recent statistics indicate there is only approximately three to six months’ supply of existing good quality distribution warehousing of over 100,000 sq ft left, and no units at all readily available over 250,000 sq ft.

“This shortage of stock has had an upwards impact on rental levels in the region, with prime quoting rents for big sheds now reaching £6.50 per sq ft in the Midlands M1, M42 and south M6 corridors.”

Goodman is quoting £6.25 per sq ft for its two speculative warehouses in Grange Park. The developer bought 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.

 

Benefit

The larger unit known as Unit A will benefit from 15m eaves, 26 dock and four level access doors, 38 trailer space and 224 car parking space and will have a 50m yard. The smaller unit, known as Unit B, will have 12m eaves, 16 dock and two level access door as well as 23 trailer and 121 car parking space as well as a yard up to 67m. Letting agents are JLL and Lambert Smith Hampton.

At Wilson Bowden’s 65-acre Optimus Park near Glenfield, Leicestershire, the developer is speculatively building two units, after securing forward funding through M&G Real Estate.

Optimus276 totals 276,690 sq ft and boasts 12.5m eaves, 12,360 sq ft of offices, 28 dock and four level access doors, a 50kn/sqm floor loading, 48 HGV and 233 car parking spaces and a yard depth of 59m. The other unit, Optimus205 has 12.5m eaves, 9,904 sq ft of offices, 20 dock and four level access doors, 41 HGV and 175 car paring space with a 57m yard. Both units are being marketed by joint agents North Rae Sanders and Burbage Realty at quoting rent of £6 per sq ft.

The rent is justified says Andrew Windle, associate director, logistics and industrial at M&G Real Estate, as: “There is a limited supply of logistics accommodation in core locations such as the M1 corridor – this opportunity produces access to well specified and located product.” It is definitely a landlords’ market.

Indeed Nick Hardie of Strutt & Parker notes: “The concentration of development in the traditional logistics hotspots of the Midlands and the South East re-emphasises the caution that developers are taking in delivering logistics properties.”

He concludes: “Developers who committed to speculative development are having their confidence rewarded. Two thirds of the completed units have secured tenants and the ones under construction are enjoying strong levels of interest. Success is also being achieved in terms of rental levels which are increasing.”

However increasing rent levels are not just limited to new built stock. Len Rosso, Head of Industrial and Logistics at Colliers International adds: “Shortage of new supply, coupled with expansionary activity from occupiers keen to take advantage of the more benign economic environment, means that secondary rents have seen sharp upward movement in the last 12 months.

“Prime asset rents are significantly up year and on year but for those occupiers trying to avoid paying the higher prices, the secondary market is the next option. This has increased demand for secondary stock so consequently, rental prices are also rapidly rising.”

Ranjit Gill of Savills notes: “There are a number of units coming on the market at Magna Park Lutterworth with quoting rents at £6 to £6.25 per sq ft but that just reflects their scarcity.”

One of the largest is SEGRO’s 418,000 sq ft ex-Primark facility, which is being marketed by North Rae Sanders and JLL with a quoting rent of £6.25 per sq ft. There is also Pickering Properties 230,000 sq ft unit, which is also part of the Primark facility though in separate ownership. The property, which was originally let on a 10-year lease in 2006 at £5.25 per sq ft, is also thought to have a new quoting rent in excess of £6 per sq ft when it comes to the market next year.

With rent levels increasing the case for development is simplified. A number of developers are securing funding to build speculatively. Prologis is moving forward with two units of 215,262 sq ft and 85,262 sq ft at the third phase of Prologis Apex Park in Daventry, which will complete in April 2016.

The larger unit will have 12.5m eaves, 20 dock and two level access doors, 30 HGV and 157 car parking spaces. The smaller unit will have a 10m eaves height none dock and two level access doors, 18 HGV and 66 car parking spaces.

Letting agents are Lambert Smith Hampton and Burbage Realty.

Meanwhile Goodman with funding from Anglesea Logistics Partnerships are developing a 323,895 sq ft unit at Goodman’s 165-acre Derby Commercial Park, off Raynesway on the outskirts of Derby.

 

Complete

The first steelwork of the building, which is costing £25 million, has already been put up and drainage work is almost complete. The new unit will feature 38 dock and four level access loading doors, 102 HGV parking spaces, 55m service yard, and a 15m clear height. It also offers over 15,000 sq ft of office space.

As well as the unit it is building at the moment, Goodman also has planning consent for a 550,000 sq ft warehouse and distribution depot at Derby Commercial Park. It was given permission for that development in January this year.

Letting agents on the building are Innes England CBRE and DTRE

CBRE, DTRE and Moriarty & Co have been appointed leasing agents for the new unit at Derby Commercial Park.

Further south First Industrial and Clearbell are speculatively developing a 224,965 sq ft facility at Interlink Park, Bardon, Leicestershire.

The unit, to be known as 225 at Interlink, will have 19,857 sq ft of offices, 58 HGV and 174 car parking spaces as well as 18 dock and four level access doors. It will boast 15m eaves and a 35-50m yard. Joint letting agents CBRE and JLL are quoting £5.85 per sq ft.

IDI Gazeley are also speculatively developing warehouses; one totalling 297,320 sq ft in Daventry, known as Daventry Distribution Park, which has 28 dock and three level access doors and 230 car and 120 HGV parking spaces as well as a 50m yard and 12.5m eaves. Letting agents are Savills and Cushman & Wakefield. It is also developing another warehouse at its Magna Park Lutterworth scheme totalling 186,097 sq ft. The unit will have 12.5m eaves, 17 dock and two level access loading doors as well as 36 HGV and 178 car parking spaces. Letting agents are CBRE and Colliers.

Wilson Bowden and Goodman formed a joint venture to speculatively develop Interlink 130 in Bardon, Leicestershire. The unit is expected to complete in February 2016. It will feature 12 dock and two level access doors, 12.5m eaves height, a 50m-yard and car parking for 105. Joint letting agents are North Rae Sanders and CBRE.

Jason Harris, commercial director at Goodman UK Logistics, says: “The project is a sign of the strength of the market at the moment, and the growing demand for Grade A logistics space in the Leicester area, and indeed the wider East Midlands. We anticipate strong demand for the unit given the shortage of supply in the region.”

Despite all the speculative space coming forward Viktor Ktori of Savills says: “There is still a disparity between immediate demand and availability and sites for immediate development. Demand is significantly outstripping supply.”

The statistics don’t seem to reflect this with take-up down in the third quarter of the year but Simon Lloyd of Cushman & Wakefield points out: “This is not lack of demand rather a reflection on the lack of availability.”

Andrew Jackson of North Rae Sanders notes: “There are a number of enquiries in the region around the 700,000 to 1 million sq ft mark demonstrating the strength of the market by the sheer fact that occupiers are willing to commit to bigger requirements.”

These requirements include a million sq ft for House of Fraser and a 700,000 sq ft enquiry for B&M Bargains.

While there may not be immediate supply there are schemes being brought forward, which could have considerable impact on warehouse availability in the future. Schemes being progressed include Goodman and Shepherd Group’s proposals for Severn Trent’s 619-acre site at Etwall to be known as the East Midlands Intermodal Park. The £250 million scheme could provide up to six million sq ft of rail related warehousing in units from 235,000 sq ft to 1 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 early next year. For many it will be a case of one or other scheme not both.

The same holds true for the extension to Magna Park Lutterworth where IDI Gazeley has put forward plans for a 590-acre extension on land to the north accommodating up to 6 million sq ft. The company has already secured DHL as an occupier for a 1.3 million sq ft facility subject to planning.

To the south of the park Barwood and Delancey joint venture DB Symmetry, has put forward proposals for a 200-acre expansion to be known as Symmetry Park that could accommodate a possible 4 million sq ft.

Prologis has already received planning approval for its rail related scheme DIRFT III that will provide 7.86 million sq ft of co-located warehousing.

The developer still has sites in Wellingborough – two million sq ft – and Kettering as well as an 80-acre extension to its Prologis Pineham scheme that could accommodate a further 1 million sq ft.

Developer Roxhill has a variety of sites in the region including 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.

Mount Park Developments is pursuing its 1.3 million sq ft site at Bardon where it can accommodate up to 1 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 2 million sq ft with a 30m eaves height. Letting agents are Lambert Smith Hampton and Cushman & Wakefield.

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’ 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 1 million sq ft development opportunity known as Midas22. Sole agents are Cushman & Wakefield.