Always look on the bright side…

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[asset_ref id=”971″]The good news is that there is a lot of space to be had in the West Midlands. Indeed according to DTZ’s latest quarterly figures there is 24,921,207 sq ft of industrial space in the region for units above 50,000 sq ft. And there is more good news, recent analysis form CBRE shows that Birmingham remained the cheapest city in the UK for industrial property rents, along with Manchester, at £5.50 per sq ft. The most expensive is London (Heathrow), where rents are more than double that of Birmingham at £12.50 per sq ft.
Richard Meering of CBRE says: “With one of the lowest rents in the UK and a good supply of stock, albeit slowly decreasing, Birmingham continues to be an attractive city for the industrial and logistics sector.”
As always though, the devil is in the detail. Research from Colliers, which puts total availability across the region at 42m sq ft, notes that there is some 23m sq ft of space in units of 30,000 – 200,000 sq ft and only 8.3m sq ft in big sheds of 200,000 sq ft plus.
To clarify the situation further, not all of that will be in new modern space. Lambert Smith Hampton research showed that there was some 45m sq ft of second-hand space released onto the market with the result that the Midlands has a higher concentration of second-hand space at 74 per cent relative to overall availability.
Steve Williams of Lambert Smith Hampton says: “Grade A stock accounts for only 17 per cent of total stock on the market in the West Midlands.”
However, one should look at the opportunities that that presents, especially to those looking for a cracking deal and short-term leases.”
Landlords owning second-hand space will continue to offer keen pricing and attractive incentives to occupiers. The properties need to be let. It is likely that well located stock will be refurbished with additional office space in the battle to secure lettings. Although the sentiment that there are fewer large sheds about in the region prevails, Mike Price of Knight Frank says: “It will still take a brave landlord to hold firm, most will be keen to get the buildings occupied. It takes three to six months to secure a letting and enquires are not exactly thick on the ground so there is not a lot of point waiting.”
In addition, a lot of the second-hand space is already fitted out which saves a huge amount, especially when banks are still reluctant to lend money for capital expenditure.
Deals done on second-hand properties include the letting of a 130,800 sq ft warehouse to TP Toys in Kidderminster. As part of the deal, landlord Revelan agreed to refurbish the unit to the occupiers’ specification.
Rents on second-hand units are also considerably lower. David Binks of Cushman & Wakefield says: “Rents for new build properties such as The Hub and Meteor Point are at £5.50 per sq ft, while properties such as the 112,000 sq ft former Macro store in Wolverhampton are at £5 per sq ft and buildings such as the 130,000 sq ft Trinity Point, also in Wolverhampton, are only at about £3.50 per sq ft.”
Other second-hand buildings on the market include the 129,685 sq ft Arvato Building on Crystal Drive Business Park in Oldbury. The property boasts a working eaves height from 4m-18m, 18 dock level and 2 level access loading doors, as well as detached two-storey office accommodation providing fitted offices. There is a vehicle wash, refuelling facility and vehicle maintenance facility and it has yard depths of 43m to 85m. It has substantial car parking areas as well as 32 lorry parking spaces. It also benefits from heating and lighting and an automated racking system capable of holding 8,000 pallets. It is being marketed by Cushman & Wakefield at a quoting rent of £3.95 per sq ft. Binks says the landlords are flexible and willing to consider short term leases on an assignment or sublet basis.
The property is located 1.5 miles from Junction 1 of the M5 motorway and is accessed via the A457 and A4252.
There is also Royal Mail’s former 200,000 sq ft sorting centre in Coventry, which is available through Jones Lang LaSalle, as well as the 211,000 sq ft former GIST building in Rugby marketed by North Rae Sanders. The property is available on assignment until 2014 although landlord the Prudential could be flexible.
The property is fully racked and available on a flexible lease. It has heating, lighting and sprinklers and is effectively cross-docked with two yards. It can accommodate up to 17,000 pallet spaces.
One of the largest second-hand buildings on the market is the 365,000 sq ft warehouse at Shire Business Park in Worcester, which was previously let to Boots before the company took Opus Axis earlier this year. The property comprises a detached warehouse constructed in 1992 and extended in 1996 and 2001. It is located around 0.5 miles from Junction 6 of the M5 motorway.
The facility is cross-docked with 360 degree access and 55 dock level loading doors, as well as 50kN/sq m floor loading and 10.5m eaves. It has a part chill store totalling some 94,000 sq ft. It is fully sprinklered, racked and benefits from heating and lighting.
The property has a passing rent of £2m and is being marketed by Cushman & Wakefield. The landlords are willing to consider an assignment or sub lease.
Those looking for smaller units might like to consider the 64,000 sq ft former Norbert Dentressangle unit at Middlemarch. The property has 9m clear height, 35 per cent side cover and 16 level access doors. It is being marketed through North Rae Sanders.
There is one proviso with second-hand space says Binks: “Occupiers will have to make compromises and will need to be prepared to revise their expectations to secure the best deals.”
New space
While there might be a lot of second-hand space in the region there is a distinct lack of modern new space.
DTZ’s latest research suggests that there is just over three years’ worth grade A stock in the UK. Increasingly strong levels of grade A take up has meant the rate of fall in the potential supply of grade A space has been pronounced since the start of 2009.
Take up in the first half of 2010 was 43 per cent up on the first half of 2009. A key driver of take up was grade A stock which accounted for 48 per cent of the total, as occupiers took the opportunity to trade up.
There has been a plethora of deals secured on modern warehouse space in the West Midlands including the sale of Opus Land’s Opus Axis scheme in Burton on Trent where chemist Boots has paid in the region of £50 per sq ft. The refurbished cross-docked property has a 15m eaves height, 41 dock and six grade level doors. Jones Lang LaSalle, BNP Paribas Real Estate and GVA Grimley advised Opus Land while Boots was represented by Lambert Smith Hampton.
Nearby, Ceva Logistics took Close and Wrenbridge’s Barton 150 building totalling 150,000 sq ft on a new lease. Ceva has now undertaken an extensive fit out within the unit, while US clothing retailer Gap took developer ProLogis’ 230,000 sq ft warehouse at its ProLogis Stafford scheme in the West Midlands to service its soon to be launched e-commerce operation.
In Birmingham, Stapleton Tyres has taken PRUPIM’s 105,332 sq ft warehouse at Express Point on a ten-year lease. The headline rent equated to £4.75 per sq ft.
The unit developed by Astral Development is a modern distribution warehouse boasting 12m eaves, as well as 50kN/sq m floor loading. Letting agents were North Rae Sanders and Knight Frank.
Down the road in Coventry, ProLogis let its 105,000 sq ft H2 unit at ProLogis Park Coventry to British Gas, part of Centrica, for the distribution of smart meters and to expand its home insulation products division.
Of the modern grade A buildings that are still available there is Standard Life’s 300,000 sq ft The Duke on Wellington Road in Burton on Trent, built in conjunction with Anson Properties boasting a 12m eaves height, 24 dock and 4 level access doors, a 50m deep yard and 15,000 sq ft of two-storey offices. It is being marketed by CBRE and Knight Frank, who are quoting £5.25 per sq ft.
The largest spec warehouse in the region is Gazeley’s 700,000 sq ft Flair unit at G.Park Rugeley. The huge cross-dock warehouse is set on a 40-acre site and boasts a clear internal height of 14.3m to underside of haunch and a floor loading of 50kN/sq m. It has 80 loading docks, eight level access doors and 260 HGV spaces. Agents are CBRE, Cushman & Wakefield and Burbage Realty.
Then there is the jewel in Gazeley’s crown, the £50m G.Park Blue Planet at Chatterley Valley in Staffordshire. It is the first development to achieve the BREEAM (Building Research Establishment Environmental Assessment Method) “Outstanding” rating (design stage). This is the highest sustainable accolade available in property development. And if that is not impressive then perhaps the fact that the building could create cost savings in the region of £300,000 a year is.
The 387,762 ft facility has 15m eaves and 38 dock and two level access doors with a floor loading of 50kN/sq m. It is being marketed by joint agents CBRE, Bulleys and Lambert Smith Hampton at a rent of £4.95 per sq ft.
Robert Rae of North Rae Sanders says: “Stock is diminishing quite quickly and while there is a reasonable supply, there are no new buildings. In fact, no-one has built speculatively for a year.
“I don’t think there will be any new buildings until autumn 2011 at the earliest and maybe not even until 2012 subject to the economy. There might be the odd pocket but it is more likely that there will be more D&B and pre-lets.
“We are certainly seeing more proposals going out to occupiers for new buildings which could lead to an increase in activity in that area in the next 12 months. That is where they [landlords and developers]will be seeking deals and in areas where there are higher land values and occupiers will be looking at prime rents of between £5.50 – £5.95 per sq ft and leases of 15 years as generally D&B is unfundable on any other basis.”
Pushing sites
Developers are actively pushing sites, says Ranjit Gill of BNP Paribas Real Estate. “Developers are making sure their land is primed and ready for action.”
Indeed Richard Smith of Opus has just relaunched a 33-acre site at Opus 9 as Opus Blueprint which can take a single unit of 475,000 sq ft. The developer is moving ahead with infrastructural works and already has detailed planning in place.
Smith says: “There has been a massive take up in the last 12 months of most of the large sheds in the West Midlands, in fact there is approaching a shortage of decent sheds and no-one is going to be building them spec. If there are any big requirements we are one of the only shows in town ready to go.”
Although not quite through the planning process, Nigel Dolan of Gazeley says the company is just about to start marketing the former Johnson Matthews site at Meir Park totalling 20 acres for D&B; it will be known as G.Park Stoke.
“It could take a unit of up to 460,000 sq ft, with 15m eaves,” he says, “the usual build time is roughly 20 weeks but it could be fast tracked.” Letting agents are CBRE.
IM Properties has submitted plans for a 123-acre extension of its Birch Coppice Business Park in Warwickshire. Phase II could accommodate up to 2m sq ft of warehousing.
ProLogis is working on a variety of sites including its ProLogis Park Sideway scheme where it could accommodate a single unit of 650,000 sq ft.
There is also a site owned by Goodman in Burton on Trent, which could accommodate a unit of 400,000 sq ft.

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