[asset_ref id=”1000″]It hasn’t always been seen as the most important area as it hasn’t got the biggest conurbation, but it has come to a point where retailers have realised it is an area they have to sort out.
Paul HobbsThe Co-operative has confirmed plans to invest £20 million in a new regional distribution centre in Avonmouth near Bristol. The 430,000 sq ft facility will serve around 400 Co-op food stores in the Bristol, north Somerset and South Wales areas, replacing a number of smaller depots in the region.
The retailer decided to relocate following a strategic review of its logistics network after the acquisition of Somerfield last year. The new distribution centre is expected to open in early 2012, subject to legal agreements and planning consent.
Mark Leonard, The Co-operative Group’s regional head of logistics, explains: “The acquisition of Somerfield, with its many stores in South Wales and in and around Bristol, meant we needed a regional distribution centre in a location from where we could provide our enlarged store estate with an excellent service.
“Avonmouth is ideally located for serving both South Wales and the South West, and provides us with the scope we need to develop a major distribution centre.”
The Co-op is the latest food retailer to relocate to the area, following Tesco, which moved to Severnside earlier this year and Morrisons which has begun building an 800,000 sq ft facility at Bridgewater.
According to Paul Hobbs of GVA Grimley, Asda is also thought to be looking along the M5 corridor and has got to the detailed planning stage for a property of 600,000 sq ft in Avonmouth. In fact, he says the region has “probably never been in a better place with retailers.
“It’s as good a market in that sector as we would ever expect. It hasn’t always been seen as the most important area as it hasn’t got the biggest conurbation, but it has come to a point where retailers have realised it is an area they have to sort out.”
Philip Cranstone of DTZ agrees. “There has been a sea change in companies that were in South Wales relocating to the South West to larger facilities with a view to serving the whole of the South West rather than just South Wales.”
Indeed, the South West saw an 85 per cent jump in take up from Q1 to Q2 according to the latest statistics from BNP Paribas Real Estate, representing the biggest increase for any region during the quarter.
A total of 1.06m sq ft was secured during the quarter, 79 per cent of which was new units. The biggest boost for the region was B&Q securing 700,000 sq ft at G.Park Swindon.
Take-up in the UK logistics market as a whole increased by 12 per cent during the quarter, and by 39 per cent compared to the same period in 2009.
Kevin Mofid, logistics analyst at BNP Paribas Real Estate, says: “Overall, take-up remains steady with occupiers still able to strike good deals, especially in the areas where the levels of supply remain high. However, supply is dwindling and not being replaced, which has led to as little as 2.6 years of supply remaining in the Midlands and only one year of new stock in the South West. While some occupiers will be able to take a footloose approach, many will continue to have specific requirements with regards to both size and location which could spur on a spate of design and build deals in the immediate future and a return to speculative development in the short to medium term, especially where there is proven demand.”
In fact, according to DTZ’s UK Industrial Property Report for the second quarter, overall availability in the South West fell ten per cent by the end of the quarter. Take-up was focused on grade B stock in Swindon, with the most prominent deal being done by Japanese car component company TS Tech, which took the 210,000 sq ft Spectrum building. Landlord Burford was advised by Whitmarsh Lockhart, and Savills and Colliers acted for TS Tech.
DTZ says that current requirements suggest the food sector is likely to be a key driver of big shed take-up during the second half of 2010. However, according to the report, the South West has the lowest availability ratio in the UK at six per cent. Of that only 11 per cent of total availability is grade A stock, far below the national average of 25 per cent.
Given this shortage, together with the lack of development, prime rents in certain South West locations may return to growth sooner than other regions.
In Wales, the grade A availability ratio fell from 9.6 to 8.6 per cent during Q2, accoring to DTZ. However, supply of grade B stock remains elevated, particularly thanks to the abundance of second-hand ex-manufacturing facilities and given the large volumes of space added during 2009.
The volume of take-up in Wales during the first half of 2010 was up 58 per cent on the previous year, according to the report, with deals including Mabey Bridge taking 181,000 sq ft and Spectre Logistics taking 121,000 sq ft in Pontypridd. However, it has been anticipated that take-up will fall back during the second half of 2010 as the lack of prime supply will limit occupier choice.
Of the properties still available, Philip Cranstone points to the Former Focus Facility and Crossflow 550 in the Bristol area. However Simon Lloyd, also of DTZ, says that although there has been interest from the larger food retailers in the Crossflow facility most have deemed it unsuitable as they require a more bespoke building.
Elsewhere, Central Park, which sits on a 640-acre site, has recently come to market with phases one and two planned to provide buildings in various sizes of up to 1.3m sq ft. The development is located between Junction 1 of the M48 and Junction 18 of the M5, with some plots offering frontage to the M49. GVA Grimley and Knight Frank are joint agents.