Hitting the tipping point

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Although there seems to be a lot of space available to let occupiers should be very wary as to exactly how much of it will meet their requirements in the East Midlands.

According to the latest research by Jones Lang LaSalle occupier demand for large industrial and logistics units over 100,000 sq ft made a strong recovery during the first half of 2010 totalling 10.2 million sq ft, a 67 per cent increase on the previous half year. The strongest occupier activity was recorded in the Midlands which accounted for 50 per cent of the total figure. In comparison with 2009 volumes, take-up almost tripled in the East Midlands alone.

Andrew Jackson of North Rae Sanders says “Available space has reduced sharply over the last few months.”

Indeed, research from Bidwells confirms that letting activity in the East Midlands and East Anglia has seen the most significant improvement in take-up and occupational demand. “The nature of industrial occupiers means that they are extremely cost conscious and this is driving them to take advantage of the favourable terms on offer at the present time.”

Letting activity outperformed the long-run average for the Northampton industrial market with 692,706 sq ft of take-up completed in the first half of 2010, 22 per cent above the ten year average of 550,000 sq ft for a six month period.

Occupational demand has strengthened significantly in the first half of the year, with larger requirements boosting the overall level of demand in the Northampton and surrounding area to 7.4m sq ft. Requirements of 50,000 sq ft and above account for 95 per cent of the overall demand in the market, while the demand for smaller units has remained relatively stable.

[asset_ref id=”1007″] Richard Meering of CB Richard Ellis says: “There has been a slow but steady take up in the last six months with some seven million sq ft transacted across the whole of the Midlands, of that the vast majority has been in the East Midlands with some three to four million sq ft of space let or about to be let in the general Northamptonshire stretch of the M1 motorway alone.”

Recent deals include the letting of ProLogis’ DC372 warehouse at ProLogis Park Pineham in Northamptonshire to budget retailer 99p Stores. Letting agents were Burbage Realty and Readings Hope & Mann while Proteus Properties advised 99p Stores.

In fact, developer ProLogis has secured quite a number of deals in the region, including the letting of Brackmills DC1, a 490,000 sq ft warehouse, to building supplier Travis Perkins on a 17-year lease, which will run from 1st November 2010.

The deal was off-market and involved the surrender of the lease from the previous occupiers. The property was first marketed in 2002 through Lambert Smith Hampton at an asking rent of £2.3 million a year equating to £4.70 per sq ft. The transaction was completed on behalf of PEPR by ProLogis, manager of the PEPR portfolio. Chadwick McRae represented Travis Perkins.

In addition, ProLogis secured a letting to Oxford University Press at its ProLogis Park Kettering scheme. The Oxford University Press took a 402,153 sq ft warehouse which it will use for its UK distribution headquarters. Letting agents were Budworth Brown and Burbage Realty.

ProLogis has not secured all the deals in the region, although it certainly has been going through a purple patch. Other deals on existing properties include the letting of 240,000 sq ft at Rushden Link by PRUPIM to US fashion retailer Urban Outfitters. In addition, there was the letting of Fourteen: 45, CBRE Investors’ 245,612 sq ft warehouse at Warth Park, which was snapped up by GEM Distribution. North Rae Sanders and Cushman & Wakefield were letting agents.

The Big Swan in Swan Valley is also under offer. This 303,000 sq ft warehouse has been marketed for four years and has been on many an enquiry shortlist, even coming close to letting on several occasions. Now it is believed to be under offer to Pets At Home. The property is being marketed by North Rae Sanders and CB Richard Ellis at a rent of £5.75 per sq ft
Other smaller deals include fashion retailer White Stuff taking Unipart Group’s 90,729 sq ft Link 21 warehouse in Grove Park, Leicester on a ten-year sub-lease. The passing rent was £415,000 a year. DTZ advised Unipart while Andrew & Ashwell acted for White Stuff. [asset_ref id=”1008″]

In addition, SEGRO let 118,529 sq ft to manufacturer Camden Group at its Moulton Park scheme in Northampton. North Rae Sanders advised.

According to Bidwells, availability fell from the peak levels recorded at the end of 2009, to 2.2m sq ft on the back of a reduction in the amount of good quality second-hand space on the market. New built stock represents less than one quarter of all space on the market, standing at 502,000 sq ft at the end of June 2010.

Helen Longstaffe of DTZ says: “The significant amount of take-up in the region over the last six to nine months is the result of the competitive deals currently on offer from some landlords for existing grade A stock. There is now a comparative lack of good quality units along the M1 corridor and there are a number of units currently under offer in the region which will further exacerbate this situation, leaving design and build as the only viable option for many occupiers.”

Indeed two major retailers have sought to do just that. Tesco has secured an 800,000 sq ft D&B at ProLogis DIRFT II site and Marks & Spencer has opted for Clowes Development’s East Midlands Distribution Centre.

A spokesman for Marks & Spencer said: “I can confirm we have agreed a lease on a distribution centre in Castle Donington, subject to planning consent.”

A planning application has been submitted for a 950,000 sq ft rail-connected facility on Plot 2. The intention is to develop a distribution facility that will service the e-commerce retail division of the business both within the UK and overseas as well as the retail stores throughout the UK and Ireland.

The proposed building will hold all of the lines sold by M&S and as orders are received over the internet the ordered items will be selected and packaged for dispatch by third party courier companies. Essentially, this building will service all of the orders from around the globe that can be delivered by a single person. This makes this facility the first of its kind in the UK operated by a major high street retailer.

The rail link and proximity to East Midlands International Airport were key determining factors for M&S in identifying EMDC as its preferred site for this new development. The intention is to use rail to bring as large a proportion of goods to the site as possible. It is likely that the majority of UK sourced goods will be brought to the site by road. However, it is the intention to bring the majority of goods received from abroad to the site by rail from both deep sea ports, and via the Channel Tunnel link to continental Europe.

Proposals submitted include a main warehouse of 854,256 sq ft, with internal structural mezzanines totalling some 100,000 sq ft with a three-storey integral office building designed to provide a total of 52,827 sq ft of accommodation. This will be developed in two phases, the first phase providing 34,776 sq ft and the second phase extension comprising 18,051 sq ft. The building will be carbon neutral. 

Work to create a rail link to the site will begin in January 2011. Clowes Developments signed a deal with Network Rail in June 2010.

The rail connection will serve the new terminal allowing train access to serve a global market by way of the deep sea ports at Hull and Felixstowe, as well as linking up with the pan-European rail network, giving multi-modal transport options.

Paul Shanley, director of Clowes said: “Despite the recession and difficult economic times, we are investing in the future of this major distribution site. The rail works are due to commence in January 2011 with the connection becoming ‘live’ shortly thereafter.”

It is thought the works, with a value of some £10m, will include connecting the site from the existing Birmingham to Nottingham freight line, reinstating tracks, signals and points.
Joint Letting agents are Savills and Fisher Hargreaves Proctor. Marks & Spencer is advised by Cushman & Wakefield.

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On the availability front there are many sites offering space on a D&B basis. Developer Gazeley has quite a number, including G.Park Crick where the developer has started work on site for a £38m development of a 260,000 sq ft bespoke state-of-the-art facility for Butcher’s Pet Care.

Bruce Topley of Gazeley says: “There is space for up to 1.1 million sq ft on the residual 75 acres which could be in one building, although we will consider units from 100,000 sq ft on a D&B basis. We are quoting rents at £5.95 per sq ft but as ever, we are willing to negotiate on each individual deal.” CBRE and Dowley Turner are letting agents.

Meering says: “The beauty of Crick is that it can provide for a 1.1m sq ft building and there is nothing in the general area that competes with it on size or quality. There is land that can accommodate [buildings of that size]but you could almost consider it a different location as it is stretching the Midlands box just a bit.”
Nigel Dolan of Gazeley says there are 40 acres available for D&B at G.Park Newark. The site can deliver 750,000 sq ft. “The location is good value for money as land is cheaper along the A1 corridor.”

Letting agents Jones Lang LaSalle, Colliers and Fisher Hargreaves Proctor are quoting £4.50 per sq ft.

There is also up to 2.2 million sq ft of space available on a D&B basis at Magna Park Milton Keynes according to Alex Verbeek of Gazeley. Letting agents Burbage Realty, Jones Lang LaSalle and Savills are quoting rents of £6.50 per sq ft. In terms of interest there are three occupiers lined up, but panic not: there is still room.

Over in Bedford, Gazeley has sold 6.5 acres at £410,000 an acre to baker Lantmannen which will be building a manufacturing and distribution facility for its Unibake bakers business.

There is still 11.5 acres left which could accommodate up to 200,000 sq ft. Lantmannen was advised by Douglas Duff and Savills, while Brown & Lee acted for Gazeley.

Verbeek says Central Bedfordshire Council has granted planning permission for a 761,000 sq ft distribution centre at Gazeley’s G.Park Dunstable scheme at Boscombe Place close to the M1 motorway. The £90m scheme has been forward funded by Cardiff-based Julian Hodge Bank and Deutsche Hypo Bank. Savills and Colliers International are joint agents on the 32-acre site.

Verbeek adds that the building is most unusual in that to secure planning the rear yard had to be covered. This means that the cross-dock building benefits from a 50m deep covered yard which is column free, lit, ventilated, sprinklered with frost protection and more importantly it is free as the space is not included in the rent.

Other D&B sites include Goodman’s 115-acre Derby Commercial Park in Raynesway. Sean Bremner of Lambert Smith Hampton says: “Goodman’s Commercial Park has the ability to accommodate two million sq ft of development and has planning consent for a 1.2 million sq ft cross-dock warehouse.”

Then there is developer Gladman’s Vertical Point in Nottinghamshire. The scheme is located on the site of the former Bevercotes Colliery and has secured outline planning for up to 2.7 million sq ft of space.

Andrew Hartwright of Gladman says: “We believe the scale of this opportunity is unrivalled in the market as we can offer a single building of up to two million sq ft, an eaves height up to 30 metres and we can reach circa 80 per cent of the UK population within a four hour drive time.”

The total site extends over 200 acres. Developer Gladman can accommodate enquiries from 200,000 sq ft upwards. Letting agents are Lambert Smith Hampton and DTZ.

D&B unfortunately is not financially accessible to all occupiers. Jackson says: “Tenants looking to opt for D&B will not be able to get the terms they would have received if they had been able to secure existing buildings.”

There are still a number of existing good quality buildings in the region for immediate occupation. These include Gazeley’s Solar warehouse at its Magna Park development in Leicestershire. The building totals 275,534 sq ft and boasts a 15m eaves height and 50kN/sq m floor loading. It has 24 dock and two level access doors and is set on a 14-acre site. Joint letting agents are CBRE and Colliers International.

Miller Birch and Standard Life have the Langley 255 warehouse in Nottinghamshire, totalling 255,000 sq ft at @ccess 26, which is being marketed by North Rae Sanders, CBRE and Innes England.

And there is also Great Line Developments’ Crackerjack building in Corby. The 525,000 sq ft cross-docked warehouse has a 15m eaves height as well as 50 dock and four level access doors. It has capacity to store 77,000 pallets. The building has two service yards and parking for 98 lorries and 336 cars. Letting agents are CBRE and GVA Grimley.
Although second-hand, in addition to Solar at Magna Park there is also Hydro totalling 422,784 sq ft. It has 15m eaves, 36 dock level doors and a large secure yard up to 92m deep. It is being marketed by North Rae Sanders and CB Richard Ellis on a short or long-term basis. The property was originally let to TNT/Primark at a rent of £5.25 per sq ft.

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