There is a groundswell of interest in rail served sites from the big high street names that want the insurance of a rail terminal onsite even if they have no immediate plan to use it. So what are the options? Lucy Tesseras tracks down the opportunities.
Finding new well-located large distribution units is becoming increasingly difficult – especially if you want rail connected sites. Parts supplier Euro Car Parts is now fully operational at its 265,000 sq ft distribution facility on Phase One of IM Properties’ Birch Coppice Business Park in Tamworth. The company took the property on a 15-year lease with a break at ten years at a rent in the region of £5.50 per sq ft.
The business park is located at Junction 10 of the M42 motorway and is connected to Birmingham Intermodal Freight Terminal which is owned and operated by Roadway Logistics.
Colliers CRE acted for Euro Car Parts, while Birmingham-based commercial property agent Eagleton & Co advised IM Properties.
Mike Eagleton of Eagleton & Co says: “This letting virtually exhausts the available supply of new, welllocated distribution units in this size bracket in the region. There is a definite ground swell of interest in rail-served sites from big named high street retailers. Our perception is that they do not necessarily need a direct rail link into their business space requirement but do want the
insurance of a rail freight terminal on the park.”
A point which Simon Lloyd of DTZ concurs. “Most people have the view that rail is beneficial to have but not critical to the scheme. I believe having distribution centres close to or adjacent to rail links is going to be the way forward as there is no evidence that people are willing to pay more. There are one or two developments with dedicated sidings, but it is very expensive. Instead, people prefer buildings with proximity to rail in terms of future proofing their business.”
Birch Coppice is also the preferred option for Ocado’s 350,000 sq ft centralised distribution facility planned on a 35-acre development plot. Final negotiations are now in hand between IM Properties and Ocado.
The site acquisition is expected to cost in the region of £16.5 million. Ocado raised £200 million in funds for the facility in its initial public offering in July. It is thought the money will also be used to pay down debt and increase capacity at its existing automated warehouse in Hatfield.
IM Properties is now set to develop Phase Two at Birch Coppice after receiving planning consent from North Warwickshire Borough Council for a 124-acre extension of rail-served B8 warehousing space in August.
Contractors are now on-site preparing design and build developments with up to one million sq ft due for completion in spring 2011. Sole marketing agent is Eagleton & Co.
Elsewhere, Tesco has secured an 800,000 sq ft D&B at ProLogis’ DIRFT II site and Marks & Spencer has agreed a lease on a rail-connected distribution facility at East Midlands Distribution Centre in Castle Donington near Nottingham. The 950,000 sq ft facility will be developed in a joint venture between First Industrial Developments and Clowes Developments and will include a dedicated rail link into the EMDC.
Clowes announced recently that it has placed a multimillion pound contract with Network Rail to provide rail connection at the 200-acre site which is close to Junction 24 of the M1 motorway.
The rail connection will serve a new rail freight terminal to be constructed at EMDC which will allow 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.
Paul Shanley, director of Clowes, says: “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.”
ProLogis is currently working on a number of railconnected projects across the country. However, Simon Jenkins says: “The fact that regional planning strategies have been removed means getting planning approved is becoming very difficult.” As developers of Radlett Aerodrome and Kent International Gateway have discovered, both of whom have been refused planning permission in the past few months.
Jenkins doesn’t believe the new government is any less supportive of rail freight. In fact, he says: “I don’t think the government’s stance on rail freight has changed – any correspondence has always been positive, but we still don’t have a national planning policy statement that pushes anything forward. We’re in a bit of a policy vacuum at the moment. And the localism agenda is
making things more difficult too.”