The East Midlands dominated letting activity last year, accounting for the largest share of floor space taken up in the first nine months, but what’s in store for 2011? Liza Helps reports.
In the Midlands supply peaked at 24.7 million sq ft by the end of the final quarter of 2009 – a 28 per cent increase from 15.4 million sq ft in 2008 – as a result of a hardening economy forcing many businesses into administration or to downsize.
However, since then the picture has changed somewhat. According to Richard Meering of CBRE in the first quarter of 2010 alone the demand for industrial and logistics property in the Midlands outstripped all other regions. “Take-up during the quarter was more than 2.25 million sq ft – 51 per cent of total take-up of industrial and logistics property in the UK.”
In fact, it was the East Midlands, which saw the majority of the action with Oxford University Press’ 402,000 sq ft letting at Zone C, ProLogis Park, in Kettering; and 99p Stores’ 373,000 sq ft letting at ProLogis Park in Northampton. Letting agents for ProLogis’ DC372 unit were Burbage Realty and Readings Hope & Mann while Proteus Properties advised 99p Stores.
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.
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.
In addition, SEGRO let 118,529 sq ft to manufacturer Camden Group at its Moulton Park scheme in Northampton. North Rae Sanders advised.
Throughout the year the East Midlands dominated letting activity in the country. Anna Behan of King Sturge noted that regionally, the East Midlands accounted for the largest share of floor space taken-up in the first nine months of 2010, at 28 per cent of the total.
Research by DTZ noted that in comparison with 2009 volumes, take-up almost tripled in the East Midlands alone. Not surprisingly the region also recorded the largest reduction in available floor space during the first half of 2010, as a number of big shed transactions created a notable dent in the overhang of supply.
Helen Longstaffe of DTZ says take up in the East Midlands increased by 166 per cent in the third quarter of 2010, despite the fact that take-up decreased overall across the country in that quarter. “Although overall take-up was down in the last quarter, take-up in the East Midlands increased reaffirming the region’s strategic importance as a location for occupiers.”
Indeed a number of warehouses that have been on the market for some time have now been, or are shortly due to be let; the most predominant being the letting of The Big Swan to Pets @ Home. The pet retailer has taken the 330,000 sq ft warehouse at a rent considerably below the £5.75 per sq ft quoting rent.
The property boasts a 12m eaves height and 36 dock and two level access doors, as well as a 50kN/sq m floor loading, and was being marketed by North Rae Sanders and CB Richard Ellis. It benefits from two secure yards with a minimum 50m depth and has a gatehouse and 1,900 sq ft transport office. There is room for 45 HGVs, as well as 233 car parking spaces.
Another property which has been on the market for a while was finally occupied by AT Logistics. Max Park in Corby has been on the market since 2006 when it was acquired by Kaycee Estates through Perland Properties. The facility totals 212,000 sq ft and is one of two warehouses on the site. It has 16 dock and two level access doors, as well as an eaves height of 12m. It was marketed through GVA and Burbage Realty with a quoting rent of £4.50 per sq ft.
Other deals include US fashion retailer Urban Outfitters taking PRUPIM’s 240,000 sq ft Rushden Link development in Northampton, on a ten-year lease at a rent believed to be in the region of £3.50 per sq ft, considerably less than the £4.75 per sq ft rent quoted. DTZ advised Urban Outfitters, Jones Lang LaSalle and Burbage Realty advised PRUPIM.
Gem Distribution has secured CBRE Investors’ 245,612 sq ft Fourteen:45 warehouse at Warth Park. The facility boasts minimum clear internal height of 11.5m (to underside of haunch) in the warehouse area, 23 dock and four level access loading doors, as well as a 50kN/sq m floor loading. It was marketed by Cushman & Wakefield and North Rae Sanders.
Andrew Jackson of North Rae Sanders says: “Available space has reduced sharply over the last few months.”
Looking at standing stock, what is left makes poor reading for occupiers looking for modern big box space. Robert Rae of North Rae Sanders says “Take up this year has seen ten deals go through roughly totalling 4.4 million sq ft. There is some 3.8 million sq ft available in ten units, of which three are under offer leaving 2.8 million sq ft in prime units above 250,000 sq ft. Things are getting a bit tight.”
Helen Longstaffe of DTZ agrees: “If you are looking at large buildings there is limited availability.”
She cites The Core at Langham Park Distribution Park in Chesterfield totalling 167,000 sq ft. The warehouse, owned by investment fund Royal Liver and developer Langham Park Developments, is the first phase of a 14-acre project. It has 15 dock and two level access doors, as well as a 12m eaves height, 50kN/sq m floor loading and hard standing stretching to 62m in depth. Fisher Hargreaves Proctor and CBRE are working with Lambert Smith Hampton as joint agents on the scheme.
There is also Miller Birch & Standard Life’s Langley 255 warehouse totalling 255,000 sq ft at @ccess 26, which is being marketed by North Rae Sanders, CBRE and Innes England.
The warehouse boasts 12m eaves, 20 dock and four level access doors, fitted offices with comfort cooling and raised floors, as well as 68 lorry parking bays and 163 car parking spaces.
Gazeley still has Magna Park Solar available. 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 Burbage Realty.
Looking at second-hand warehouses brings a few more to the fray including the Crackerjack warehouse in Corby totalling 528,108 sq ft. The cross dock facility has 50 dock levellers and four level access doors as well as a 15m eaves height. It is being marketed by GVA and CBRE.
There is also the 422,784 sq ft Hydro unit at Magna Park in Lutterworth. The building has 15m eaves as well as 36 dock level doors and a large secure yard up to 92m deep. It is an eco-friendly building with reduced running costs, one of the first in the country to incorporate Gazeley’s Eco Template in 2005. 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.
Then there is Celestia, Frontier Lands and Palmer Capital Partners’ 318,526 sq ft warehouse at Snelshall West to the south west of Milton Keynes which is being marketed by Bidwells and DTZ.
The building boasts 24 dock and two level access doors, a 12 m eaves height, as well as parking for 200 cars and 39 lorries all on a 14-acre self-contained site. It has a five per cent office content, fully-fitted office accommodation and a 56m yard depth. It is also rumoured to be under offer.
With such a lack of available space Rae says a number of occupiers have re-geared their leases. These include Ingram Micro at Daventry, Geodis at Magna Park and Europa Worldwide Logistics in Northampton. “Companies that have been looking to move have re-geared to take advantage of the market.”
Not all companies looking for space in the region already have a foothold, and many that could not find exactly what they wanted have opted for build to suit. These include Butcher’s Pet Care’s 300,000 sq ft warehouse at Gazeley’s G.Park Crick, Tesco’s 825,000 sq ft at ProLogis’ DIRFT site in Daventry and M&S taking 814,000 sq ft at Clowes Development’s East Midlands Distribution Centre.
Recently, ProLogis signed a build to suit agreement with BMW for a new 457,546 sq ft warehouse at ProLogis Park Pineham in Northampton. The development of the multi-million pound depot will create an estimated 200 jobs in the town. The new warehouse will be BMW’s regional distribution centre for parts made for all its cars.
There are a number of other occupiers looking for space in the region which can only be satisfied with build to suit. Most notably, Amazon is in the market for a one million sq ft facility. Several sites are rumoured to have been considered and these include Gazeley’s 95-acre G.Park Crick scheme where the developer has secured panning for up to 1.1 million sq ft in a single building. Nigel Dolan of Gazeley says: “The building will be designed as a cross dock on a build to suit basis only with rents at £5.95 per sq ft and as ever we are open to negotiation on each individual deal.” Letting agents are CBRE and Dowley Turner.
Other sites include Gazeley’s Magna Park Milton Keynes where there is up to 2.2 million sq ft of space available on a D&B basis, 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 addition, there is land at Goodman’s 100-acre Derby Commercial Park, where the developer has permission for a 1.2m sq ft unit. Letting agents are North Rae Sanders, CBRE and Innes England.
Another site which could take such a large facility is Gladman’s Vertical Park on the site of the former Bevercotes colliery, near Nottingham. The developer has secured outline planning for up to 2.7 million sq ft of space with outline consent for a single facility of 2 million sq ft with a 30m eaves height.
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.
The site also benefits from an historic rail freight link from the site to the Midlands Main Line, which could be reintroduced via a W8 gauge link.
With so much going on there is cautious optimism among agents that the East Midlands could be a strong contender for the return of speculative development in 2011. Indeed Tim Johnson of King Sturge in his predictions for 2011 says there may “possibly [be]a very limited number of ‘big box’ units in the Midlands/Golden Triangle area.”
Helen Longstaffe agrees: “There could easily be speculative development in the more prime M1 motorway/Northamptonshire/Lutterworth area.”
A lot of developers are gearing up to acquire land in the region. And some have already secured it. Grafton Gate has a joint venture agreement with Harworth Estates on a 70-acre site near Ellistown in Leicestershire where there is a resolution to grant planning for up to 570,000 sq ft in two phases subject to a Section 106 agreement.
While developer ProLogis is set to exercise its option on a 60-acre site in Eastwood, Nottinghamshire from Eden Park developments. The site could accommodate up to 800,000 sq ft of distribution space. Letting agents for ProLogis Park Eastwood are North Rae Sanders, Dove Haigh Philips and Fisher Hargreaves Proctor.
Evander has secured an 18 acre site known as Grange Park in Northampton from Shepherd Developments at Junction 15 of the M1 motorway which it will bring forward in conjunction with BA Pension Fund. The site could accommodate up to 360,000 sq ft. Letting agents are Dowley Turner and Butler Hardcastle.
And Roxhill Developments is pushing ahead to secure planning on the former Gefco site in Corby with joint venture partner Legal & General. The site could accommodate up to 850,000 sq ft of rail-connected warehousing space. The developer also has a site at Warth Park which could take a further 900,000 sq ft.