3PLs are beginning to gripe about the fact that they cannot get decent quality warehouse space “for love nor money”.
Well that’s not strictly true. If you pay enough you will get the space you want and you’ll also have to sign up for at least 15 years for the privilege. It’s called bespoke and bespoke now means getting space where you want it not just how you want it.
The reason for this state of affairs is obvious; but it seems as if some tenants and potential tenants aren’t quite up to date with the economic facts of life.
Investors, who frequently know nothing about your business and how it works (and nor do they actually care) don’t feel like investing in anything risky and that includes building warehouses especially when you are demanding short term leases. DTZ’ Property Times research points out that difficulties in obtaining debt financing and uncertain economic outlook mean that pre-lets and build-to-suit will be the predominant method of securing prime space throughout the first half of 2012.
But there is an alternative: secondhand space – or pre-loved as they say in the US.
In its latest research BNP Paribas Real Estate notes that the total supply of logistics and industrial property in excess of 50,000 sq ft has risen from 147 to 149 million sq ft, due to an increase in the amount of second hand properties coming to the market.
Ranjit Gill, head of logistics agency adds: “What we are witnessing is a large amount of older and smaller stock (sub 100,000 sq ft) available in the mainstay logistics areas of the Midlands and the South East/London. However, there has increasingly been a polarisation in the market as the availability of brand new stock has dwindled to 22.9 million sq ft, a 15 per cent year on year reduction.”
Though tenants should note that now that there is a dearth of modern space, landlords are getting wised up and the deals that could be had on the better quality second hand space are rapidly hardening. There is no point trying to hang out for year on year rolling rents nor is it likely you’ll secure rents less than 50 per cent of the quoting rent but you will get three and five year leases and you will get other incentives. Obviously it depends on the property available but good quality properties in prime locations will not come cheap whether second hand or not.
Contributing Editor, Property