The supply of Grade A space has been falling but home delivery growth is opening the way for new investment, reports Liza Helps.
Headline deals with Harvey’s Furniture, Yankee Candles and most recently Culina, involving upwards of 500,000 sq ft of industrial space, has left the South West seriously short of big sheds according to Tim Davies of Colliers International. “In fact,” says Robert Cleeves of Savills, “if an occupier were to seek upwards of 300,000 sq ft in and around Bristol, there are only four buildings to choose and only one of those is of institutional stock, the rest are second hand.”
It’s not just the larger warehouses that are in short supply, according to the latest report from BNP Paribas Real Estate nearly two million sq ft of logistics properties of more than 50,000 sq ft in size, were secured in the South West in 2012 – the largest figure since 2008.
However, overall take-up across the UK has in fact fallen. Davies notes: “The main factor behind this fall in take-up has been the lack of suitable product in the right location for businesses. Potential occupiers seeking top quality, modern warehouses are having to sign up to design and build schemes to guarantee a property that will meet their requirements. This has created pockets across the West Country where the shortage of space is particularly marked.
“The lack of speculative development in the last few years has created pent up demand for quality commercial property both generally and in particular pockets around the West Country such as the Yeovil-Bournemouth-Poole area.”
In Wales a lack of Grade A space has meant a massive drop in take-up in 2012 – down nearly 50 per cent. However, Chris Sutton of Jones Lang LaSalle notes: “There is a renewed interest in bespoke urban logistics units reflecting the growth of internet commerce.
“The growth in demand for local delivery units will allow South Wales to compete for new investment in the B8 sector. Whereas Avonmouth had previously dominated the big shed ‘regional distribution centre’ market for the South West and Wales, the growth in urban logistics has seen relocations from Smiths News, DHL, City Link and UPS; the latter acquired the 44,785 sq ft former Maskreys warehouse in Wentloog. Increased demand for cross docked units of 30-50,000 sq ft with good access and capacity for 24/7 working access should prompt the Welsh Government to plan a bespoke distribution park in South East Wales.”
That is not to say that there has been a dearth of deals being done. Russell Crofts of Knight Frank notes: “There has been some keen movement in the chilled and frozen sector around Avonmouth, which until recently has been stalling as there was little in the way of supply, however with Asda committed to its Portside development it looks to have unlocked the rest.”
Asda has started work on its £70 million 616,000 sq ft RDC at the former Rhodia site in Avonmouth. Once completed the supermarket retailer will vacate its 200,000 sq ft chilled and frozen facility in Portside. Not to be outdone Culina has just taken 212,000 sq ft at GE Capital’s massive 549,626 sq ft Crossflow 550 facility on a ten-year lease at a rent in the region of £5.75 per sq ft. It is vacating its 115,000 sq ft chilled store adjacent, which it leased from ProLogis in 2009. Once vacated this unit will be let to Arla Foods.
Looking at the market overall, Jeremy Hughes of BNP Paribas Real Estate, says: “As occupiers realise that there is a restricted amount of new stock coming onto the market, the demand for better quality second hand stock continues to increase, causing supply to fall further.”
“The occupational figures suggest that it may be the right time for new, larger, speculative developments, due to the lack of current supply. However, from an economical point of view, those who acquired land at post-crash prices may find it hard to make speculative developments feasible,” added Hughes.
However, there is a lot of land. Crofts reckons: “There is over 1,000 acres of consented land in the region probably enough for upwards of five million sq ft.” However, he is quick to point out that demand is equally high: “We still have over four million sq ft of demand in the region.”
Swindon which is also suffering from tight supply according to Simon Lloyd of DTZ has the remainder of G.Park Swindon which can accommodate bespoke buildings up to 435,000 sq ft. Other sites in Swindon include Graftongate and ING’s 30 acre Ecco scheme which could accommodate 400,000 sq ft of space.
In Bristol and especially round Avonmouth there are a plethora of sites, the most advanced being Severnside Distribution and Roxhill’s 640 acre Centre Park which is being marketed by Knight Frank and GVA. Two phases are being brought forward and have already secured master planning meaning that as soon as a deal is secured development can take place immediately. A 3km road is in place as well as other services. The scheme could take up to 1.3 million sq ft in a single unit and the first phases have planning for a total of 4.4 million sq ft. The whole site could accommodate up to 10 million sq ft in total.
Developer Bericote has launched a 62 acre scheme in Bristol to be known as Bericote Portside. The ex-Rhodia site, which closed in 2006 and has since been demolished, could take up to 1.1 million sq ft.
St Modwen has a number of sites in the region including the remaining 32 acres at its Access 18 scheme, which is being marketed by Alder King and Knight Frank. The scheme could take up to 550,000 sq ft in total with a single unit of up to 480,000 sq ft. There are still two plots at Gazeley’s G.Park Bristol.