Gazeley Development’s ongoing purchase of 48 acres at Redrow’s Western Approach Scheme in Avonmouth represents a significant watershed. Current market rumour suggests that the major UK distribution developer may progress with an initial 32,550sq m speculative unit to underline its belief in the location, and as a reflection of its UK demand experience.
Such a development mirrors developer commitments in the Midlands, South-east, and East coast locations but is a first for this region – previous speculative buildings have never exceeded 9,300sq m. We believe the time is right however, and this has been reinforced by a recent purchase of 26 acres by Dixon Stores Group for a 34,410sq m crossdock unit in Avonmouth; a vindication of the location in a national context. Bristol has now become established as an important point in comprehensive networks for Asda, Sainsbury, Focus, Co-op, MFI and Scottish and Newcastle (pictured).
The principal distribution development in Avonmouth, Burford’s 452 acre Cabot Park, has even bigger plans afoot with the promotion of Hypersite – a 93,000sq m single footprint unit close to J18 of the M5. With pressure on land values and controls eastwards along the M4 this opportunity offers significant cost benefits to retailers, manufacturers and third-party logistics providers (3PLs).
The project combines a package of road, rail and sea connection, an established labour force, and 24-hour working. Recent client searches with M25 focused supply have had to look as far as Bristol to achieve such large footprint buildings at economic cost levels.
Against a total annual take-up in the Greater Bristol area of 264,120sq m, big shed options over 26,040sq m appear a risk, but our regional population is expanding and all agree that legislation such as the Working Time Directive (WTD) will squeeze central, north and east national distribution centres’ (NDCs) potential to fulfil the supply chain in this region. A recent acquisition of 26,040sq m at Yate, north Bristol, by Morrisons is a clear example of such, and perhaps a pre-cursor to a larger acquisition in due course.
In the wider geographical area, the expectation of such network demand has led to considerable groundwork on the part of developers.
Gloucester in particular has six big shed opportunities – 13,950sq m-plus – under promotion and we have seen several client logistic strategies that identify the location as meeting NDC criteria given excellent communication to the Midlands and South-east (via the A419). As an example, Merloni Hotpoint has recently secured 16,740sq m on the Howard Tenens Sharpness Distribution Centre Development at J14 of the M5. The developer has a further 22,320sq m consent available in line with the above demand profile.
Swindon has crucified its critics with resurgence in the town’s distribution market. Honda has committed to purchase 32,550sq m from ProLogis at South Marston Park (A419) and such confidence may lead to the construction of a further speculative 27,900sq m phase.
Concerns always lay in labour availability but the decline of the technology and manufacturing base, and sheer growth of the sub region has improved the position significantly. Once again, Gazeley is in at the start of the trend with the purchase of 100 acres at the Swindon Triangle site (A419).
A quiet revolution is also taking place in locations south of Bristol. Bridgwater – J23 of the M5 – will see an outstanding take-up level for the past five-year period as Gerber Foods concludes construction of its 65,100sq m facility. Clarks has been developing a bespoke 93,000sq m unit at Street, Somerset, and notable 18,600sq m-plus development opportunities are appearing at Wellington, (J26, M5), Tiverton (J27), and Exeter (J29). Take up here will be a true measure of the WTD’s impact.
Rental levels and land prices are rising with £5 psf – £6.50 psf, and £250,000 – £400,000 per acre the general tone. Perhaps a low cost base against South-east values, but a significant growth in a short period.
For such a large geographical region, existing 24 hour use and big footprint distribution, opportunities are actually relatively limited in number. Bristol for example has no current availability over 8,000sq m in a single building. Only Bridgwater and Swindon have standing buildings over 13,950sq m.
For the South-west market, 2005/2006 will be an interesting period. We wait to see if the logistics sector can stretch existing supply chains by adhoc ‘park and sleep’ facilities or whether the commercial reality is that the South-west needs a permanent network base to fulfil clients’ contract demands against legislative changes. It is clear that the supply chain, particularly for retailers, is one of the main differentiators between companies, and offers the potential for competitor advantage. Treat the South-west with complacency at your peril.
Paul Hobbs is a partner at GVA Grimley LLP, National Industrial Team (South-west and Wales).
Tel: 0117 988 5220.[