Many occupiers report that existing facilities are often not suitable for their needs, mainly due to their age and tenure. One factor reducing availability is that good industrial and employment sites are being taken up for other uses, notably residential, especially after some manufacturing closures. Also, an existing 37,200sq m plus 36,040sq m of new build may soon be taken out of the market if Quinn succeeds in its negotiations with the Welsh Development Agency (WDA) at the former LG site in Newport.
Cardiff is still the main driver of the Welsh economy, and this is reflected in the amount of development in the area. New build take-up continues unabated but tends to be concentrated in the 186-930sq m unit range mainly from owner-occupier and the Self-Invested Personal Pensions (SIPP’s) sectors. This demand has been underpinned by ongoing historically low interest rates.
Units in east Cardiff are now quoting £7 psf to let and £70 psf to purchase freehold. Admittedly, these figures are for smaller units as throughout the region, rental levels for second-hand stock remain on average below £3 psf. The result of this is that when such units become vacant there is little incentive for landlords to undertake refurbishment and they consequently remain un-let. Rents need to achieve £4.50psf to justify development, meaning the only area suitable for speculative development (without funding) remains the M4 corridor.
The new industrial schemes in Cardiff tend to be concentrated in the East along the foreshore from the Port of Cardiff to Wentloog and include South-Point Industrial Estate (now onto Phase III), JR Smarts’ 75-acre Capital Business Park and the new 36-acre HelioSlough International Railfreight terminal, the latter being a joint venture with the WDA and Cardiff (CCC).
The site adjoins the 25-acre Freightliner terminal at Wentloog, both being serviced by the Paddington-Swansea rail line. The scheme should provide up to 46,500sq m of distribution and warehousing space. Confidence in the area has also increased on the back of Aldi taking 28 acres off Capital Business Park for a 37,200sq m regional distribution centre and office headquarters.
Logistical enquiries have been constant throughout with a growing trend towards national mega distribution hubs – Wilkinson is taking 79,050sq m; Tesco 59,520sq m; and rumours of another large occupier at Loc8, Magor. The nearby 13,950sq m former Littlewoods warehouse at New House Farm Distribution Park, Chepstow was let to Constellation Europe.
Outside these mega hubs there is demand for larger warehouses with GVA Grimley involved in the disposal of a 16,554sq m facility at Corporation Road, Newport; the disposal of a 6,231sq m warehouse at Waterton, Bridgend and a 3,720sq m warehouse within the Port of Cardiff.
Improving the transport infrastructure throughout Wales has been a priority for the Welsh Assembly Government and WDA with schemes such as the new £55M Newport Southern Distributor really opening up the southern part of Newport. This has been quickly realised with increased demand for industrial / distribution land of which there is scarce supply.
The Heads of the Valleys has also seen improvements to the A465 and this has sustained demand for medium-sized units from Ebbw Vale through to Merthyr and Hirwaun. A further phase is also under way between Abergavenny and Gilwern. Market reaction to improved transport links is evidenced by Dixons acquiring a 2.8 hectare site at Hawtin Park, Blackwood to build a new ‘Mastercare’ depot to service South Wales.
The Assembly has announced an agreed route for the proposed M4 Relief Road that will link the M4’s J23 and J29. This will avoid the always-congested Brynglas tunnels and should open up areas in and around Llanwern Steel works where owners and investors are already land banking in anticipation of announcements as to where the intersections will be.
The downside is that the only way to finance the road, in the absence of government funding, will be through tolls. This may leave the existing part of the M4 toll free and with likely restrictions on public use, it is sure to be the subject of much discussion. Added to this is that EU Transport Ministers have purportedly agreed that all member states should be allowed to impose tolls on lorries weighing 3.5 tonnes or more on all roads. Revenues raised should be ploughed back into transport, including rail links but will not be obligatory. MEPs have still to approve the plan.
Moving further west, the approach to Swansea via Fabian Way has seen a dramatic change of scenery with the construction of SA1, a mainly residential led scheme led by the WDA with some high-spec office projects. Interest is now accumulating on further developments again on Fabian Way but closer to the M4 with the WDA inviting interest from developers on an 80-acre mixed-use scheme adjacent to car parts manufacturer Visteon. The Port of Swansea has also been busy spending £1.6M on a new distribution and warehouse facility for RKL Plywood.
The Welsh Industrial Partnership has tried to prime the market with speculative developments of 5,115sq m at Baglan Energy Park, a 2,232sq m Medi Centre at Llantrisant as well as two “Omega” units of 2,325sq m and 4,650sq m at Pontypool.
The Port of Newport invested in new facilities – warehouses and plant and machinery – for clients such as Saint-Gobain, Sims Group, Corus and WE Dowds.
With the new Southern Distributor road at its front door it will move from strength to strength. With all the development and road improvements, it should at last live up to its billing as the gateway to Wales.
Owen Young is an associate at GVA Grimley’s Cardiff office.
Tel: 02920 248904.