Regeneration generating demand

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According to GVA Grimley the Midlands industrial / distribution market is seeing continued growth, with units of 18,600sq m plus being built. This activity is pushing another wave of speculative development. There has also been more activity for buildings circa 93,000sq m leading to a shortage of supply of units of this size. Demand for development land remains strong with competitive bidding among developers.

Labour availability is continuing to be an issue with occupiers and there is a move among some to look at more traditionally off pitch locations such as the Black Country and Stoke-on-Trent.

However for some requirements, location is still very much the driver which has led to the continued success of the traditional distribution heartland of the golden triangle. Despite rumours, there have been a number of land transactions in the past 12 months including:

Prologis Developments buying 114 acres at Prime Point, J14 Stafford.

Sladen Estates acquiring eight acres at Radial Park, Stoke-on-Trent and is looking to build out a unit of 165,540sq m.

Eden Park Developments acquiring 11 acres at Burton-Upon-Trent from Littlewoods where it is looking to build out one unit of 195,300sq m.

Wrenbridge Land acquiring ten acres at Ravensbank Business Park and has built out two speculative units; one of 5,301sq m and one of 8,510sq m.

Tesco signing a pre-let deal for a 69,750sq m distribution unit at Daventry International Rail Freight Terminal.

Demand for land

Bidding battles have broken out among developers looking for Midlands sites on which to build new industrial parks and distribution centres, according to property experts. New research conducted by GVA Grimley indicates that serious competitive bidding is now taking place between developers as demand for land remains strong. David Willmer, GVA Grimley’s Birmingham-based industrial partner, says: “There has been a real desire among developers to acquire land across the Midlands, with a lot of competitive bidding taking place. It has been driven by a continuing need for large distribution units of 18,600sq m and above, and rising demand for smaller units of about 93,000sq m – in fact there’s now growing shortage of property in the latter”. He continues: “There have been a number of major transactions of late, and that has led other landowners to look seriously at selling off some of their assets.”

Among major purchases in the region have been Coltham Developments’ acquisition of 5.2 hectares at Bilston from Advantage West Midlands, and subsequent sales to Threadneedle; and Eden Park Developments’ purchase of 4.5 hectares in Burton-on-Trent from Littlewoods, on which to build a 19,530sq m warehouse.

Willmer predicts that average rental growths within the West Midlands would rise sharply over the next few years, from an estimated 0.4% for this year to 2.1% by 2008 – a five fold increase.

Eleanor Deady, property partner at leading law firm Cobbetts, comments: “No-one can doubt that the transformation taking place in the Midlands region is a consequence of the major regeneration of the area. The transformation extends beyond Birmingham City Centre as we are now witnessing significant commitment to areas such as Walsall, Dudley, West Bromwich, Smethwick and Hill Top.”

She says that “the construction sector can only benefit from such regeneration with the creation of new sites providing new jobs and the development of new areas will undoubtedly attract more businesses to the area.

The promise of new investment, new jobs and new facilities is to be welcomed by all and undoubtedly progress is enhanced by a true partnering approach between the public and private sectors to bring about these changes.” Deady says that The West Midlands Development Agency, English Partnerships, the local authorities and the URCs can all be seen to be collaborating effectively with the private sector to achieve ambitious renewal plans on a massive scale.

She explains: “In Walsall we see the commitment of the URC and the council to bring about significant change as evidenced already by Urban Splash’s innovative mixed-use scheme at Walsall Waterfront, and the proposal for the relocation and re-provision of a new College of Art and Technology, the College’s existing grounds then providing the site for a new Tesco superstore. Similarly in West Bromwich Tesco is spearheading the regeneration, which led to a £100M revamp of the town centre.

“There is, however, much more to regeneration than bricks and mortar, in its widest sense it is about the larger policies on immigration, economics and support for the community.”

Further to Walsall’s regeneration, Rob Blyth, chief executive of Horton’s Estate comments: “Walsall has a population of 250,000 offering a large mainly untapped labour pool on the doorstep. Distribution companies which are located in isolated spots face the additional costs associated with having to bring staff in from outside.” When TX Maxx decided to build its 25,110sq m distribution centre in Walsall one of the reasons it gave for the decision was the need to find 900 shift workers. This investment was a major coup for the town, and helped to put it on the map as a distribution location. Hortons would dispute any claims of saturation in the area as they are currently looking to expand its Anchorbrook site by creating a further 6,510sq m of industrial units.

The regeneration of on of the biggest brownfield development sites in the West Midlands will put Birmingham firmly on the map in its offering to the UK logistics market. A £150M scheme at The Hub, located in Aston, Birmingham, will provide scope for logistics distribution and production companies as well office development, to be based right near the city centre and have bespoke high bay units built on the 80 acre site.

Mike Loftus, head of Birmingham city council’s inward investment service, is working with developers on the scheme and says: “Being in a central location with quick access to major population centres in the UK makes Birmingham a natural base for distribution and sales service functions. There are no other sites in the region offering the flexibility and scope to cater for large scale requirements, and currently companies have to look further afield to meet their specification in the 3,720sq m and above bracket. The hub will go a long way to redressing the balance and meeting the growing demand for larger buildings.”

With the accepted bid for the new P&O deep water port on the former Shell Haven oil refinery, property developers around the UK are gearing up to respond to the need for inland rail heads. P&O has publicly stated that the London Gateway terminal will represent 50% increase in deep sea container freight and will relieve ports such as Southampton and Felixstowe which are nearing capacity.

In the Midlands at Birch Coppice Business Park close to J10 of the M42 north east of Birmingham, IM Properties is around 50% through the development of the 35-acre Birmingham Intermodal Freight Terminal (BIFT). Due for completion in spring next year, the site will be operated by Roadways Container Logistics. Graeme Clarke, managing director of Roadways, comments: “The whole Midlands area is one of the fastest growing distribution regions in the country serving imports from all over the world and this development will provide the infrastructure vital to support this area’s continued success in the coming years.”

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