A huge demand for distribution warehousing is transforming the sector in the North and North East. While many will agree the past few years have seen a distinct move away from the Midlands to areas such as Doncaster in South Yorkshire, Allan Sandison of DTZ Debenham Tie Leung, says people are looking further north.
“The perception seems to be that larger enquiries will push further northwards as changing distribution patterns evolve. We have seen a number of distribution depots established recently in the North East including Argos, which has a 65,000 sq m (700,000 sq ft) unit at Faverdale Darlington and George at Asda, which built a 35,300 sq m (380,000 sq ft) warehouse at Washington.
“It is also now rumoured that Lidl is to acquire a site at Aycliffe to develop a distribution depot and there are other similar enquiries that have been identified in the market.”
This has spurred developers to look more closely at this area and even to build speculatively. Evans of Leeds are proposing units of 6,967 sq m (75,000 sq ft) and 9,290 sq m (100,000 sq ft) at its Follingsby Park scheme in Gateshead, in addition to a range of units from 371 sq m (4,000 sq ft) to 1,858 sq m (20,000 sq ft) now under construction. HeliosSlough has secured planning permission for units of 2,7870 sq m (300,000 sq ft) and 37,161 sq m (400,000 sq ft) at Wynyard while Gladman Developments is pursuing planning consent for three of 6,782 sq m (73,000 sq ft), 15,886 sq m (171,000 sq ft) and 26,291 sq m (283,000 sq ft) on the Drum Industrial Estate, Birtley.
As a result, land prices have risen, says Mr Sandison, to £370,650 per ha (£150,000 per acre) in good locations while nearly £494,200 per ha (£200,000 per acre) is being quoted for a site in Washington. He adds: “Prime locations in Team Valley would probably exceed in excess of this if a good site became available.”
There also continues to be an overwhelming demand for new and good second hand freehold properties of all sizes. Capital values for new units have now reached £645.90 per sq m (£60 per sq ft) for say 465 sq m (5,000 sq ft) to 1,858 sq m (20,000 sq ft) buildings and even for second hand buildings figures have now reached about £485 per sq m.
Rent levels are now generally circa £53.83 per sq m (£5 per sq ft) in good locations, figures in excess of this having been achieved in some instances. For the larger units referred to of 9,290 sq m (100,000 sq ft) plus rents tend to be in the order of £43 per sq m (£4 per sq ft) for buildings outside of the Enterprise Zone.
There is land due to come on stream according to Mark Proudlock of Knight Frank. He says “Confidence in the South Tyne area’s ability to appeal to logistics operators and attract inward investment is indicated by a joint initiative by the district councils of South Tyneside, Gateshead, Sunderland and regional development agency One NorthEast to promote a large new strategic employment site in the area.
“Following a study by external consultants it is proposed that this site will be located in Hebburn close to the A1804, A194 and A19. The release of this 71ha (175 acre) site from Green Belt status is seen as a major opportunity for new economic development.”
Looking further south areas such as Sheffield and Doncaster continue to do well says Guy Gilfan of Lambert Smith Hampton with the likes of Polestar taking a 58,898.6 sq m (634,000 sq ft) in Gazeley’s G Park in Sheffield at £51.13 per sq m (£4.75 per sq ft); followed by Tesco taking Gladman Development’s 46,450 sq m (500,000 sq ft) Barlborough Links scheme.
There is much development and activity in these areas. Gazeley’s G Park is offering 25,268.8 sq m (272,000 sq ft) and a 14,213.7 sq m (153,000 sq ft unit). St Paul Developments at Brookfields Park Scheme at Rotherham comprises some 34.4 ha (85 acres) where Garnet Dickinson have recently acquired 11,148 sq m (120,000 sq ft) and the developer is now speculatively building a unit of 16,350.4 sq m (176,000 sq ft) with a potential up to 148,640 sq m (1.6m sq ft) of distribution and warehousing space.
An application has also been submitted for 27,870 sq m (300,000 sq ft) of space at the 32.38 ha (80 acre) Sheffield International Railfreight Terminal (SIRFT), where HelioSlough and rail operator partner EWS, have already started infrastructure works including a rail link to the East Coast.