Up and down the M1/A1 corridors there has been a startling increase in developer and investor activity that can only be to the long-term benefit of potential occupiers, as it has resulted in the start of a speculative building boom.
However, the boom has been triggered by a shift in land prices and rent hikes. Roger Haworth of NAI Fuller Peiser pinpoints the beginning of the rush with the sale of Shepborough’s newly built 123,000 sq ft warehouse, which was on the market at £55 per sq ft – “an occupiers’ price”.
In December 2005, Axa offered £53 per sq ft for the untenanted building but at the last minute it was gazumped by IM Properties who came in at the asking price and secured the deal within the week.
“By April we had evidence of another four funds in the market for empty warehouse buildings and land prices had shifted considerably too. In December prices were around £250,0000 – £275,000 an acre; four months later a 10-acre plot at Thorne, just off Junction 6 of the M18, went to best bids off a quoting price of £250,000 an acre. The lucky bid was more like £350,000 an acre – the market is through the ceiling.”
Adding fuel to the smouldering fire came the news that HelioSlough had secured a rent of £4.75 per sq ft for the final unit at its Traxpark development in Doncaster.
The 120,979 sq ft warehouse, with self-contained service yard, was let to national electrical retailer Miller Brothers on a 15-year lease. Miller Brothers went bust and the unit is back on the market at a quoting rent of £4.75 per sq ft.
Appraisals at this rent coupled with strong investor interest meant it suddenly made sense for developers with the result that schemes, which had been on standby, could now go ahead.
Dave Robinson of DTZ Debenham Tie Leung says he is aware of nearly five million sq ft of speculative distribution space that is currently built, under construction or due to start imminently. These include seven schemes with buildings over 300,000 sq ft: Gladman Developments Cosmic Park in Sherburn-in-Elmet; Gazeley’s G.Park developments in Worksop and Sheffield; Catesby’s 120 acre Firstpoint scheme; HelioSlough’s Nimbus Park; ProLogis’ Crossflow 525 in Barnsley; and Walker Haulage’s 305,000 sq ft development in Haworth.
“The building at Firstpoint has been funded by Standard Life and is rumoured to be appraised off land values of £325,000 per acre and £4.75 per sq ft.
“These figures are greater than transactions concluded to date for this size development in this part of the world and seem to indicate an increase in both land and rental values.”
The Catesby Property Group, which is developing the site, has submitted a planning application and started enabling works for the construction of the 415,000 sq ft distribution complex and a detailed application for two additional units totalling 550,000 sq ft of distribution space is to be submitted shortly.
This bullishness is reflected in the quoting rent – a whopping £4.95 per sq ft.
Catesby’s Gareth Williams says: “We have confidence in the increasing demand from logistics companies which is being created by the growing significance of the region’s ports.”
Haworth agrees and says ProLogis’ decision to develop speculatively its 525,000 sq ft unit at Houghton Main in Sheffield owed a lot to its proximity to the ports.
The warehouse is planned for the 14.5ha (36 acre) site, which the developer bought from UK Coal in October last year for £4.3 million. It is due to complete in September.
Joint agents CB Richard Ellis and NAI Fuller Peiser are quoting £43 per sq m (£3.95 per sq ft). The building will boast 81 dock levellers, four level access doors, a 50kn/sq m floor loading and 15m eaves height.
Port proximity certainly seems to be attracting the occupiers. Stephen Tonkin of CB Richard Ellis says: “The logistics business is coming into Yorkshire big time and a significant amount of this business is due to increased use of the East Coast ports at Grimsby, Hull and Immingham.”
Robinson adds: “Levels of imports into the UK are on the increase and as this increases more pressure is placed on all of the nation’s ports. Yorkshire is well placed to benefit from the east coast ports, which have all seen big increases in traffic recently but are not yet running at capacity. This is particularly prevalent because of the high congestion being experienced elsewhere in the UK.”
Recent transactions in the area include Ilva, a Danish rival to Ikea, which is opening a 60,385 sq m (650,000 sq ft) head office and warehouse depot to support its 20-store expansion in the UK.
Ilva has taken SladenAston’s Beast and Whopper combination at Wheatley Hall Park in Doncaster, along with another base in Hull, totalling 380,000 sq ft.
Whopper was the first phase of SladenAston Developments’ refurbished warehouse scheme and totalled 23,225 sq m (250,000 sq ft). The second phase of the scheme totalling 37,160 sq m (400,000 sq ft), is known as Beast. The buildings have 5.5m eaves and 24 hour access. Joint agents Gent Visick, M3 and Knight Frank were quoting £3.50 per sq ft.
An Ilva spokesman said: “The new warehouse in Doncaster is an integral entry into the UK market and will form the backbone of our trucking operation for delivery of bulk, flat pack and accessory items imported from Denmark to the Ilva stores for home delivery.”
However, it is not just this section of the A1/M1 that has been proving popular for speculative development. Looking at the area between Nottingham and Derby, Sean Bremner of Lambert Smith Hampton says: “The limited number of quality sites coming onto the market has restricted opportunities, but allowed those with banked land to succeed with speculative development in a strong freehold market.”
Noteworthy deals include a ten-unit scheme at Langham Park, where 90 per cent is sold and let. Here small units ranging from 4,000 to 10,000 sq ft achieve rents of £5.35 per sq ft and values of £70 per sq ft.
On Willow Farm, Expeditors International (UK) has taken 22,000 sq ft of industrial space on a ten-year lease at £124,300 pa, or £5.65 per sq ft.
At Junction 26, Wilson Bowden has secured its first major occupier at Blenheim Park with The Health Store signing leasehold terms upon 79,000 sq ft.
Sladen Estate’s lease of 175,000 sq ft at Point 28, South Normanton to Clearway at £4.75 per sq ft also puts it into the top ten list of key transactions over 100,000 sq ft. Nearby, Sladen has also sold 30,000 sq ft at The Nursery.
Sean adds: “Nottingham is continuing to put itself on the map as a key distribution centre, competing with destinations in the south east. At £300,000 per acre, it is up there with Leicester and starting to compete with the likes of Northampton.
“This is due to the fact that Nottingham and Derby can meet occupational needs and labour requirements and is still competitive in terms of the cost.”
Derby is set to see major development sites such as Rosemound Development’s purchase of more than 180 acres on Raynesway to develop a £175m business park, the city’s largest since Pride Park.
In Nottinghamshire, at Sherwood Park on Junction 27, L’Oreal is taking a 159,000 sq ft distribution unit from Highbridge properties, which is currently under construction.
As available space has increased during the first quarter of 2006, Wilson Bowden is developing the East Midlands Distribution Centre at Junction 24, which will provide up to 2.6m sq ft of distribution space.
Close to Junction 26, Miller Birch is speculatively building a 23,690 sq m (255,000 sq ft) unit at @ccess 26. Letting agents are Innes England, North Rae Sanders and Wright & Partners. At Junction 28, Gateway 28 provides speculative buildings of 32,000 sq ft and 75,000 sq ft.
“Prime rents are edging higher, up to £5.65 per sq ft in Nottingham,” says Mr Bremner. “Meanwhile rents along its section of the M1 Corridor look set to range from £4.95 per sq ft in the north to £5.75 per sq ft in the south. Freehold values have firmed up at £60 to £70 per sq ft due to ongoing demand.”
Just north of Gateway 28, Henry Boot Developments has finally got on board with its 200 acre Markham Vale scheme, which is being let by King Sturge. It has just secured a compulsory purchase order allowing it to create a new M1 motorway junction, 29A, providing direct access to the site.
The development project will see the creation of three million sq ft of commercial floor space on the former Markham Colliery site off the A632, and the subsequent creation of 5,000 jobs for the area.
An early phase of development, totalling 45,000 sq ft, will comprise small to medium sized commercial units ranging in size from 3,000 sq ft to 15,000 sq ft. Other phases will house larger units, up to one million sq ft.
In fact, there is a 152,000 sq ft design and build unit in solicitors hands and the developer proposes to submit a detailed planning application for a 550,000 sq ft cross docked unit on a 40 acre site known as Plot 1 East later in September 2006.
Richard Harris of King Sturge says it is unlikely that the developer will speculatively develop this unit. “There is a lot of supply coming out of the ground to the north and while many occupiers will be happy to take a speculative unit some will want something specific and that can be accommodated here.”
Other schemes along the M1 corridor towards Sheffield include: HelioSlough’s 850,000 sq ft Sheffield International Rail Freight Terminal (SIRFT) at Junction 33. The joint venture with EWS will be South Yorkshire’s primary rail distribution facility.
Jaguar Estates and Euro Dismantling Services are planning a £35m scheme called Magna 34 Business Park on a 27-acre site in Rotherham. They will jointly develop 250,000 sq ft of industrial and distribution space on 19 acre site.
At Junction 37 Sterling Capitol has now started work on site at its 36-acre Capitol Park Barnsley development and is talking to a number of prospective users interested in design and build options to accommodate manufacturing and distribution operations. Letting agent is Knight Frank.
The only area where there seems to be a dearth of warehousing is around Leeds. Mr Harris says that Miami, a 178,500 sq ft refurbished warehouse is the only one of its size in the locality.
The predominantly 1980s building has undergone a £3m refurbishment by Chase Commercial giving it a new 50m secure yard. The unit is available now at £4 per sq ft through letting agents King Sturge and Gent Visick.
However, in the future this is likely to change according to David Cato of Sanderson Weatherall. He says the recent decision to give the go-ahead for the £32m East Leeds Link Road is great news for Yorkshire and will see a huge amount of mainly brownfield land in the Aire Valley open up for development.
Due for completion in November 2008, the new road will provide a high capacity link from junction 45 of the M1 to the Leeds Inner Ring Road.
Vital government funding was increased from £9.5m to £14.8m to pay for the road and an additional £12m has been set aside through the single regeneration budget to help improve the surrounding area.
The area is ripe for industrial development and it is expected that up to 30,000 jobs will be created over the next 10 years.