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There is in general a massive lack of suitable industrial sites throughout the Midlands, which is leading to increased competition between developers and investors alike.

Mike Price of Knight Frank says: “For those sites which do come to the market, purchasers are having to pay higher land prices to secure these development opportunities. In turn, higher land prices mean that higher rents will need to be achieved to justify these figures.”

The only reason why occupiers have not been hit with higher rents sooner in the region is because tenants have benefited from the effects of the large yield improvements, which have been received in recent years in as much as this has allowed landlords and developers to offer a good level of incentives while holding rents steady.

Now, Andrew Jackson of North Rae Sanders warns: “With yield compression coming to an end we now expect to see more pressure to increase rents and reduce incentives.”

But where is the pressure coming from? Matthew Smith of King Sturge explains: “With the region still experiencing dramatic increases in the ‘big shed’ market, both in occupier demand and the amount of speculative development currently under construction, there has been an almost inevitable rise in land values.

“In fact, during the last twelve months prime logistics land values in the East Midlands have risen by 35.7 per cent. The significant growth in land values that the region has experienced means that the price of prime locations has jumped from £350,000 to £475,000 per acre.”

Ian Harman of Lambert Smith Hampton says: “Northamptonshire has become so popular with warehouse developers and occupiers that land prices have been as high as £375,000 per acre.

Jackson says that in certain locations this is even higher. “In terms of land prices in the East Midlands, Northampton provides an interesting example, in as much as a few years ago sites would command circa £350,000 an acre whereas today this would be up to £600,000 an acre.”

Recently, developer Frontier Estates paid £340,000 an acre for the final plot at Parlison Properties’ A1M1Link scheme in Northampton. The developer bought the 12.5-acre Triangle site with planning permission for a 255,000 sq ft warehouse. Parlison Properties was advised by Savills and Burbage Realty while Frontier Estates was unrepresented.

Graham Brown of Savills says: “The price achieved reflects the efficiencies of developing large sheds to meet market demand, particularly in the B8 sector. This is a record land price for the location.”

The Triangle is the final part of the A1M1 link site at Thrapston to be developed. The A1M1 link is a 100-acre warehouse and industrial development fronting the A14. Other occupiers at the park include Ikea, Superior Group, Avandero and International Paper Containers.

The cry is the same all over the region. Ian Harman of Lambert Smith Hampton says: “In Kettering there is a combination of unprecedented levels of demand coupled with a lack of supply. Within industrial estates there are high levels of occupancy and shortages of supply constraining the ability of existing companies and those looking to locate in the town.

“Such is the pressure on land that values have increased significantly. While headline deals in early 2005 were reflecting £250,000 per acre it is now considered that values in excess of £325,000 per acre will be achievable.”

In Wellingborough, Harman says: “Immediate shortages of supply are constraining levels of inward investment and frustrating the ability of companies already based in the area to expand. This has fuelled rents and freehold prices to the highest levels ever before achieved within the town.

“Where good quality buildings and land have become available there have been instances with parties bidding against one another with owner occupiers in particular generally out bidding the investment and development market sectors.”

In a recent transaction Lambert Smith Hampton sold a one acre plot on the Finedon Road Industrial Estate for a price reflecting in excess of £400,000 per acre.

Elsewhere Harman says that Corby has experienced strong growth in values. “This is predominately due to the town witnessing the highest levels of occupancy witnessed for many years. Developers are now progressing a number of exciting schemes within the town, many of which are receiving very encouraging levels of interest.

“Land values have now reached £225,000 per acre. This represents a threefold increase of land values in less than 10 years. Supply is now so limited that it took us over two years to acquire a suitable site for one of our clients, Frenbury Properties.”

In Leicestershire, developer Highcross secured a 37-acre industrial site on the Old Dalby Trading Estate near Melton Mowbray for £14.75 million, which equates to nearly £392,000 per acre. The site, which houses more than 728,000 sq ft of industrial buildings, will be redeveloped as a joint future initiative with Rotherhill Developments.

Harman says: “Within the industrial estates throughout the region there are high levels of occupancy and a shortage of supply, which are constraining the ability of existing companies and those looking to locate into the region to invest and expand.

He adds: “Such is the shortage of supply and the strength of demand that land inflation is being created and is anticipated to continue. The issue is not now attracting occupiers, but providing the supply for them.”

For some developers the only way round this is to refurbish existing properties. Wrenbridge has bought Meteor 90, the distribution centre in Northampton on the Round Spinney Industrial Estate from Eagle Global Logistics.

The building comprises an 88,500 sq ft high bay warehouse with an eaves height of 9.2m, excellent loading facilities, yard and parking. It is positioned with easy access to the A45, M1 and A14.

The property is immediately available on a new lease at a quoting rent of £5.35 sq ft, or for sale freehold at a quoting price of £6.85m. King Sturge and Marriott Hardcastle are retained as marketing agents.

As well as looking at refurbishments within the heart of the region, many developers are taking a calculated risk in opting for more uncharted waters – especially those further east.

Evans Property Group has unveiled plans for a one million sq ft high bay distribution and warehousing facility in Lincoln.

Called Network 46, the 65-acre site is situated on the former RAF Swinderby base on the A46 between Lincoln and Newark-on-Trent and will be the largest distribution facility in Lincolnshire.

Phase one will consist of four units ranging from 10,000 sq ft to 100,000 sq ft and is scheduled for completion in Autumn 2007. One unit of 100,000 sq ft has already been let to Lincoln-based Danwood, an independent supplier of Total Office Solutions in the UK and Ireland.

Daniel Brumfitt, development surveyor at Evans Property Group said: “There is a shortage of distribution facilities in Lincolnshire and the fact Danwood agreed to let 100,000 sq ft as soon as we received planning permission demonstrates the interest we have received. Network 46 enjoys excellent transport links and is ideally suited to companies wanting to improve their distribution or warehousing facilities.”

Pygott & Crone and GVA Grimley have been appointed agents for the development.

Further into the heart of the eastern counties in Cambridgeshire, Peterborough has become a bit of a shed magnet ever since Lambert Smith Hampton and ProLogis identified it as a potential distribution hot spot. Guy Gilfillan of Lambert Smith Hampton says: “Prime rents are expected to increase by 10 per cent to £5.50 per sq ft in the next year.”

As a result of this news, developers are happy to build speculatively. ProLogis has just launched the 545,000 sq ft second phase of its ProLogis Kingston Park scheme in the town. The building boasts 57 dock levellers and two level access doors and parking for 140 HGVs and 346 cars. It has 15m eaves and a 50kN/sqm floor loading. Letting agents are Savills and Burbage Realty.

Taking it further east again Gladman has secured a 12.11-acre site for a speculative 200,000 sq ft distribution development on the A14 at Saxham, near Bury St Edmunds in its first foray into East Anglia. The site has outline planning permission for use as a distribution facility and Gladman plans to submit a planning application for two speculative distribution warehouses of 140,000 sq ft and 58,000 sq ft. The company will start construction as soon as it receives planning permission.

The 200,000 sq ft warehouse complex is expected to have an end development value of £18 million and help create up to 200 new jobs. Strutt & Parker and Barker Storey Matthews are joint letting agents.

“Saxham is a strategic location on the A14 on the main route to Felixstowe and close to the A12, M11, and A1,” says Mike Sowerby of Gladman. “This is our first deal in East Anglia, but we hope it will be the first of many. We have significant funds available to invest in development land across the area.”

Further east again at Stowmarket, plans for a 1.3 million sq ft multi modal distribution park have been submitted on land totalling 112 acres near to Junction 49 of the A14. The developer, Stowmarket Multi Modal Distribution Park, says the aim of the scheme is to service freight from the Port of Felixstowe with repacking and redistribution of goods. The proposals include railway sidings, HGV parking and container handling. The developer has said it could provide up to 1,500 jobs for the area.

Looking into the heart of the region, although land prices are high and supply has been limited, there are many opportunities being brought forward but Matthew Smith of King Sturge says these might be short-lived.

“The recent budget announcement to remove tax relief on empty properties with effect from April of this year could have significant implications for the big shed market, as vacant industrial/distribution properties currently benefit from 100 per cent tax relief,” he says. “The change could potentially discourage speculative development because of the increased costs associated with holding void properties.

“Alternatively,” says Smith, “developers will take account of the increased costs by paying less for land or by seeking higher rents, which, currently in the East Midlands, stand at £4.75 – £5. 50 per sq ft.”

Smith says that both nationally and regionally the market is significantly influenced by demand for “big sheds” – those of 107,639 sq ft and over, one of which is the @ccess 26 high-bay warehouse at Langley, Nottingham, providing 254,996 sq ft of lettable space.

Another significant Nottinghamshire scheme is the G. Park at Newark, where a single building of up to 768,628 sq ft can be accommodated.

Also in Nottinghamshire, Sladen Estates is creating 49,998 sq ft at Hamilton Place Business Park, Mansfield, while Gazeley is developing a single large-scale distribution unit of 329,988sqft (30,657sqm) on the former Nestle Purina site at Worksop, which is scheduled for completion in October.

Edward Hine of Fisher Hargreaves Proctor says of the Nottinghamshire district within the region that developers have been speculatively developing large amounts of space in response to increased demand.

“Over the last few years there has been little stock available of industrial buildings and this has led [developers]to carry out a significant amount of speculative development in such locations as Willow Farm Business Park and Langham Park at Castle Donington, Gateway 28 and Park Lane Business Park at Sutton in Ashfield, Doncaster South at Harworth and the Newark Business Park.

“As a result over 600,000 sq ft of the total space transacted last year was new build accommodation, all bar 80,000 sq ft which was speculatively developed.

The largest project underway in the East Midlands is at Kettering, where ProLogis is developing a single unit of 399,986 sq ft.

If you can’t find the site then of course there are the second-hand warehouses to go for. Kilmartin secured funding to acquire and re-let the former TDG Warehouse at Grantham in Lincolnshire. Known as Grantham 334, the building totals 334,000 sq ft and is fully serviced to include lighting, heating and full sprinkler systems together with full racking in a combination of wide, narrow and automated systems. Kilmartin has appointed Fisher Hargreaves Proctor, King Sturge and Knight Frank to act as letting agents.

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