In 2000 it was calculated that the average Londoner ate their way through more that 680 kg of food of which 81 per cent was imported from outside the UK and how did it get into the city – well it was transported there.
In a similar study in 2002 it was calculated that the average person in the South East was responsible for 11t of material coming directly into the region. If you count all the material moved around to get that 11t delivered, it comes up to 26t per person, a total of 211 million tonnes, every year, and rising. And how did it get there? It was transported in.
To reduce that and lower our carbon emissions it has long been noted that removing goods from road to rail is the best solution. Indeed, the public, industry and Government alike support the transfer of freight from road to rail. But to do that and ensure the shop shelves are full still requires delivery of goods by truck because to state the obvious, there isn’t a railway line leading up to every store.
Therefore there must be a point where goods on freight can be exchanged and loaded onto the waiting trucks – these are strategic rail freight terminals.
The problem is where should these exchanges be built? It needs to take place within the South East to be in any way effective but the South East is a crowded place and despite all the talk from the government, MPs, political parties and local councillors on the need to facilitate this, when it comes down to it they all want it done elsewhere.
There are two strategic rail freight terminals currently proposed for the South East. ProLogis’ 155 acre development at Howbury Park in Kent and HelioSlough’s scheme in Radlett near St Albans in Hertfordshire.
The first point to note is that the powers that be are completely divorced from the needs of the logistics sector and interviews with developers across the board make this perfectly clear.
One developer complained that a senior government official who was integral to a public inquiry into the development of one of the strategic rail freight terminals mooted in the South East did not even know how the supply chain worked.
In addition, according to the Rail Freight Interchange Investment Group (RIIG), a lobby of developers and private companies interested in promoting the building of freight interchanges in the UK, the current planning process is frustrating efforts to build the terminals and the opportunities which could be created.
The complexity of the transport system creates additional problems. A developer explains: “There are so many people involved; the GLA, TfL, local authorities, Network Rail – the list of consultees is endless. It is true of any region but a lot are specific to London and therefore the input costs are vastly greater to bring an SRFI scheme forward.”
Another voiced concerns regarding the cohesion between those bodies: “Developers end up having to do all the work for everyone -I blame it on the arthritic nature of the planning system, which is very well known. However, it would be wrong to blame everything on planners.”
A few are brave enough to mention that the government needs to take responsibility too. But championing the need for distribution warehouses or in fact joined up thinking on the supply chain is hardly a vote winner and it is not likely to increase revenues for the Exchequer.
Developers are nothing but realistic and many are in it for the long haul. Indeed Nigel Godfrey of Gazeley reports that it took 12 years for the fruition of its Magna Park Milton Keynes scheme, which is now being hailed as one of the most innovative developments in the country.
The £340 million joint venture development with Land Securities totals 241 acres and is located at Fen Farm, just five miles east of Central Milton Keynes close to Junction 13 of the M1 motorway.
Its flagship development is the John Lewis automated distribution centre totalling 650,000 sq ft. The building incorporates a range of sustainable design initiatives contributing to a saving of up to 66 per cent of carbon emissions and £240,000 per annum reduction in energy costs when compared to a standard industry unit. This is the first warehouse unit to be constructed on the 3.8 million sq ft park. Gazeley and Land Securities have also submitted a separate planning application for a second phase of development on 32 acres of land at Fen Farm together with a further phase of development on the adjacent Glebe site, which amounts to 30 acres.
Together, these two future extensions to Magna Park Milton Keynes could accommodate an additional 1 million sq ft of industrial and distribution floor space.
Colliers CRE represented the John Lewis Partnership and joint letting agents for the scheme, Jones Lang LaSalle and Burbage Realty acted for Gazeley and Land Securities. Rents start from £6 per sq ft.
Godfrey says: “Nowadays it is a relatively long haul [to secure a site] you are talking much longer planning lead times and being able to promote [a development] through the system can take a number of years, it involves serious expenditure.
“Land in the South East for big sheds, although not quite at starvation level, is in very short supply and the prospect of getting planning permission is more difficult than it was a number of years ago.
“With an increasingly articulate population, lobbying through the internet and via like minded groups it is more important than ever for big schemes to be integrated into their environments.”
This has been the problem for both HelioSlough and ProLogis with both schemes going to public inquiry. The Howbury Park Inquiry was in May while the Radlett Inquiry has just started.
Opposition to the Howbury development at the inquiry in May this year included concerns about the loss of green belt, the aesthetic concerns regarding an access road and a lifting bridge over the River Cray, the problems of flooding and protecting flora and fauna, the scale of the development and whether it really would take freight off the road.
Similar concerns look to be raised at the Inquiry for the HelioSlough scheme. Though here the opposition group has been more active with its own dedicated web site and very active support from local MP Anne Main.
The rationale for both schemes has been put under pressure following the announcement of planning being secured for a new port and associated logistics centre at Shellhaven in the Thames Estuary.
Main says: “This is a massive development which will I feel will fulfil the need for a rail freight interchange in the East of England region. I believe that this decision undermines the developer’s argument that we need a rail freight interchange in St Albans. I do not see the rationale behind loading freight onto the railways in Essex and unloading it in Hertfordshire to then drive it into London.”
The Dubai Ports £1.5bn initiative will see the regeneration of the 1,500-acre former oil refinery site at Shellhaven, to create a port and logistics centre over a 10 to 15-year time frame.
London Gateway Port will be built on part of the site of the former Shellhaven oil refinery in Thurrock, Essex. Land will also be reclaimed from the Thames estuary to help form the port.
DP World and Shell are also collaborating to develop a 700-acre Logistics and Business Park to be known as London Gateway Park on a separate part of the site. The Park will be able to accommodate buildings in excess of one million sq ft and offers linkage to the rail network. High quality architecture and high levels of security will be key features of the park. Extensive landscaping on the site, including a protected ‘habitat’ zone around the park will create an attractive environment for occupiers.
Together, the two schemes are expected to create up to 14,000 new jobs and help drive forward the Thames Gateway regeneration initiative in Thurrock. The proposals anticipate that the first container berths will be operational by 2010 and the first business units occupied within 12-18 months.
Commenting on current supply in the region, Chip Mitton of Edwin Hill says: “There are quite a few buildings, new and nearly new, of 150,000 sq ft plus. These include Gazeley’s Voltaic at Dagenham totalling 235,000 sq ft on the market through Edwin Hill and Colliers CRE; the 100,000 sq ft Crayford Imagination Unit, which is also being marketed by Edwin Hill and Colliers CRE.”
Mark Coxon of Cushman & Wakefield adds: “There are a few really large distribution warehouse developments within the area; Bridgeside, Dartford comprising newly constructed distribution warehouse accommodation within three buildings of 670,000 sq ft.
“In addition, adjacent to the Bridge, ProLogis are purchasing a site at Dartford, known as Littlebrook of 28.6 acres.
“Other buildings include the former DC1, Sandpit Lane, Dartford of 160,000 sq ft and Olympus, River Road, Barking of which 273,000 sq ft remains vacant.
“Three buildings of 425,000 sq ft, 85,000 sq ft and 124,600 sq ft will be speculatively constructed by Bericote after their recent purchase of Bronze Age Park, Erith from Apollo/Astral. Bericote purchased 38 acres at Bronze Age Park for £800,000 per acre.”
As well as these buildings Gazeley is shortly due to commence with the development of Link 360 in Enfield, which will total 360,000 sq ft. The developer is also in talks with potential occupiers for its G.Park Sittingbourne scheme in Kent, which could accommodate units up to one million sq ft.
Mitton says that in the East M25 sector there is a shortage of units from 20,000 sq ft to 100,000 sq ft. “As a result of that Ravenbourne & Standard Life are pursuing the development of Thames Gateway Park at Dagenham totalling 300,000 sq ft. Units are available from 20,000 sq ft to 65,000 sq ft. It is the only scheme providing that range of units in the area.”
Letting agents are Edwin Hill and GVA Grimley. Although the units will be ready in the summer of 2008 they are not quoting rents at present. Coxon says the shortage of space has been acerbated by the advent of the Olympic Games. “Due to lack of available stock within the Olympic Zone, a number of companies have been persuaded to move out of London to Essex and Kent. Some 250 companies are in the process of being displaced and a number of these are yet to find alternative premises.
To help assuage this demand Goodman Properties is developing two sites in partnership with LDA in Beckton and Leyton totalling in excess of 500,000 sq ft and offered on a freehold basis of £110 to £135 per sq ft, although these are only now coming to the open market as they have previously been restricted to dealing with displaced Olympic refugees.
Despite there being a number of opportunities these are being snapped up as a plethora of recent deals prove.
In the last few months nearly one million sq ft of space has been snapped up. Non-food retailer Comet has secured a 385,000 sq ft warehouse at Canmoor Developments and Kenmore’s 14.75-acre site at Edinburgh Way, Harlow (known as Arrow Park), which will be developed as the company’s new southeast distribution centre.
The scheme stands as 2007’s largest pre-let transaction and was let on a new 20-year lease with fixed uplifts at £6.15 per sq ft. CB Richard Ellis advised the developer. In Oxfordshire Hong Kong-based power tools manufacturer Ryobi has taken a 167,000 sq ft distribution unit at ProLogis Park, Didcot on a 10-year lease with a tenant-only break option at the seventh year, at a rent of £6.25 per sq ft. CBRE acted for ProLogis while Lambert Smith Hampton advised Ryobi. In Hemel Hempstead internet fashion retailer ASOS (As Seen on Screen) took a 158,250 sq ft warehouse from developer ProLogis on a 10-year lease with a tenant-only break option in year five, at a rent equating to £7.70 per sq ft.
Finally, electrical goods wholesaler Moss Electrical is relocating to Dartford, Kent, from East London, following its purchase of a 119,780 sq ft warehouse from Axa Reim for £7.4 million.
The high-profile refurbished building, known as Dartford Gateway, sits on a self-contained 4.8-acre site on Sandpit Road. The deal equates to a capital value of £62 per sq ft.
Chip Mitton of Edwin Hill, joint agent with Knight Frank for Axa Reim, says: “Moss Electrical needed to relocate, following the sale of its existing premises for residential redevelopment, and required a large enough building with good motorway access from which to service its national customer base.”
With take up still going a pace this will only increase the pressure for more sites for warehouse space to satisfy demand to serve this avaricious region.