With a take-up explosion is there any space left for occupiers in the East Midlands and East Anglia? Liza Helps investigates.
A lot of deals have been done in the East Midlands resulting in a take-up explosion.
CBRE research states that in the first nine months of 2018 the total amount of space let in the region, increased by 430 per cent compared with the same period in 2017. Lettings and sales of warehouse space totalling more than 100,000 sq ft reached 8,414,021 sq ft up to the end of September 2018 in the East Midlands.
Indeed activity in the Northern East Midlands alone in the third quarter of the year hit 2.3 million sq ft – accounting for 20 per cent of all quarterly occupier activity nationwide reports Gerald Eve research.
“The market has had some very big deals,” says Andrew Jackson of Avison Young, “and the level of take-up already exceeds the whole of 2017 and we are not at the end of the year yet.”
The largest deal in the third quarter saw US online furniture company Wayfair secure a 1 million sq ft pre-let build-to-suit deal with Gazeley at Magna Park. The developer has been granted detailed planning permission for a 1,064,314 sq ft warehouse facility on 54 acres of land on Mere Lane, adjoining Magna Park. The facility includes 20,000 sq ft of office space as well as 217 HGV spaces. The warehouse has 138 dock and 12 level access doors.
At 277,000 sq ft M&G and Wilson Bowden’s Optimus 277 warehouse is the next largest unit to be let in the region in the final quarter of the year. It has a warehouse totalling 262,494 sq ft with 12,670 sq ft of office space. It also benefits from 12.5m eaves as well as 28 dock and four level access doors. It has a 59m yard with parking for 233 cars and 48 HGVs. Joint letting agents are Avison Young and Burbage Realty.
Other deals include Clipper Logistics, taking a ten-year lease on a 196,268 sq ft purpose built distribution centre at Crick.
The unit, known as AlcheM1, was built speculatively by Legal & General, in partnership with Graftongate. It comprises a 179,589 sq ft warehouse unit, office space, gatehouse accommodation and 138 car and 60 HGV parking spaces. It has 12.5m eaves as well as 24 dock and eight level access doors. It was built to BREEAM ‘Very Good’ standard. Joint letting agents are Avison Young, JLL and GVA.
A similarly sized deal saw logistics giant Dachser take Cabot Properties’ speculative distribution unit, C172, on Brackmills Industrial Estate in Northampton.
Dachser is expanding its operations on the estate, taking a new 10-year lease on the newly completed 172,879 sq ft warehouse.
While there has been a plethora of deals done, should occupiers be concerned? Jackson says: “A lot of floor space has been take-up but the majority of deals are build-to-suit.”
According to Gemma Constantinou of Cushman & Wakefield: ‘There are still a number of properties available with quite a few around 200,000 sq ft – although the number is eroding.”
Immediately available warehouses around 200,000 sq ft include Prologis’ DC7 unit at Prologis Park Pineham in Northampton. The speculatively built property totals 211,304 sq ft and has 5,328 sq ft of two storey offices. The warehouse boats 15m eaves as well as 21 dock and four level access doors and 60m yardages. There is parking for 165 cars and 51 HGVs. It is being marketed by Burbage Realty, Cushman & Wakefield and CBRE.
There is also Logicor’s 225 at Interlink facility just off Junction 22 of the M1 motorway in Leicestershire.
The property totals 225,690 sq ft and has 12,019 sq ft of two storey offices. It has 12m eaves as well as 18 dock and four level access doors. Joint letting agents are CBRE, Burbage Realty and JLL.
Further up the M1 motorway at Junction 28 Richardsons Capital and Thorngrove Land & Property have Nickel 28 – a 261,000 sq ft high bay distribution warehouse on the South Normanton Industrial Estate in Derbyshire.
The speculative unit comprises a warehouse with associated office accommodation, a large 50m yard, generous lorry parking facilities, 24 dock loading doors, a secure gatehouse and double stacking entrance road. Savills and Commercial Property Partners are joint letting agents.
For those looking for immediately available larger units there are a variety on offer including the Quantum unit at Magna Park, Lutterworth; SEGRO’s 418,000 sq ft ex-Primark facility, which is being marketed by Avison Young and JLL with a quoting rent of £6.25 per sq ft.
The fully refurbished unit has 26 dock and three level access doors as well as a 67m yard depth. It has FM2 50kn/sqm floor loading as well as a 15m eaves height. There are 231 car parking spaces and 74 HGV spaces and it benefits from a Beliner Luft heating system with high level duct work, lighting and sprinklers. It has 10,400 sq ft of two-storey offices as well as a gatehouse and its located on its own secure yard. (CEVA was rumoured to have secured the unit but agents are being tight lipped.)
For those that can wait until next year there are a number of big sheds being speculatively built. Rob Haigh of LSH says: “Build costs reduced a fraction this year making it more viable for speculatively developing the larger units.”
That coupled with the seemingly insatiable demand for stock from investors has made appraisals stack up for the development of larger sheds.
Virtually all the big name developers are speculatively building – the most aggressive being First Panattoni, which is currently speculatively building a massive 550,000 sq ft cross-dock facility at its Panattoni Park Nottingham scheme near Junction 26 of the M1 motorway. It is due to complete in the Spring of 2019. The developer is rumoured to have secured a plethora of other sites in the region, which it intends to speculatively develop. It has recently secured the remaining land at Goodman’s Derby Commercial Park. The developer is currently negotiating changes to Plot L at the site which could provide a 530,000 sq ft cross dock facility which would have 15m eaves, 56 dock levellers as well as parking for up to 389 cars and 114 trailers on a secure 26.5 acre site. It is thought the developer has secured land to provide a further 300,000 sq ft building on the site.
Goodman is speculatively building a 335,000 sq ft unit at its 40-acre Leicester Commercial Park development immediately adjacent to the M1/M69 intersection in Leicestershire in partnership with Wilson Bowden.
The unit is being constructed to the minimum BREEAM Very Good certification and features 50m wide service yards, 15m clear internal height, significant HGV and car parking together with two-storey office accommodation.
Agents marketing the scheme are Burbage Realty, Avison Young and Mather Jamie.
IM Properties is set to speculatively build a 532,000 sq ft facility at its Hinckley Park scheme alongside the new super hub for parcel giant DPD.
IM says the new warehouse and offices will contribute to the 2400 jobs expected to be created on the 82-acre employment park, next to Junction 1 of the M69.
With a target completion date of Q4, 2019, the new Grade A, cross-dock unit, is designed to attract high quality businesses to this premier location.
Richard Lawrence, development director for IM Properties said: “The Midlands is a consistent performer in the industrial & logistics market, with the East Midlands taking 45 per cent of all industrial space take-up in the 100,000 sq ft sector in the first half of this year.
“As connectivity and the ability to deliver becomes a key differentiator in the rapid growth of the e-commerce industry in particular, operators need to be centrally located.
“The site’s location offers immediate access to the motorway network and a large established, high quality workforce, already a draw for DPD and a big determining factor in our decision to speculatively build the unit.”
Constantinou says: “Occupiers looking for the larger units are perversely better served than those looking for smaller mid-box units.”
Haigh agrees: “There has been a dearth of mid box development in recent years however, as the demand for mid box space has increased, developers are looking to start on speculative developments in 2019.”
Indeed some already are; with Panattoni speculatively developing two sub 100,000 sq ft units of 89,000 sq ft and 75,400 sq ft at Panattoni Park Nottingham, while Goodman is building a new units of 95,500 at Leicester Commercial Park.
Gazeley is speculatively developing three units at its 19-acre G-Park Northampton site near Moulton, which it acquired earlier this year from Ropemaker.
The units comprise 50,000 sq ft, 90,000 sq ft and 155,000 sq ft of space. The site, which was formerly occupied by Robert Horne Paper Company, can accommodate a total of 430,000 sq ft. The units are scheduled for completion by the end of 2018. Equation Properties was the adviser on the acquisition and will be retained as the Development Manager.
Each building will be developed to BREEAM Very Good certification and feature a range of state-of-the-art sustainability features such as LED lighting, solar thermal heating, rainwater harvesting, power charging stations for electric vehicles together with a variety of wellness initiatives designed to improve the working environment for employees. Burbage Realty advised Ropemaker on the transaction.
Not all developers though are looking to speculatively develop despite the seemingly strong demand. There are still a lot of sites for build-to-suit.
Philip O’Callaghan of Mountpark says despite getting planning and having a site fit to go, his company are taking a wait-and-see approach for the second phase of its scheme at Bardon in Leicestershire.
“We could speculatively develop up to 500,000 sq ft of space but the site can accommodate up to 1.3 million sq ft of space and we have decided to retain that flexibility [to develop a 1 million sq ft warehouse]rather than speculative developing a unit right now. We just don’t think there are that many sites that can accommodate a 1 million sq ft warehouse immediately.”
Schemes that could accommodate a million sq ft plus warehouse facility and have the potential to build it straight away include Prologis DIRFT scheme in Daventry and SEGRO’s East Midlands Gateway scheme.
Prologis has just secured planning for a 535,000 sq ft unit at DIRFT. The expansion at DIRFT was authorised via a Development Consent Order (DCO), a special kind of consent for major infrastructure projects in England and Wales. The level of detail contained within the initial submission and consultation helped to bring about a quick decision and will help secure further investment on the logistics park.
“The DCO planning process at DIRFT means we can give certainty to any customers looking for a bespoke logistics building within a short timeframe,” says Phil Oakley of Prologis. “Working in partnership with Daventry District Council we have now reduced the time taken to bring forward a bespoke building from a typical 13 weeks for planning approval to just 8 weeks at DIRFT. We know speed is often the essence for our customers.”
Having has a good look at all the sites and the immediate availability of space in the region Sam Robinson of Colliers notes: “If you look at what can be delivered in the short term there is still a fairly limited amount of supply and certainly not enough to dampen rental growth.”
Haigh agrees: “Rent levels are creeping up but not at the levels seen last year.”
As a rule of thumb secondary units are looking at rents from £5 – £5.50 pre sq ft I the north of the region with that rising to as much as £6.75 per sq ft in areas such as Brackmills and Magna Park depending on size.
For new build Jackson says: “Rent levels are gently moving up with quoting rents in Brackmills hitting £7 per sq ft.”
Getting busy along the A14
There is a lot of activity in East Anglia, in particular along the A14 from Cambridge to Ipswich with some pretty big schemes either under construction in the offing.
Developer Jaynic has started to speculatively build two units of 147,000 sq ft and 206,000 sq ft respectively at its Suffolk Park scheme near Bury St Edmunds. The scheme has consent for up to 2 million sq ft of space and is considered the largest in the immediate area.
The units will have 12.5 m eaves, 50m deep service yards, level access and dock loading together with ancillary offices.
Ben Oughton, development director with Jaynic says: “These units will be the only speculative development in this area currently being undertaken. It will provide much needed stock that can be delivered before the end of 2018 setting the scheme apart from other development sites in the vicinity, where lead in and occupation lags by anywhere between 12 – 24 months.”
Agents are Savills and Hazells.
While not going forward as speculative there are two other large schemes coming forward. Ipswich Council is bringing forward development at the 80-acre former sugar factory at Sproughton advised by LSH while Mid Suffolk Council is pushing forward with Gateway 14 just off the A14 at Stowmarket.
The 200-acre Gateway 14 scheme has planning for up to 1.3 m sq ft of logistics space in four units from 166,000 sq ft to 726,000 sq ft. It is being marketed as offering space for port centric services to Felixstowe
Paul Fitch of LSH explains: “You could say that these developments are the result of a ripple effect from London in the sense that land values immediately round the M25 are high that it makes financial sense to look for land further out. As there is little or no opportunities for development until Ipswich it begins to make sense.”
The area is close to the biggest container port in the UK and has access to London via the A12, A14 and M11 as well as access to the Midlands, the logistics hub of the UK.
This article first appeared in Logistics Manager, December 2018