Tuesday 17th Oct 2017 - Logistics Manager

Surprisingly spacious…

Availability might not be not overly abundant, but occupiers have a  variety of options. Liza Helps reports.

This article first appeared in Logistics Manager, December 2016.

This article first appeared in Logistics Manager, December 2016.

Availability, although not overly abundant in the region, is allowing occupiers looking for big sheds of 100,000 sq ft plus, a variety of options.

BNP Paribas Real Estate advised US internet home furnishings company Wayfair with the search for its first UK distribution centre earlier this year.

The search covered the Midlands region; reached as far as Staffordshire in the north, Daventry in the south, over to the M5 motorway and along the M1 motorway. Among its search criteria was the need to be in a location where a large proportion of the UK populace could be reached within a four-hour drive time and where there was a good logistics labour force. Unsurprisingly the company opted for the ever-popular ‘Golden Triangle’.

Its initial search secured a long-list of some 30 properties which was whittled down to a half-dozen or so that were viewed in a concentrated couple of days earlier this year. Wayfair finally opted for IDI Gazeley’s 4400 warehouse at Magna Park Lutterworth.

Andrew Cosnett of BNP Paribas says: “When we were looking we had quite a few choices; it was not a case of us just being down to the one unit. I would imagine that looking now the choice would be constrained although there would be a number of options.”

Wayfair took the 15-year old former Costco cross-dock unit at Magna Park which had been heavily refurbished to provide a facility totalling 258,503 sq ft with 131 dock level loading doors, 185 car parking spaces, and 163 HGV parking spaces. BNP Paribas advised Wayfair while Colliers International and Strutt & Parker acted for IDI Gazeley.

The East Midlands led the UK’s industrial and logistics market in the first half of 2016, according to the latest Big Box analysis by property adviser JLL. JLL’s director, James Keeton, says the East Midlands mopped up 26 per cent of the lettings in England, Wales and Scotland, the largest percentage in the UK with the South-West just behind on 25 per cent.

“Significantly, each of those regions secured a letting of at least a million sq ft in the first half of the year; Amazon took 1.05 million sq ft at Mountpark Bardon, which is due to complete in October, and The Range signed for 1.158 million sq ft at Avonmouth’s Central Park,” he says.

Other notable deals in the East Midlands include the completion of 480,000 sq ft for Great Bear at the ever-successful Markham Vale at Junction 29a on the M1 motorway as well as the letting of two further buildings to Amazon. The internet giant took IDI Gazeley’s 297,111 sq ft warehouse at Daventry Distribution Centre; a speculatively built property on the Royal Oak Industrial Estate, which has 12.5m eaves height, 28 dock and three level access doors, 230 car and 120 HGV parking spaces as well as two storey offices on an 18.5 acre fully secured site. Letting agents were Savills and Cushman & Wakefield.

It also snapped up the 161,000 sq ft remaining unit at Goodman’s 22-acre Northampton Commercial Park where JLL and Lambert Smith Hampton are joint letting agents.

Prologis has secured CSM Bakeries on the larger of its two speculative buildings at Apex Park. The facility totals 215,262 sq ft and has 12.5m eaves as well as 20 dock and two level access doors with 30 HGV and 157 car parking spaces. The smaller unit totalling 85,262 sq ft was let to Hellmann Worldwide Logistics in January this year. Joint letting agents are Lambert Smith Hampton and Burbage Realty.


Demand

“Retailers continue to drive demand for space, and the trend is now very marked for them to either open new fulfilment centres, or to consolidate existing distribution facilities into larger centres to increase productivity,” says Keeton.

According to Savills’ latest Big Shed Briefing, take up of properties in the third quarter of 2016 in the East Midlands accounts for some 13 per cent of the UK’s total by number of deals.

The briefing states: “Strong levels of take-up, combined with a slowing pace of speculative delivery in 2016 has resulted in the supply of units over 100,000 sq ft declining sharply and now stands at 26.4 million sq ft, down 22 per cent from the third quarter of last year.

“As speculatively constructed schemes have reached completion and entered our supply statistics the balance of available supply has also changed at a nationwide level. Since October 2015 the proportion of Grade B and Grade C stock on the market has fallen from 72 per cent of total supply to just 60 per cent, meaning that the remaining 40 per cent is either speculatively constructed or grade A second hand.”

At the end of the summer in the Midlands (East and West) there was a total of 5.3 million sq ft of Grade A space including some 1.9 million under construction speculatively. This gives the East and West Midlands a vacancy rate of 5.3 per cent – a supply of 10 months on current take-up levels.

The JLL analysis indicates that the amount of new space across the UK reaching the market remains well below its pre-recession peak, hinting at potential supply issues ahead.

However, Keeton thinks the Midlands is well placed to cope, pointing to the number of speculative developments under construction in the region. “There are 23 Big Box schemes under way across the country, which would deliver another 4.6 million sq ft. Nine of these are in our region, delivering a good supply of immediately, or soon to come to market space, able to capture demand.

Simon Lloyd of Cushman & Wakefield adds that the availability of warehouse space for the East Midlands is better than for the West. “As there was more land available, more development took place in the East Midlands.”

Brand new Grade A units available or soon to be available include AlchemM1 in Crick which totals 195,135 sq ft. The facility is being speculatively built by L&G and Graftongate and is expected to be available shortly. It is located just off Junction 18 of the M1 motorway and has 12.5m eaves, 24 dock and eight level access doors, as well as a 79m yard, 138 car parking spaces and 60 trailer spaces. Letting agents are JLL and Avison Young.

Other properties available include two units at Wilson & Bowden’s Optimus Park in Leicestershire on the market through Avison Young and Burbage Realty. Optimus 277 totalling 277,000 sq ft and Optimus 205, totalling, as might be expected, 205,000 sq ft.

The high specification buildings have been built to achieve BREEAM ‘Very Good’ with an EPC A Rating and each unit benefits from its own security gate house, a 57m+ secure yard, generous car and lorry parking, a 12.5m clear height as well as a 50 kN/sqm floor loading.

There is also Clearbell and First Industrial’s 225,690 sq ft unit at Bardon known as 225 at Interlink on the market with JLL and CBRE. The property has 12m eaves with 18 dock and four level access doors as well as 58 HGV trailers and 174 car parking spaces.

Possibly the largest available brand new property is Mountpark’s 314,500 sq ft facility known as Unit 2 at Mountpark Bardon. The property boasts 15m eaves, has 30 dock and four level access doors, parking for 55 trailers and 211 cars. It is being marketed by Avison Young and DTRE.

Then there is Conder Development’s DVP118 totalling 118,000 sq ft at Dove Valley Park. The speculative warehouse will have 12m eaves; eight dock and two level access doors and be built to BREEAM ‘Very Good’ standard. Letting agents are MWRE and BNP Paribas Real Estate.

IDI Gazeley is also speculatively developing a warehouse at its Magna Park Lutterworth scheme totalling 186,097 sq ft. The unit will have 12.5m eaves, 17 dock and two level access loading doors as well as 36 HGV and 178 car parking spaces. Letting agents are CBRE and Colliers International.

While there is availability, it is not hanging around. Goodman and Wilson Bowden’s Interlink 130 at Bardon was only completed at the beginning of the year and is now rumoured to be under offer. The speculative facility totals 130,000 sq ft with 12.5m eaves, 12 dock and two level access doors as well as a 50m yard and 105 car spaces. It is being marketed through Avison Young and CBRE.

As well as brand new space there is also second hand space available – although that too is going fast. At present the East Midlands is home to two of the largest second hand units, both Grade A, on the market; Quantum, the former Primark building, at Magna Park Lutterworth totalling 411,613 sq ft and ex- 99p Stores facility, DC372 at Prologis Park Pineham, totalling 374,132 sq ft. JLL and Alison Young are marketing Quantum while X and Y are marketing DC372.

There are several units available on the Brackmills Industrial Estate including Goodman’s Brackmills192 totalling 192,000 sq ft which is being marketed by Avison Young and Burbage Realty; Brackmills117, totalling 117,000 sq ft, an assignment of an existing lease through Burbage Realty and Brackmills112, totalling 112,000 sq ft, another assignment also through Burbage Realty. At Magna Park there is 5420 owned by Pickering Properties; another ex-Primark building totalling 230,000 sq ft.

Rent levels in the region are robust although still at a discount to the West Midlands. Robin Woodbridge of Prologis says: “Rents are going up on the back of a lack of supply.” Andrew Jackson of Avison Young agrees: “A rent of £6.10 per sq ft is the best rent achieved so far – they have definitely moved on.”

And it is not just rents on new schemes, even second hand properties are securing top rents. Several facilities on Magna Park Lutterworth are quoting £6.50 per sq ft and although no rent has been done at this level in the East Midlands so far, property pundits feel that it won’t be long before the £6.50 per sq ft is established.

Cosnett says: “Quoting rents have sort of hit £6.50 – it is the expected norm for the Golden Triangle but it is still at a discount to the West Midlands where areas around Birmingham look to have hit £6.75 per sq ft.”

Even rents on smaller stock has increased; according to data from Colliers International: “Due to the healthy demand and on-going supply shortages, East Midlands has seen a gradual increase in rents in the past few years. Prime rents for multi-lets have overtaken prime distribution rents, firming up on average in the region at £6.05 psf and £6.25 psf in Northampton and Leicester.

As a result of the lack of available Grade A space, East Midlands secondary rents have also seen a 10 per cent uplift in the last 12 months to the current £4.13 per sq ft.”

Lease terms have also hardened says Cosnett: “The length of lease has pushed out to a ten-year minimum with very few landlords taking anything less – and many expecting 15 years. The days of a five year lease are gone.”

If that were not enough he adds, the rent free is also minimal now.

While that may have put a dampener on things for occupiers, it has encouraged developers to continue to go forward with plans for new schemes despite the turmoil in the markets following Brexit. Woodbridge says that the sentiment in the market has made it easy for Prologis to commit to speculative development across a range of schemes in the East Midlands. “We are actively looking at speculative development, though in a controlled way.”

The developer has committed to speculatively developing a 156,670 sq ft distribution centre at Prologis Park Kettering. Designed to achieve a minimum BREEAM ‘very good’ accreditation and the best possible EPC rating for its size, the building will include a rooftop solar installation that will generate 10 per cent of the building’s regulated energy. Completion is expected in the summer of 2017.

Providing around 1.7 million sq ft in total, Prologis Park Kettering is close to Junction 7 of the A14, which links directly to the M1, M6 and A1(M). Burbage Realty and Budworth Hardcastle are acting for Prologis.

The developer is also expected to announce the speculative development of a 210,000 sq ft unit at Prologis Park Pineham as well as a 275,000 sq ft unit in Milton Keynes and a 115,000 sq ft unit at DIRFT III. “It is genuinely business as usual.”


Development

On the development side, schemes being brought forward include Prologis’ 7.86 million sq ft DIRFT III. In addition there is Roxhill’s six million sq ft rail related scheme East Midlands Gateway.

Warwickshire-based IM Properties with First Industrial can accommodate a 450,000 sq ft plus unit on its 45-acre site off the M1 in Eastwood, Nottingham known as Nottingham 26. Letting agents are Fisher Hargreaves Proctor, Avison Young and Dove Haigh Philips.

Sladen Estates snapped up Prologis’ former 45 acre site in Mansfield and is now promoting Summit Park which could provide up to 900,000 sq ft of space in units from 5,000 – 350,000 sq ft. Letting agents are Commercial Property Partnership, Avison Young and Lambert Smith Hampton.

Roxhill has a variety of other sites in the region including its 240-acre Peterborough Gateway located adjacent to junction 17 of the A1(M) motorway. The site has planning consent for 5 million sq ft of industrial buildings, including individual buildings of up to 1.3 million sq ft. Avison Young, Burbage Realty, Bidwells and Barker Storey Matthews are letting agents.

Roxhill also has a 65-acre site in Burton Latimer that could accommodate up to 1.2 million sq ft, which it is progressing with joint venture partner SEGRO.

Schemes that are making their way through planning include Goodman and Shepherd Group’s proposals for Severn Trent’s 619-acre site at Etwall to be known as the East Midlands Intermodal Park that could provide up to six million sq ft of rail related warehousing in units from 235,000 sq ft to 1 million sq ft. Subject to all approvals it could be up and running by 2018

The same holds true for the extension to Magna Park Lutterworth where IDI Gazeley has put forward plans for a 590-acre extension on land to the north that could accommodate up to 6 million sq ft. The company has already secured DHL as an occupier for a 1.3 million sq ft facility, which is due to be built shortly.

To the south of the park Barwood and Delancey joint venture DB Symmetry, has put forward proposals for a 200-acre expansion to be known as Symmetry Park that could accommodate a possible 4 million sq ft.

Gladman’s Vertical Park on the site of the former Bevercoates colliery, in Nottinghamshire has outline consent for a single facility of 2 million sq ft with a 30m eaves height. Letting agents are Lambert Smith Hampton and Cushman & Wakefield.

Over at the Nailstone Colliery in Leicestershire just off Junction 22 of the M1 motorway Curtis Hall is pushing a 1 million sq ft development opportunity known as Midas22. Sole agents are Cushman & Wakefield.