East Midlands and East Anglia: the location that can’t stop giving – but does that mean that occupiers can get a good deal? Liza Helps reports.
It’s got off with a bang and take-up of warehouse space in the East Midlands has rocketed.
There seems to be no end of demand in sight.
According to Avison Young research, the East Midlands saw take up of 3,284,791 sq ft in eight buildings in the first quarter of 2018 alone – the majority accounted for through build to suit options.
Typical deals include 3PL Eddie Stobart pre-letting 844,000 sq ft at property investment company Frogmore and developer Mulberry’s 2.6 million sq ft Midlands Logistics Park in Corby, Northamptonshire.
The facility has secured forward funding to the tune of £81.8 million from Tritax Big Box REIT.
Eddie Stobart is the first tenant to commit to a new facility on the site, which has a 500-metre rail siding and yard, allowing potential future connection to the rail network.
The property will be purpose-built, with an eaves height of 18m, together with extensive parking.
Upon practical completion, targeted for winter 2018, the property will be leased on a new 20-year lease, subject to five yearly upward only rent reviews indexed to the Retail Price Index, with a cap and collar.
The first rent review is due in 2023.
The scheme is one of only a very few sites in the country that can provide fully serviced platforms for units in excess of 750,000 sq ft right now.
Richard Moffitt of M1 Agency, which is marketing the site, says: “There is a shortage of available sites of this calibre and we are talking seriously to five potential occupiers for the two remaining plots.”
One of those potential occupiers has been mooted as BSH Home Appliances of Bosch and Siemens fame.
The company is known to be looking for an 800,000 sq ft build-to-suit with the ability to expand by a further 200 – 300,000 sq ft in the Midlands.
Lambert Smith Hampton is advising.
Letting agents on the scheme are M1 Agency, Burbage Realty and CBRE.
Other build-to-suit deals include Nestle, Amazon and Shop Direct securing a pre-lets at SEGRO and Roxhill’s 6 million sq ft East Midlands Gateway near Castle Donington to the tune of some 1.7 million sq ft.
Amazon is looking to secure a unit with a footprint of 500,000 sq ft which it will fit out with mezzanines creating a facility of 1.2 million sq ft in total; Nestle through 3PL XPO is thought to be after some 700,000 sq ft and Shop Direct, which owns on-line retailer Very.com, has secured a 500,000 sq ft.
But it’s not just build-to-suits, existing stock is shifting as well.
Internet Fusion, a sustainable e-commerce platform, has already confirmed a deal at Prologis Park in Kettering.
It is taking DC6, which totals 156,936 sq ft at a rent of £5.75 per sq ft leaving only one plot available; this plot has received detailed planning consent for a 369,292 sq ft facility and is available on a build-to-suit basis.
Letting agents are Burbage Realty and Budworth Hardcastle
On the second hand front 3PL CEVA is rumoured to have secured 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.
It has 10,400 sq ft of two-storey offices as well as a gatehouse and its located on its own secure yard.
This activity is a far cry from last year when, according to Savills research, take up was just over four million sq ft through 2017.
The reason for the apparent slow down has been attributed to a number of drivers chief among those says Kevin Mofid of Savills: “is the fact the businesses are taking longer to commit to capital intensive projects, potentially driven by the current uncertainty around our future trading relations with the EU.”
Andrew Jackson of Avison Young agrees: “I think there might have been a pause from retailers last year – obviously life is tough on the high street but we are seeing pent up demand from last year now coming through and we are not seeing much space come back to the market, however I cannot help but think some will be shedding space and that may include warehousing – at the same time other parties particularly online retailers, some new to the UK, are in growth mode.”
Indeed there is still a requirement from Chinese-owned internet giant Alibaba for some 600,000 sq ft of space in the Midlands from which it intends to strike out in the UK against the likes of Amazon as the leading e-commerce player in Western Europe.
The company has logistics space in the UK through its logistics platform 4PX Express.
The supply of existing units in the East Midlands at the end of the first quarter of the year stands at 5.83m sq ft across 23 units, the vast majority over 200,000 sq ft, seven of which, were speculatively built.
And there is more speculative space on the way.
Simon Norton of Colliers explains: “There has been a dearth of good quality new buildings in the East Midlands but with demand overall remaining steady and the sheer weight of cash out there from UK and overseas funds, new space is being brought forward.”
Indeed Stuart Mair of CBRE notes: “There is not that much existing stock and there is a lot of interest in anything that is available.
The market is definitely responding as at present in terms of existing Grade A stock there is only about four months supply left.”
Virtually all the big name developers are speculatively building with the most aggressive being First Panattoni, which is currently speculatively building three units at its Panattoni Park Nottingham near Junction 26 of the M1 motorway.
It is building two sub 100,000 sq ft units of 89,000 sq ft and 75,400 sq ft as well as a 550,000 sq ft cross-dock facility which 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 two new units of 95,500 and 335,000 sq ft at its 40-acre Leicester Commercial Park development immediately adjacent to the M1/M69 intersection in Leicestershire in partnership with Wilson Bowden.
Each development is being constructed to the minimum BREEAM Very Good certification and feature 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.
Further up the M1 motorway at Junction 28, Richardsons Capital and Thorngrove Land & Property are speculatively building Nickel 28 – a 261,000 sq ft high bay distribution warehouse on the South Normanton Industrial Estate in Derbyshire.
The new speculative unit will comprise 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.
Over in East Anglia 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.
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.
There are some very big schemes available for build-to-suit and indeed more I the pipeline.
These include the 7.86 million sq ft DIRFT III development by Prologis where it also has a 115,000 sq ft speculative unit available too.
DIRFT III can provide build to suit opportunities for units from 100,000 sq ft to 1.64 million sq ft.
Letting agents are Burbage Realty, JLL and Savills.
The developer is also pursuing Prologis Park Kettering 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.
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 Moriarty & Co.
The Roxhill/SEGRO joint venture 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.
Schemes that are making their way through planning or have just been approved include a 200-acre expansion to the south of Magna Park Lutterworth where dbSymmetry has just secured outline consent for up to 3 million sq ft.
The scheme will be known as Symmetry Park Lutterworth.
Gazeley is continuing to pursue planning 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, however this application is subject to a judicial review.
Gladman’s Vertical Park on the site of the former Bevercotes 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.
Then there are four massive rail freight sites attempting to secure planning, to the north there is 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.
In Leicester dbSymmetry is pushing Hinckley National Rail Freight Interchange in Blaby District, Leicestershire which links in to the Nuneaton to Felixstowe rail freight route.
The 560-acre site could accommodate up to 8 million sq ft of associated warehouse space (some of it mezzanine).
It is located close to Junction 2 of the M69 motorway connecting the M6 near Coventry and the M1 motorway near Leicester.
The two most controversial schemes (because they are on adjoining sites) are Roxhill’s Northampton Gateway Interchange on a 610-acre site at Junction 15 of the M1, south of Northampton that could accommodate up to 5 million sq ft of associated warehousing.
Adjacent is a 600-acre site being promoted by Gazeley, which has teamed up with Ashfield Land to promote Rail Central in Northamptonshire, two miles from Junction 15A of the M1 motorway.
The scheme proposes 7.4 million sq ft of associated warehousing space.
With all this space one would think that there is plenty to choose from but Gemma Constantinou of Cushman & Wakefield says: “At higher levels there is enough space to satisfy demand – it is in the sub 150,000 sq ft where there is a real shortage.”
Gazeley is trying to cover that with its G.Park Northampton scheme at Moulton.
It plans to speculatively develop three new warehouses of 50,000 sq ft, 90,000 sq ft and 155,000 sq ft of space at the site.
Burbage Realty is advising.
Not surprisingly it is the smaller units where rent levels are highest.
Lloyd says: “If you had a brand new sparkly 50,000 sq ft unit it would be no surprise if you saw rents of £7 per sq ft.”
And, says Norton: “Rent levels are pushing on but it is land prices which have jumped the most driven by a lack of availability.”
Seam Bremner of Commercial Property Partners says: “Rent levels are holding their ground averaging £6 – £6.25 per sq ft for larger units at a discount to the West Midlands.”
There is not much discount for second hand units says Constantinou: “However, an older building can get you a more flexible lease length.”
This article first appeared in Logistics Manager, June 2018