The demand is there but is there enough supply? Liza Helps reports on the state of the logistics warehouse market in the East Midlands.
There was some 4.5 million sq ft of immediately available space in the East Midlands at the end of the first half of this year, according to the latest Big Box figures from Savills. It certainly sounds like a lot of space however it is in just 18 units, six of which were speculatively developed. Five of the units available are above 300,000 sq ft and looking at available units along the M1 corridor there is less choice for potential occupiers that would first appear.
Simon Lloyd of Cushman& Wakefield points out: “There is less availability in the north of the region.”
Something that Sean Bremner of Commercial Property Partners is only too aware: “We are definitely suffering on the supply front there has just not been the speculative development. There is no depth in the supply available.”
His patch includes Leicestershire through to South Yorkshire and he says the lack of immediately available stock has meant that good requirements, which might have been looking in the region, have had to go elsewhere.
Across the region as a whole Lloyd adds: “What units are available are being steadily taken up. There’s supply for 12 – 18 months available.”
Andrew Jackson of Avison Young agrees: “While there is a reasonable amount of shed availability there are a number of deals in the pipeline.” He counts roughly up to 2 million sq ft of deals likely to come through before the end of the year and the beginning of next – admittedly not all of these in existing units.
“There are some fairly big requirements in the region,” says Jackson. These include Alibaba looking for up to 600,000 sq ft as well as the likes of third party logistics companies such as Wincanton and Kuehne + Nagel with active live requirements in excess of 200,000 sq ft.
Lee Charnley, managing director of Thorngrove Land & Property, says: “There is a very strong demand for large distribution warehouses from regional and national occupiers across the whole of the central and east Midlands region but supply is extremely limited.”
Tim Gilbertson of FHP says: “I always seem to be saying that stock levels are low. The market is starved of good quality space.”
Gilbertson recently let just under 40,000 sq ft of space to Breezemount at Castle Donington and the fact that the new occupier moved in the day after the former occupiers moved out highlighted the issue of lack of supply he says.
“As a result rents are rising, capital values are certainly increasing too and good quality space is often oversubscribed.
“This deal combined with three further north up the motorway means that I have moved about 160,000 sq ft of space over the last couple of months in terms of high calibre warehouse or production facilities on the M1. Demand is still out there for this trend to continue but sadly space is not and with a number of unsatisfied requirements regularly ringing me I would love to have the ability to offer any new space to the market.”
If the region is to continue to maintain its right to be one of the premier distribution locations in the UK, Bremner says: “[It] has got to be seen to provide stock to satisfy these requirements.”
Buildings immediately available include 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.
There is also the 99p Store unit at Prologis Park Pineham, known as DC3. The facility is on the market through Cushman & Wakefield. It provides 374,132 sq ft of space and has 32 dock and four level access doors as well as 12.5m eaves and a 50kn/per sq m floor loading. It has 87 trailer and 250 car parking spaces and a maximum yard depth of 85m.
At Mountpark Bardon there is the speculatively built Unit 2 facility totalling 317,587 sq ft of space. It has 15m eaves as well as 30 dock and four level access doors, a 50kn/sqm floor loading and a 55m yard depth. It has been built to an EPC A specification. It is being marketed through DTRE and Avison Young at a quoting rent of £6.25 per sq ft.
The supply problem can be summed up as fairly straightforward by Jackson: “Developers and funds have not been building as much speculative space as they were in 2008, they are much more thoughtful and circumspect. However, it does not take too much to change the sentiment; three or four sheds go and perhaps there will be more speculative development – it’s a game of wait and see.”
That is not to say that no developer or fund is willing to speculatively build. Clients of Bremner, joint venture partners, Richardsons Capital and Thorngrove Land & Property are committed to speculatively build 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.
A 41 week building programme is due to commence on the 20th November with the demolition of the existing facility.
Cushman & Wakefield and Commercial Property Partners are joint letting agents.
Bremner says: “This development is a real bold and confident statement in the market.”
For Thorngrove it was logical. Charnley comments: “The council was very supportive of our proposed scheme recognising not only the high quality design of the building but also that it provides a much needed solution to the region’s lack of large distribution warehouses.
“With that in mind, we are confident that Nickel 28 will appeal to the increasing demand from logistics companies searching for premises along this popular central M1 corridor.”
It seems as if other developers and funds are picking up the speculative baton but in a considered manner. Goodman has just announced that it will build 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 will be 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.
Over in East Anglia where there are similar supply problems developer Jaynic has pro-actively submitted a reserved matters application for two large speculative warehouses on its 114-acre Suffolk Park business scheme at Bury St Edmunds, which will accommodate up to 2 million sq ft of business, distribution and industrial space.
There will be one unit of 205,000 sq ft and one of 150,000 sq ft. Jaynic plans to develop them speculatively to capture unsatisfied demand from occupiers seeking to lease large distribution space along the A14 corridor.
Simon Wilson, Suffolk Park project director at Jaynic says “We are aiming for a decision by Autumn 2017. A positive outcome would enable us to have units ready for occupation in Quarter three, 2018, comfortably ahead of anything comparable in the East of England region.”
Richard Pyatt director of property consultancy Hazells, which is joint agent with Savills on the scheme, says: “There is a real shortage of large-scale logistics facilities in the area and we are seeing more and more demand. Our enquiries to date demonstrate unsatisfied demand for over 3.5 million sq ft in the region.”
Richard Sullivan, Savills’ national head of industrial and logistics adds: “The supply of large, good quality industrial and distribution units in the UK is at an all-time low. The ability to deliver units of this size and specification into the region offers an excellent opportunity to attract new occupiers to Bury St Edmunds as demand from a wide-range of logistics operators remains at an all-time high.”
While it is good to see speculative development returning to the region, most funds and developers are still fighting shy of such a decision. Andrew Gulliford of SEGRO, which with partner Roxhill, is developing the 6 million sq ft East Midlands Gateway, says: “As long as you get the permits and infrastructure in place along with the development plots it does not take long to build on a pre-let basis. Anything over 350,000 sq ft is pre-let territory.”
The 700-acre scheme can accommodate occupiers looking for up to 2 million sq ft of floor space and is reported to have already secured a 600,000 sq ft pre-let to Nestle.
“There is an active available workforce nearby which is proving a draw for potential occupiers and we have increased the power capacity to the site from our initial analysis reflecting the growth in automation and robotics. We realised that big sheds would need a big power pool.”
Approximately £100 million has been spent on infrastructure works on the site which includes a 50-acre strategic rail freight terminal as well as extensive road improvements, designed to give the best possible connectivity to the 10 plots now available to occupiers.
A partnership with Highways England and other highways authorities means there will also be £35 million of road improvements associated with East Midlands Gateway, including better connections at Junction 24 and Junction 24A of the M1 motorway. Burbage Realty, CBRE and Savills are agents for the scheme.
Other big schemes 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.
First Panattoni, the UK development arm of Panattoni Europe – the largest developer of logistics facilities in Europe – in conjunction with Warwickshire-based IM Properties can accommodate units up to 450,000 sq ft plus 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.
The SEGRO/Roxhill 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 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 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, however this application is subject to a judicial review.
To the south of the park 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.
Another site being brought to the market is the Midlands Logistics Park in Corby, Northamptonshire. The scheme is being brought forward by property investment company Frogmore and developer Mulberry.
It 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: “Such is the shortage of available sites of this calibre that it has already secured its first pre-let and we are talking seriously to five potential occupiers for the two remaining plots.”
Infrastructure works to date are in excess of £25 million and there are three fully serviced plateaus ready for development.
The scheme will provide some 2.5 million sq ft of storage and distribution space with buildings designed to achieve BREEAM very good.
This is one of the few options in the region to take advantage of a possible eaves height of up to 30m. Letting agency on the scheme are M1 Agency, Burbage Realty and CBRE.
Construction of the building already pre-let is expected to start shortly and is due to PC in December 2018.
This article first appeared in Logistics Manager, December 2017