Despite a marked reduction in take-up, the pressure is still on for space – can the region provide it? Liza Helps reports.
Latest research from Cushman & Wakefield reveals that take-up slowed during the first quarter of the year compared to 2018’s impressive finish; figures showed that nationwide 6.5 million sq ft was taken up over 42 deals.
While empirical evidence for the region specifically, is being processed, anecdotal evidence is pointing to a marked market decrease in take-up. According to Andrew Jackson of Avison Young, there have been only two deals over 100,000 sq ft completed in the first quarter of 2019, totalling less than 600,000 sq ft.
The letting of Goodman and Wilson Bowden’s 336,635 sq ft speculative warehouse Leicester 335 on Leicester Commercial Park, to 3PL 4PX on a 10-year lease at £6 per sq ft and the letting of Perland’s 212,500 sq ft Max 200 unit in Max Park, Corby to CEVA on a 10 year lease at £5.50 per sq ft. The former Bibby Distribution unit boasts 16 dock and two level access doors, 12 m eaves, 50m yard and 132 car and 23 HGV parking spaces.
The Goodman/Wilson Bowden facility has been 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.
“It has been a very slow start to the year,” Jackson says. “Undoubtedly Brexit is making occupiers hold their position until things are clearer. Even if you don’t agree with the outcome, the worst situation is having no decision made…”
Peter Monks of Colliers agrees: “The market is definitely quieter so far this year due to Brexit.”
Despite that however, there is a strong feeling of optimism in terms of pent up occupier demand. Jonathan Wallis of db symmetry says: “We are definitely a bit light on deals done so far this year in the East Midlands, but there is no doubt with Brexit out of the way that will change. There is still a lot of confidence in the long terms strength of the sector and location [from developers].”
Robin Woodbridge of Prologis notes: “Demand over the past five years hasn’t really changed in the East Midlands, despite Brexit, and in our experience, customers have baked Brexit into their business plans.”
Admittedly no one quite foretold that Brexit would be delayed six months until October, thus the general consensus is that there will be significant deals done prior to the end of the first half of the year.
Already there is rumour that US company VF Holdings, which owns brands such as Timberland, Vans and North Face, is set to sign a deal for a 670,000 sq ft warehouse on Phase II of developer Mountpark’s 145-acre Mountpark Bardon scheme near Leicester, just 2.5 miles from Junction 22 of the M1 motorway. Phase II totals just over 72 acres and has outlined planning permission for 1.3 million sq ft of space. Joint letting agents are DTRE and CBRE.
This would be the largest deal secured in the region so far this year and is expected to be just one of many waiting to complete in the wings.
“There are big design and build transactions working their way through the system,” says Jackson. “Quite a lot of occupiers have not taken deals to the next stage because of the political indecision but enquiry levels are still strong.”
Monks adds: “There is a lot of depth to enquiries but take-up has been stifled by Brexit and the government at present.”
According to Robin Woodbridge of Prologis: “Demand over the past five years has not changed in the East Midlands despite Brexit.”
There is definitely an air of change in the marketplace. Simon Lloyd of Cushman & Wakefield says: “There are more viewings taking place and [deals]have been on hold but everything is changing with many occupiers unable to hold back any longer.”
In fact the slight pause in decision-making has enabled more stock to come to market without being snapped up immediately creating slightly more choice for occupiers.
Latest research figures from Cushman& Wakefield say that stock levels reached 59.2 million sq ft nationwide and that the Midlands alone saw a 30 per cent increase in availability.
Andrea Ferranti of Colliers states: “A few years ago there was very little availability in the East Midlands and that was impeding market take-up that is not so much the case now.”
That being said there are still shortages in the region with Jackson putting total availability as the equivalent of just one year’s worth of average take-up. Lloyd explains: “While there is an increase in supply, both the size and geographical range are wide which means that the choice for occupiers is not as extensive as it might first appear. For many build-to-suit options may well prove to be the optimal solution.”
With a shortage of supply still conspicuous and demand still consistent despite a hiatus in take-up developers and indeed investors have continued to bring forward speculative schemes across the region.
There were two big impressive starts with Prologis breaking ground in February on its new speculative 535,000 sq ft industrial logistics building on Prologis RFI DIRFT.
This latest building, known as DC535, will be ready for occupation in October 2019. The cross-docked facility will have two 55m yard and internally will boast 21m eaves. It will also have 78 dock and seven level access doors, 147 trailer and 415 car parking spaces. It has a power supply from 1.5Mva. In addition it has been designed for and capable of expansion up to 940,000 sq ft.
Its environmental specification is, of course, second to none with a BREEAM ‘Very Good’ rating and an EPC rating of A. It has rainwater harvesting and Brise Soleil to reduce solar gain. In addition it has 15 per cent roof lights providing natural daylight and LED lighting to external yard areas and doors as par for the course as well as LED office lighting with automatic movement and daylight controls.
Prologis says the building boasts energy cost savings of up to £283,044.67 a year when compared to an existing building (pre-1995) and £49,173.34 a year compared to a typical new build.
Joint letting agents are Burbage Realty, JLL and Savills.
IM Properties has also broken ground on its 532,000 sq ft warehouse at Hinckley Park, adjacent to Junction 1 of the M69 motorway.
Hinckley 532 will be built alongside a 318,254 sq ft unit for DPD, which is already committed to the 82-acre employment park and will create Europe’s largest automated parcel depot. With a target completion date of the last quarter of 2019, the new Grade A, cross-dock unit, will have 18m eaves as well as 70 dock and eight level doors a 50kn floor loading, two 55m yards and 545 car and 232 HGV parking spaces. There is a power supply of 2MVA installed with up to 8MVA available.
Sustainability wise it is expected to achieve an EPC A rating as well as BREEAM Very Good.
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 2018.”
Joint letting agents are CBRE, Avison Young and Wells McFarlane.
Virtually all the big name developers are speculatively building First Panattoni 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 shortly. 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.
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 has 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 BerlinerLuft 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.
Developer Liberty Property Trust and Equation Properties have just launched Liberty 196, which was developed on the former Howard Smith Paper site on the Brackmills Industrial Estate.
The prime 197,216 sq ft unit comprises a warehouse of 177,192 sq ft, a warehouse office of 15,627 sq ft and a 4,397 sq ft hub office. It has a 15m minimum clear height, floor loading of 50kN, 22 dock and four level access doors, while outside there are yard areas on two elevations, with a maximum depth of 50 metres, 152 car parking spaces and 34 HGV parking spaces.
Developers are also pushing forward a number of schemes through planning but the most significant to date must be the news that Gazeley has secured planning at appeal of a 4.5 million sq ft extension to its Magna Park Lutterworth flagship.
The proposal also includes a training centre, the Logistics Institute of Technology (LIT), an innovation centre, a heritage centre, a 170-acre country park and a new 134 space lorry park that would help reduce a local problem of HGVs stopping in lay-bys overnight.
Other controversial schemes securing planning include dbSymmetry securing consent for its Symmetry Park Kettering planning south side of Kettering just off A14.
Extending to a total of 136 acres the scheme has outline planning for 2.31 million sq ft of logistics floor space. It is situated directly alongside the A14 “Trans-European” freight route at Junction 9.
A Reserved Matters planning application is being worked up for submission later this year so Design and Build requirements can be delivered to meet an occupation date of early 2021.
Take-up falls in East Anglia
According to Savills’ latest Big Shed Briefing, take-up of industrial space (units of 100,000 sq ft +) in the East of England was just 470,000 sq ft in 2018, signifying an 83 per cent decrease year on year.
But it’s not a lack of demand for the region but a chronic shortage of stock, which is holding occupier’s back.
Even with the delivery of 353,732 sq ft of speculative space at Suffolk Park in Bury St Edmunds, the total supply of units over 100,000 sq ft stands at just 861,833 sq ft across five separate buildings.
Key deals for the region in 2018 included Sealey Professional Tools purchasing a 7 acre site to construct a 110,000 sq ft unit at Suffolk Park. The largest transaction was LDH Ladoria’s purchase of a site at Ipswich Gateway where Panattoni are constructing a 230,000 sq ft warehouse.
William Rose of Savills Peterborough, says: “At present take-up across the East of England is being thwarted by an acute lack of stock, yet we are aware of a number of occupiers who are interested in taking space in the region. There remains confidence in the market as proven with the number of smaller speculative units that came out of the ground in 2018 and we are positive that further development announcements are soon to follow.”
Chancerygate’s Alastair King, says: “There is a significant underlying demand [in the region].”
The developer has secured two sites in East Anglia to speculatively build 259,000 sq ft of industrial warehouses, one in Norwich and the other in Ipswich.
“We identified these two sites in East Anglia as part of our on-going expansion into well-connected, strategic regional locations across the UK,” he says.
As well as Suffolk Park which has space to accommodate up to 750,000 sq ft in a single units there is also MidSuffolk’s 100-acre Gateway 14 at Stowmarket that could supply more than one million sq ft of space.
Chris Haworth, chairman of the board of Gateway 14 Ltd – the wholly owned subsidiary set up by the council to develop the site, says: “The Eastern A14 is gathering serious attention from major occupiers and investors because of the lack of supply in other established markets and the great value offered by sites in this region.”
This article first appeared in Logistics Manager, June 2019.