Can the Northwest offer logistics occupiers everything that they seek? Liza Helps reports.
It’s the cradle of the industrial revolution – quite literally the dark satanic mills of old. And now it is increasingly a mecca for savvy logistics operators as the Northern Powerhouse gains traction.
Compared to the ubiquitous Golden Triangle, a hundred miles to the south or so, labour availability is higher and at a discount and for the more footloose ecommerce retailers this is indeed something to be considered, when operational costs are the fine line between success or failure.
It is hardly surprising then that take-up in 2018 has been strong – indeed it is set to surpass 2017 and be on a par with, if not exceeding, 2016, which was itself a record year. According to Paul Cook of CBRE: “2018 started really slowly but in terms of take-up for industrial space, it is almost a record year and [all the statistics are not even in yet].”
Indeed research by Colliers has stated that take-up of warehouses over 100,000 sq ft is set to breach 5 million sq ft; up considerably from last year’s 3.4 million sq ft. “It is just as well 2017 was below average, “ says John Sullivan of Colliers, “as it has allowed speculative development to ‘catch-up’. There were not the schemes to satisfy demand in 2017.”
“Take-up in 2018 is broadly inline with the five year average of around 4.9 million sq ft,” says Sam Royle of Cushman & Wakefield.
The plethora of recent deals point to a sustained demand for warehouse space – in particular a demand for large units. These deals include outdoor clothing specialist Go Outdoors taking the 352,000 sq ft former Keuhne + Nagel unit at Midpoint 18 in Middlewich from Delin Capital on a five-year lease.
In addition, healthcare logistics company Movianto is to relocate from its existing premises in Knowsley and take a 373,000 sq ft unit on a 15-year lease in Haydock Green in St Helens, as well as a further 300,000 sq ft at nearly speculative industrial scheme Titan Knowsley.
Amazon has secured a 360,000 sq ft letting at Bericote’s 90-acre M6Major.com scheme in St Helens, Haydock. The pre-let unit will comprise a 327,911 sq ft storage and distribution site with about 29,500 sq ft of office space. Its total size would be 361,092 sq ft and be made up of the main warehouse, a head office and two hub offices, 111 docking spaces, 211 HGV parking spaces, 437 car spaces and a proposed area of landscaping.
Royal Mail has also agreed a pre-let for a 300,000 sq ft plus facility in the North West. It is taking a 346,000 sq ft unit at the next phase of Omega Warrington, due to complete construction shortly.
Mountpark Logistics is forward-funding the development at Omega South, which features 750,000 sq ft of warehouses across three units.
Two other units of 137,000 sq ft and 97,000 sq ft are also being delivered. A fourth unit, totalling 184,000 sq ft, also has planning consent and will follow as a second phase.
Omega Warrington Ltd is carrying out construction work at the site, and a reserved matters planning application was given the go-ahead in January 2018. The unit will act as an additional base for Royal Mail, which also has a facility just off Junction 21a of the M6, as well as a smaller facility as part of the first phase of Omega.
JLL and CBRE are the retained agents for the second phase of Omega.
The recent flurry of deals since September 2018 has put the focus strongly on what is left. According to Cook there is about 5 million sq ft of space equating to just a year’s worth of available stock: “The concern is that unless that stock is replenished there will be severe shortages.”
It is not just the amount of stock that is the issue, there is also the quality of the remaining stock available. According to Savills research earlier in the summer of 2018 there was 5.6 million sq ft available in the North West across 30 separate units. While this was the highest amount of any region, 62 per cent of the available space was either Grade B or C quality.
Jonathan Atherton of Savills says: “There is weak occupier demand for this product, which has resulted in poorer quality units staying vacant for longer periods.
“Despite the North West having the most amount of supply in the UK, supply has actually been falling in the region. Current supply is nearly 20 per cent below the highs of 2016 where supply totalled 6.9 million sq ft. Furthermore with occupier demand being focussed predominantly on Grade A space, there is only a year’s worth of Grade A supply in the region. There are currently less than 10 Grade A units available in the North West.”
Dean Young of Lambert Smith Hampton adds: “There is not enough supply and the reason for that is a surge in ecommerce, which in turn is driving the amount of warehouse space required to fulfil consumer demand.”
Demand is also being bolstered by SMEs and manufacturers, says Mike Walker of Chancerygate. “It is not just ecommerce driving demand, a lot of smaller manufacturers and SMEs need to upgrade their premises to more customer facing buildings. For a long time developer and investors would not build the smaller facilities needed and the result was a dearth of these units. Now that these are deemed viable to build again there is pent up demand, which of course is fuelling further development.”
With a shortage of space and sustained demand it is hardly surprising that rent levels have increased. According to research from Cushman & Wakefield, prime rents in the North West registered the strongest growth over the year at 6.2 per cent.
Royal Mail, advised by CBRE, is thought to have agreed a rent of £6.25 per sq ft for its 360,000 sq ft facility at Omega South.
Cook says: “Rents on Grade A stock are definitley into the mid £6s. The best deals done two years ago at Logistcs North and Omega were around £5.75 – £6 per sq ft. We are definitely seeing an upward rent trend.”
Rick Davies of Davies Harrison agrees: “Industrial funds and landlords are seeing substantial rental growth.” Indeed research by Savills says rent growth in the region has increased 35 per cent since 2013.
Its not just the bog sheds where rent levels are increasing, Royle suggests: “Occupiers looking for units sub 50,000 sq ft should expect rent levels north of £7 per sq ft.”
While rent increases certainly make good headlines and possibly difficult reading, the good news is that they also bolster development viability. Atherton says: “Developers are pushing the button on speculative development and getting sites oven ready…”
Taylor notes: “There is a wave of speculative development coming out of the ground and there is more to come in the New Year as well.”
Schemes include Panattoni’s 240,000 sq ft development in Crewe to be known as Crewe 240. The development is due to be completed shortly and is being built to BREEAM “Very Good” and EPC “A” standards.
The facility will have a 226,481 sq ft warehouse with 10,088 sq ft of two-storey offices as well as reception and gatehouse. It will have 15m eaves, 50kn/sqm floor loading, 15 per cent roof lights as well as 18 dock and four level access doors, 9 tonne rack leg loading 43 HGV and 184 car parking spaces.
It is situated close to Junction 16 of the M6 motorway and the Bentley Motors manufacturing plant on Pyms Lane in the town.The location is also set to benefit from the recently announced upgrade of the A500, which is due to be widened in preparation for Crewe’s proposed HS2 hub station.
Dan Burn, development director at Panattoni says: “With the increased growth of e-commerce and the rising demand for large units of this scale, Crewe 240 offers a unique opportunity for warehouse and logistics operators.” The retained agents for Crewe 240 are CBRE, Legat Owen and Burbage Realty.
As well as Crewe the developer has its joint venture scheme with Exeter Property for a 375,000 sq ft facility at Logistics North near Bolton, where JLL and Savills are joint agents.
Known as 375 at Logistics North This is the second unit being developed by the joint venture at Logistics North. The previous speculative build was a 360,000 sq ft unit, which is occupied by Amazon.
Logistics North is one of the biggest developments of its type being brought forward in the North of England. The 250 acre scheme offers immediate access to Junction 4 of the M61 and is just 3 miles from the M60 and M62, providing easy access to the key ports of Liverpool and Hull.
The facility will have 15m eaves, 35 dock and four level access doors as well as parking for 73 HGVs and 330 cars.
Then there is Grand Central in Trafford Park totalling 185,000 sq ft. The unit is being built by L&G and Peel Logistics. Letting agents are Avison Young and Savills.
Devlopers DB Symmetry and Pochins are looking to start on two speculative units at Ma6nitude in the New Year of 149,000 sq ft and 41,000 sq ft. The project is expected to complete in summer 2019 with Pochins acting as main contractor. Designed by architect AEW, the retained agents for the units are Legat Owen, B8RE, and Savills.
Further phases are also likely to be brought forward on nearby land, which the joint venture partners signed an option for in May 2018. This gives the developers the chance to build out a further 69 acres, which is allocated for employment use under Cheshire East’s Local Plan; units here vary between 92,000 sq ft and 375,000 sq ft.
The biggest speculative development in the region is set to be Bericote’s 523,000 sq ft facility at its M6Major.com scheme in Haydock. The building will comprise a 476,000 sq ft storage and distribution warehouse with about 42,500 sq ft of total office space – providing 523,500 sq ft overall.
However, Len Rosso of Colliers says: “The next wave of speculative development is limited and that is why we need more. There are a number of sites that can take larger buildings but these are not quite ready as yet.”
Young adds: “Developer and investors are providing a service for the occupiers; they want to provider space but inevitably property [development]is a slow process.” If that were not enough Walker notes: “The amount of land available [for development]is fairly slight there are not many sites to go at. There has not been a lot of land transactions simply because there is not the supply.”
Davies says: “The big issue at the moment is the shortage of development opportunities.” Atherton agrees and adds “its not just availability it is also about deliverabilty.”
The release of land for development moves slowly and despite the various drafts and spatial frameworks proposed by a variety local authorities, which involves the controversial release of greenbelt unless these are fast tracked these sites will not be coming to the fore for a few years yet.
Sites in the pipeline include db symmetry’s proposal for a 1.44 m sq ft scheme at Junction 25 of the M6 corridor to the south-west of Wigan. While it is within the Green Belt, it has been identified in the Greater Manchester Spatial Framework (GMSF) as part of a proposed employment site allocation. This site is considered suitable for logistics as it has direct access to the M6 Junction 25 slip road, meaning vehicles do not need to pass through residential areas. The scheme would be known as Symmetry Park Wigan and a planning application was submitted to Wigan Council in August 2018.
This article first appeared in Logistics Manager, February 2019