The rise and rise of the pre-let

There is only a limited supply of modern new units of anywhere near this size in the region.
There are a number of property consultants and developers who are convinced that the only way occupiers are going to be able to get exactly what they want in terms of distribution space in the near future will be if they opt to pre-let and go down the build to suit route.
Already the storm clouds are brewing in the East Midlands, especially for those looking for warehouses over 250,000 sq ft.
Nick Waddington of M3 says: “There is only a limited supply of modern new units of anywhere near this size in the region.”
These include Gazeley’s Solar warehouse at its Magna Park development in Leicestershire. The building totals 275,534 sq ft and boasts a 15m eaves height and 50kN/sq m floor loading.
It has 24 dock and two level access doors and is set on a 14-acre site. Joint letting agents are M3 and Colliers CRE.
At 330,000 sq ft there is The Big Swan in Northamptonshire, just off Junction 15A of the M1 motorway. It has a 12m eaves height and 36 dock and two level access doors, as well as a 50kN/sq m floor loading. The scheme benefits from two secure yards with a minimum 50m depth. It has a gatehouse and 1,900 sq ft transport office. There is room for 45 HGV, as well as 233 car parking spaces.
The property can be split into two units of 220,000 sq ft and 110,000 sq ft. Letting agents are CB Richard Ellis and North Rae Sanders.
ProLogis also has a 402,153 sq ft warehouse at its ProLogis Park Kettering scheme. The warehouse has 30 dock and two level access doors, an FM2 special floor with a loading of 50kN/sq m as well as an eaves height of 12m to underside of haunch. The three-storey offices, totalling 20,000 sq ft, are carpeted throughout and have double glazing, gas central heating and a suspended ceiling. Outside the scheme has security lighting, landscaped surroundings and 104 trailer and 310 car parking spaces. ProLogis is including a free three-year service and maintenance package on the unit when it is let. Marketing agents are Budworth Brown and Burbage Realty.
At its Pineham scheme ProLogis has DC372 totalling 372,572 sq ft. The building has a 12.5m eaves height as well as 32 dock and four level access doors. It boasts 87 trailer parking and 280 car parking spaces. Letting agents are Burbage Realty and Readings Hope & Mann.
There is also Miller Birch and Standard Life’s Langley 255 warehouse in Nottinghamshire, totalling 255,000 sq ft at @ccess 26, which is being marketed by North Rae Sanders, M3 and Innes England.
The warehouse boasts 12m eaves, 20 dock and four level access doors, fitted offices with comfort cooling and raised floors, as well as 68 lorry parking bays and 163 car parking spaces.
Crackerjack
Finally, in Corby, there is Great Line Developments’ Crackerjack building. The 525,000 sq ft cross-docked warehouse has a 15m eaves height, as well as 50 dock and four level access doors. It has capacity to store 77,000 pallets. The building has two service yards and parking for 98 lorries and 336 cars. Letting agents are M3 and GVA Grimley.
Although second-hand, in addition to Solar at Magna Park there is also Hydro. Fashion clothing company Primark recently occupied the three year old building following the destruction of its previous facility by fire in November 2005. Hydro is surplus to requirements now that Primark has taken a larger distribution warehouse in Thrapston.
Hydro totals 422,784 sq ft and has 15m eaves. It incorporates substantial features from 36 dock level doors and a large secure yard up to 92m deep. It is an eco- friendly building with reduced running costs, one of the first in the country to incorporate Gazeley’s Eco Template in 2005. It is being marketed by North Rae Sanders and CB Richard Ellis on a short or long-term basis. The property was originally let to TNT/Primark at a rent of £5.25 per sq ft.
There is another large second-hand building due to come onto the market in the spring. This is a 275,000 sq ft building at Goodman’s Royal Oak complex in Daventry, which is being vacated by Diageo. The property has 9.4m eaves, 15 dock levellers and level access doors, which could be extended, as well as heating, lighting and sprinkler provision. It is being marketed by North Rae Sanders at a rent of £4 per sq ft.
At present there are still some good deals to be done. Waddington says: “It is still a tenant-friendly market and for a good covenant you can secure a year’s rent-free for every five you commit to and you can get something off the quoting rent.”
Obviously how much a tenant can negotiate will depend on how long the buildings have been vacant and on individual landlord circumstances.
Deals
Over the last quarter of 2009 there were a significant number of deals in the region as occupiers sought to make the most of the deals on offer. In fact as Bidwells noted in its latest research: “Over the first half of the year, occupier demand reached a five-year high, with 4.2 million sq ft of requirements recorded on the Bidwells system. The increase in demand has largely been evident at the larger end of the market, with requirements for units in excess of 50,000 sq ft up by 44 per cent over the past six months to 3.65 million sq ft.”
Therefore it is no wonder that so many deals have been concluded recently. Amazon secured 545,000 sq ft at ProLogis’ Kingspark scheme in Peterborough, albeit on a very short-term lease at a rent of £4.50 per sq ft. The online retailer took the space as a temporary fulfilment centre to cover deliveries over the Christmas period.
An Amazon spokesperson explains: “Our goal was to find a centre in a great location with a strong local workforce and Kingston Park in Peterborough offered us just that.”
Peterborough councillors are hoping that Amazon could be persuaded to stay. The company has just four permanent fulfilment centres in the UK, in Glenrothes and Gourock in Scotland, Swansea in Wales and Marston Gate near Milton Keynes, in England.
ProLogis also secured two further lettings in the region. One at Cardinal 3 in Huntingdon. The 79,624 sq ft unit was let on a 15-year lease to pharmaceutical packaging company Firstan, and the other saw Taiwan-based global marketing and manufacturing group Kenmark taking the 150,000 sq ft Eurohub Corby unit in Northamptonshire at a rent in the region of £4.10 per sq ft. Budworth Hardcastle and North Rae Sanders advised ProLogis. Savills acted for Kenmark.
ProLogis implemented an aggressive letting campaign at the end of last year when it announced that it was offering leases from three years with six- monthly break clauses thereafter across the whole of its five million sq ft portfolio in the UK. It seems the strategy is paying off.
Other deals saw Unidrug Distribution Group take Sladen Estates’ Point 28 development, a 173,000 sq ft warehouse in Sutton in Ashfield, Derbyshire at a rent of £4.75 per sq ft.
On the second-hand front, Siko Energy secured Unit 3, totalling 124,148 sq ft, at the Northampton Distribution Centre at a rent of £1.45 per sq ft.
With so many deals finally being secured and a distinct lack of speculative development, there seems to be one solution, occupiers will soon have to secure space by pre-letting.
Andrew Jackson of North Rae Sanders says: “There is no speculative development underway and it is likely to be some while before activity in this sector resumes, therefore new development is likely to be focused on design and build.”
James Chasen of Lambert Smith Hampton agrees: “While there are no new developments being constructed, this will ultimately put pressure on availability as existing stock dries up.
“With the lead times associated with commercial property development we could be looking at a minimum period of another two years before any new schemes come to the market.”
Secured
Indeed there have been two D&B deals secured recently in the region and there are at least two due to sign shortly. Royal Mail bought a site at Swan Valley for £16.5 million, where it has secured a D&B with ProLogis for a new 212,846 sq ft mail hub and distribution centre, while in Derbyshire waste to energy provider Cyclamax has secured a 360,000 sq ft D&B facility at Goodman’s Derby Commercial Park in Rayensway at a rent of £5 per sq ft.
Sean Bremner of Lambert Smith Hampton says: “Goodman’s 115-acre Commercial Park has the ability to accommodate two million sq ft of development and has planning consent for a 1.2 million sq ft cross-dock warehouse, the scheme is unlike anything that Derby has seen before.
“For a long time Derby has been unable to offer premier distribution space with much of the stock being somewhat dated. However, Commercial Park will promote Derby to warehouse and logistics operators in a new light.”
Other developers are pushing sites for D&B; chief among these is Andy Hartwright of developer Gladman, who is promoting Vertical Point in Nottinghamshire. The scheme is located on the site of the former Bevercotes Colliery and has secured outline planning for up to 2.7 million sq ft of space.
Hartwright says: “We believe the scale of this opportunity is unrivalled in the market as we can offer a single building of up to two million sq ft, an eaves height up to 30m and we can reach circa 80 per cent of the UK population within a four-hour drive time.
Disposal strategy
“While we have no current plans to speculatively build the scheme we are completely flexible on our disposal strategy, we are able to sell land, offer D&B deals on a freehold or leasehold basis or offer deals on a phased or expansion basis.
“We are well down the line with infrastructure upgrades and have approvals in place on a new estate road and scheme junction and there are plans to improve the A1/Tywford Bridge junction.”
The total site extends over 200 acres. Developer Gladman can accommodate enquiries from 200,000 sq ft upwards. Letting agents are Lambert Smith Hampton and DTZ.
Hartwright says: “The site also benefits from an historic rail freight link from the site to the Midlands Main line, which could be reintroduced via a W8 gauge link.”
ProLogis is also looking to secure D&B deals. A spokesperson explains: “ProLogis is pleased with the way it is destocking existing buildings with quality occupiers keen to strike good deals in the area. As the existing stock diminishes ProLogis is confident that build-to-suit deals will pick up in 2010.”
Gazeley is also hoping to secure pre-lets at its developments in the region which include G.Park Crick and Magna Park Milton Keynes, where it has recently secured planning permission for Phase 4 known as Glebe Land.
Approved
The Glebe Land site lies north of Magna Park Milton Keynes and will be bound on its east side by the M1 motorway. The approved development will comprise 312,152 sq ft of B1 offices, R & D and light & general industry; and 161,458 sq ft of B8 logistics space and an extension of the linear park. The planning permission will be issued up on the signing of an associated section 106 agreement, which will deal primarily with the payment of the Milton Keynes planning tariff.
Don Morgan, planning director for Gazeley, the project managers on Magna Park, says: “This is a great outcome after two years of negotiations and the permission completes the framework for the Magna Park project. It represents the fourth and final phase of the overall development and enables us to offer a broader range of unit accommodation to the market.”
Indeed as deals pick up some property companies are looking to secure empty warehouses as an investment hoping that they will be able to cash in on the growing demand. Marville properties has bought PE2 on Morley Way, Peterborough at £35 per sq ft from developer Wrenbridge. The 130,850 sq ft warehouse has 12m eaves, ten dock and two level access doors and a 48m deep yard.