[asset_ref id=”1173″]The lucrative Liverpool-Leeds corridor has seen a good level of activity in the large sheds market over the past 12 months, to the extent that there is now a lack of availability in certain size ranges.
Paul Mack, associate director of DTZ’s Leeds industrial agency, says: “Despite tough economic conditions we have seen a dramatic rise in transactions over the last nine months. A combination of lower rents and greater incentives being offered by landlords over the past two years and a continued appetite for freehold premises from the occupier sector has certainly created an environment where in some locations take-up levels have exceeded all expectations.”
According to Lambert Smith Hampton’s latest National Industrial & Distribution report, the North West recorded an eight per cent increase in take-up – the highest level of take-up over the past five years. Take-up of good quality existing stock was steady throughout the year but mainly where landlords were prepared to tailor terms to meet occupier’s requirements. In fact, there were 13 transactions on buildings of over 175,000 sq ft.
And things don’t appear to be slowing down. DHL has just taken 360,000 sq ft at Gazeley’s G.Park Liverpool, a joint venture between the developer and MetLife Real Estate Investment, on a ten-year lease. It is the first deal DHL has done with Gazeley in the UK.
“That leaves us with circa 28 acres and we’ve got permission for another two buildings on that site, or 430,000 sq ft as a single unit. The enquiry list is slim but those that are there are strong,” says Gazeley’s Bruce Topley, who expects the site will be let as two buildings of between 100,000 and 350,000 sq ft.
So as the only spec warehouse goes at G.Park Liverpool the options are becoming fewer and farther between.
Perspective
“From an occupier’s perspective they must be getting increasingly concerned with the lack of quality stock available within the M62 Liverpool/Manchester area now compared with say 12-18 months ago in the 200,000 sq ft plus range,” says Julien Kenny-Levick of Colliers.
“Indeed, recent deals at Revolution in Chorley [for Conair] and with G.Park Liverpool…now under offer to DHL, there is real concern that there is insufficient space to meet this continuing demand. Due to a lack of speculative development over the past three years and with a return to speculative development unlikely until the start of 2012, occupiers which have come primarily from the retail sector coupled with a return from the manufacturing sector will have no choice but to proceed down the build to suit procurement route.”
Topley confirms that Gazeley will not return to building speculatively just yet but he says the developer will be looking to replenish its land bank in the North West.
Kenny-Levick adds that it’s likely that with “pre-let” or “pre-sale” transactions that the deals on offer to occupiers will be limited by the economics of the financial appraisal, “which will not work without more sensible rents and lease lengths (min 15 years) and vastly reduced rent free incentives. If the rent/price does not stack up for a developer then the property will not get built.”
The other big news is that Waitrose is set to invest almost £35m in a northern regional distribution centre after signing a deal with Evander Properties to take a 30-acre plot at Matrix Park in Chorley as part of its expansion into the north of England and Scotland.
Currently, Waitrose’s most northerly regional distribution centre is at Bardon in Leicestershire but it is already operating at capacity.
The new site will comprise a 360,000 sq ft warehouse, 50,000 sq ft of office space and a vehicle maintenance unit, allowing the supermarket chain to serve up to 80 branches across the region. A planning application for the scheme is expected to be submitted to Chorley Council on 6th April 2011. If approved the centre should open next autumn creating up to 600 jobs.
David Jones, Waitrose’s supply chain director, says: “This new regional distribution centre will provide a vital platform for future expansion and unlock significant opportunities for us to open more shops in the north of England and Scotland.”
At the end of last year Debenhams took 667,000 sq ft at Evander Properties’ Sherburn Distribution Park just outside Leeds, which is expected to create some 800 jobs.
At the time of the letting, Toby Vernon, senior director at CB Richard Ellis, said: “This significant letting signals positive news for the Yorkshire industrial property market and the regional economy. This is the third plus 400,000 sq ft letting in the region this year [2010], all of which have been to large retailers – Amazon at Vulcan in Doncaster and ASOS at Crossflow, Barnsley.”
DTZ’s Paul Mack expects take-up to continue at a similar rate. However, he says: “With no new development on the horizon, the demand-supply ratio is starting to shift back into the landlord’s favour in certain locations.”
Mike Baugh of DTZ adds that the options are now very limited for properties over 150,000 sq ft. He suggests there have been a few enquiries for 200,000 to 250,000 sq ft properties which is a trend that is likely to continue. “That will lead to take up of remaining space in South Yorkshire and then design & build. It’s going to mean occupiers have to be more prepared for a time lag [when moving] into a new facility though, although nine out of ten need requirements filled quite quickly.
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DHL has taken 360,000 sg ft at G.Park Liverpool on a ten-year lease.
