When all is said and done, the West Midlands is still the best logistics location in the country and agents say there are plenty of enquiries for space in the region.
Mark Fitzpatrick of GVA Grimley says: “Generally there are still good levels of enquiry. And for every scheme there is no lack of potential occupiers. However, what is quite frustrating, is that they are taking a lot of time to decide to do a deal.”
With that in mind, Fitzpatrick warns that contrary to rumour: “It is not an occupiers’ market at the moment. A lot of occupiers have probably been unduly influenced by the doom and gloom in other sectors and are expecting to get [rents] 25 per cent less than at the beginning of the year and that is just not the case.
“At present landlords are not offering rent reductions because the occupiers are still there and there is still competition for buildings. If there were no enquiries on our books then maybe there would be developers and landlords offering massive discounts and rent-frees but at present the market is still healthy.”
Looking at the overall picture for occupiers in the West Midlands, John Sambrooks of DTZ Debenham Tie Leung says: “The major impacts on the Midlands logistics industry from a property perspective relate to the availability of land for large distribution centres, congestion and access to markets.
“The north Midlands area has been very popular over the last two to three years because of the availability of large tracts of land and, as such, Stafford and the A38 corridor have been very successful in this sector.
“Increasing congestion around the Birmingham conurbation, which is the major consumer market to be served, means that the area is often best avoided in terms of large distribution centres, as guaranteed delivery times to the customer are of paramount importance. Congestion means unpredictability.
“With increased congestion and the prospect of congestion charging we are likely to see a growing number of smaller distribution centres, or spokes, coming forward around the periphery of the major conurbations including Birmingham to satisfy domestic demand.
“In terms of hot spots and cold spots in the West Midlands, there are no real issues over geography, but the hot spots remain the better located sites, with good quality buildings. The less attractive areas remain those with poor infrastructure and poor quality or older buildings.
“The key requirement from a larger occupier’s point of view is multiplicity of routes, not just proximity to a motorway junction, to ensure maximum transport flexibility. Sites where motorways merge are very popular, such as the M5 and M6 where Opus Land and Goodman are developing Opus 9, a 33-acre production and distribution development capable of accommodating a single building of 432,000 sq ft.”
Gareth Williams of Opus Land says: “We will start the next phase of ground works shortly and at present we are considering whether to speculatively develop the scheme.”
The developers have just secured a local occupier for the first phase of the scheme, which was built speculatively. Point 1 totals 105,475 sq ft and boasts a 12m eaves height, a 50kN/sq m floor loading, eight dock levellers and two level access doors as well as a secure yard. It completed in 2006. Letting agents are King Sturge and DTZ Debenham Tie Leung.
Recently completed is SEGRO’s Meteor Park, which is next to Junction 6 of the M6 and three miles from Birmingham city centre.
Interest
Suitable for B1, B2 and B8 use, the scheme comprises four self-contained industrial/warehouse units, which have been built on the former Delta Metals site. The units are 22,235 sq ft, 37,042 sq ft, 58,609 sq ft and 115,607 sq ft respectively. The range of unit size coupled with Meteor Park’s location has created a good deal of interest from a range of occupiers.
Sambrooks says: “One unit actually sits next to the M6, perfect for any occupier needing swift access to the motorway network. With rents from £5.95 per sq ft there is going to be a lot of interest in Meteor Park and one unit is currently under offer.”
Each unit has a ground floor reception, staff facilities and first floor offices. Outside, gated and fenced service yards benefit from monitored CCTV, external lighting, plus designated lorry and car parking.
Joint agents for the scheme are DTZ Debenham Tie Leung and Knight Frank.
For those occupiers looking for a great deal the signs are to try the second hand market – however you have to be quick as these are being snapped up fast.
Nick Waddington of M3 says: “There is good demand for second hand space particularly from 3PLs looking for more flexible deals.”
Indeed UBS has just let its Colossus building on the Lynehill Industrial Estate, Penkridge, Staffordshire, to Wincanton.
The 3PL intends to exercise its contract with M&S from the facility. The 366,000 sq ft warehouse boasts ten dock and 15 ground access doors and an eaves height of 6m as well as racking for 18,000 pallets. It also has 5,900 sq ft of two-storey offices. It is located just three miles from Junctions 12 and 13 of the M6 motorway and only four miles from the M6 toll. Joint agents North Rae Sanders and Savills were marketing the site at £3.45 per sq ft.
Wincanton has also taken five buildings totalling 540,000 sq ft on the Marchington Estate to service the M&S contract. The buildings are all in close proximity to each other. There were three different rents and different break clauses as well but it is believed the average rent paid was in the region of £3.25 per sq ft. M3 advised the landlord CBRE Investors.
In other second-hand deals, PDQ has taken Pritchard Group’s 233,357 sq ft warehouse at Citygate Park close to Junction 2 of the M54 motorway in Wolverhampton on a years lease at £3.50 per sq ft.
The warehouse has loading access to three elevations, 23 dock level and three level access doors as well as marshalling posts to front and rear loading areas and canopy-covered loading to two elevations. It boasts a 6.5m eaves height, high level down lighters, oil fired blowers and a sprinkler fire system throughout. Pritchard Holdings has also applied for planning to redevelop the site for other uses.
Major second-hand schemes with refurbished space now on the market include the recently completed Opus Axis at Centrum 100 at Burton upon Trent, where an extended distribution centre of 460,651 sq ft is available through joint letting agents North Rae Sanders, GVA Grimley and Jones Lang LaSalle.
The 300,000 sq ft former Littlewoods Distribution Centre at Centrum 100 Business Park on the A38, close to its intersection with the A50, was acquired for £22.6 million at the end of 2006.
Unrivalled
Opus has extended the existing space by a further 160,000 sq ft featuring a ‘cross docked’ facility. The resulting 460,000 sq ft facility will be offered at a guideline rent of £5.25 per sq ft.
David Gallagher of Opus said: “Opus Axis boasts an unrivalled spec when compared with other speculatively built units of its size; as such, it will have broad appeal to prospective occupiers in all sectors and will reduce their set up costs considerably.”
The building boasts a 15m eaves height, a floor loading of 50kN/sq m and two storey offices. It has 41 dock and six grade level doors as well as three service yards of 62m, 56m and 35m depth.
There is also The Big Tel in Telford. Wincanton formerly occupied the 242,715 sq ft building. It is owned by Blackrock (Merrill Lynch) and is being offered through joint letting agents M3 and Knight Frank at a rent in the region of £4.25 per sq ft.
The building boasts heating, lighting and racking as well as offices totalling 7,992 sq ft and 15 dock and eight level access doors.
Nick Waddington of M3 says: “What is so great about this building is that there are no capital costs of having to fit it out and it is available on more flexible leases than occupiers would be looking at on brand new institutional space.”
Other units include Force Ten on the Lichfield Road Industrial Estate in Tamworth, which offers 161,458 sq ft of space. The former industrial complex is to be refurbished and is segregated in units from 20,000 sq ft. It is being marketed through Knight Frank and King Sturge at a rent of £3.50 per sq ft.
There is also Big Blue totalling 202,000 sq ft close to Junction 6 of the M6 motorway. It boasts 18.5m eaves with 16 dock levellers and is cross-docked. It is part chilled and part racked out. Owner Innovate Logistics is looking for an assignment or sub-lease on the property, which is surplus to requirement. Letting agent M3 is quoting £4.95 per sq ft.
Innovate has another building, which it never occupied known as Lynx Birmingham. The 148,816 sq ft building has 16m eaves, 12 dock and two level access doors, a secure 50m-yard with gatehouse and a 50kN/sq m floor loading. It is available through joint agents M3 and CB Richard Ellis at a rent of £5.50 per sq ft.
In Solihull there is the former Land Rover Distribution Centre on the Elmdon Trading Estate totalling 171,229 sq ft on a 13.8-acre site.
The purpose-built cross-dock facility has a minimum eaves height of just over 10m and is served by 21 surface loading bays with extensive covered canopy areas to the front and rear. It has single storey offices to the front of the main entrance while on the opposite corner there is a two-storey office block. It is located a few miles from Junction 6 of the M42 motorway. It is on the market through Cushman & Wakefield.
Close by, GVA Grimley is marketing 25 Elmdon Trading Estate. The second hand building totals 171,351 sq ft and is located off Bickenhill Lane. It has 9.1m eaves. Access is via 11 electronically operated roller shutter doors with loading canopies. Office accommodation has gas radiator central heating, suspended ceilings with integral lighting and also includes male and female toilets, canteen and kitchen. Externally the property has car parking for 50 cars.
Increase
According to King Sturge’s latest UK Industrial & Distribution Floor space report the total amount of industrial and distribution space as December 2007 in the West Midlands increased by two per cent to 33,087,000 sq ft and availability in large buildings rose by 25 per cent to 12,535,400 sq ft representing some 37.9 per cent of the regions total available stock.
King Sturge reports that the West Midlands has seen an increase in the level of speculative development under construction since its previous survey. The figure stands at a whopping 3,093,898.12 sq ft across 14 schemes.
There are currently nine large distribution units under construction. The largest of these is under construction at Rugeley, Staffordshire. The Gazeley-developed G Park Rugeley building, is a 696,720.76 sq ft cross-docked building on a 39.54-acre site.
Nigel Dolan of Gazeley says: “Flair is the largest speculatively built unit under construction in the UK at the moment.”
The building will boast 14.3m clear to underside haunch, 80 dock and eight level access doors, on a site with a density of just 41 per cent, leaving plenty of room for HGVs etc. Indeed the facility has some 523 car parking spaces and 260 lorry spaces.
As with all Gazeley developments, there are significant environmental features to reduce carbon dioxide emissions and save money included at no extra cost.
Dolan says he expects practical completion in the autumn. “But we could bring it in sooner if we get an occupier. The size and configuration of the unit means it could be used for a wide variety of uses and chilled facilities could be accommodated.”
Gazeley is also bringing forward its Blue Planet scheme in Chatterley Valley, Staffordshire, where it has just started on site. The scheme is expected to be completed by the end of the year.
The £50m pioneering Blue Planet will be built so that it does not add to the carbon footprint of the UK and, in fact, will reduce the amount of carbon generated through a variety of means including its own bio-fuel micro power station, using rapeseed oil, which will produce sufficient power and heat for the on-site buildings and a surplus that will provide enough energy to power up to 650 local homes.
Other sustainability credentials of the scheme include thermally-efficient buildings with air tightness and thermal insulation 25 per cent better than current building regulations. They will use efficient systems for further energy reduction and this will be achieved with low-energy lighting, maximum use of natural light, under floor heating and a solar panel wall. The latest solar cell technology will be incorporated into special roof lights, which eliminate night time light pollution. Kinetic plates will be installed to capture energy every time a vehicle enters the site.
The development has been split into two plots. Plot A will provide three units capable of offering flexible accommodation from 18,000 sq ft up to 40,000 sq ft. It offers a total development area of 116,000 sq ft. Plot B provides a larger single building with ancillary office accommodation totalling 385,000 sq ft of warehousing.
Fifty-two per cent of the site will be dedicated to open space. Gazeley worked in consultation with the local community before designing the scheme to offer extensive “greenscaping” to the site including public footpaths, links to canal towpaths and the preservation and improvements to ecological habitats.
Bulleys and Lambert Smith Hampton advised Advantage West Midlands and Newcastle-under-Lyme Council, and M3 advised Gazeley.
ProLogis Park Midpoint in Birmingham currently has two buildings under construction, the larger being 312,373.56 sq ft and the smaller 234,912.32 sq ft. It is expected that both of these buildings will complete in August. A further two large distribution units are planned on this site.
ProLogis Park Stoke has one building under construction; unit DC3 will total 384,852.92 sq ft and is expected to be available for occupation in June. A second building of 121,953.84 sq ft is available on this site on a design and build basis.
Citadel Junction is a further distribution unit under construction in this region. Located in Darlaston, Walsall this unit will provide a total of 319,884.04 sq ft. The developer, Coltham Development, hopes this unit will be available for occupation shortly.
Work has just started on Standard Life Investments £17.6 million 14.9-acre industrial scheme, The Duke, on Wellington Road in the heart of Burton.
The 300,000 sq ft speculative development will provide a top specification finish, with 12 metre eaves, 50kN/sqm floor loading, 24 dock levellers and four level access doors, 55 lorry spaces and 50m yard depth.
Mike Price of Knight Frank believes such top specification speculative developments are essential to maintain the strength of the resilient Midlands market.
Price says: “According to a recent RICS survey, new development starts saw a decline at regional level at the beginning of quarter one, 2008. Yet the demand for new industrial property appears very much alive.
“The central location and strong infrastructure of the Midlands means Burton continues to be a property hotspot for warehouse and distribution occupiers. With fewer speculative schemes coming forward, it is innovative developments such as The Duke that will help to maintain the appeal of the region.”
Completion
The building was formally launched to the market earlier in the year with completion due in August 2008. Joint agents are Knight Frank and M3.
At Birch Coppice Business Park in North Warwickshire, King Sturge says that IM Properties is on site with a 249,901 sq ft building. Practical completion is expected in June.
At Monkspath, Solihull, The Revelan Group is just about to complete its Stirling 150 building. This 149,327.28 sq ft unit has been completely rebuilt and boasts 12m eaves, 12 dock levellers and a 50m deep yard. It is being marketed by joint letting agents M3 and Colliers CRE at a quoting rent of £5.95 per sq ft or is available freehold for £85 per sq ft.
Developers Wrenbridge and Gleeson have recently completed Kingswood Lakeside 127, a 127,500 sq ft warehouse at Kingswood Lakeside Business and Distribution Park, Cannock.
The warehouse has 12m eaves, ten dock-level and two level access loading doors as well as 7,000 sq ft of office space, secure parking for 126 cars and 40 lorries and the potential to increase the amount of parking and storage by expanding the current 50m rear yard to up to 114m giving an average depth of 80m.
The warehouse is immediately available either freehold or at an annual rent of £5.50 per sq ft through joint agents North Rae Sanders and King Sturge.
Impressive
It makes impressive reading. But, as the agents say, there are still record numbers of enquiries for space. Indeed some are saying that it would only take a few select deals before occupiers looking within specific size ranges, for example in the 250,000 – 350,000 sq ft, suddenly find there is a dearth of supply.
Price says: “For occupiers, if there is more take up there will be far less choice and a little more forward thinking could be required. That said, larger distribution companies are doing that already and looking at having multi-occupier sites so that they have accommodation available when contracts come up.
“Indeed Kuehne & Nagel has just taken a 525,000 sq ft building in Wellingborough off ProLogis and is believed to be looking for a further two for multi-occupancy.”
Agents are saying that there is less choice in terms of speculative development, as the biggest developers do not want to build out mainly because of issues of void rates. At the smaller end of the scale, developers such as Chancery Gate are rumoured not to be building out at its HP site and Boultbee is again not looking to build out its scheme in the region.
Looking at rents in the region, Robert Rae of North Rae Sanders says: “Rents have risen in all areas of the Golden Triangle to £5 plus from £4.75 per sq ft – they have gone up some up 25p per sq ft in a year.”
Gerald Eve’s latest Prime Logistics research confirms that they have risen in the last year with Birmingham showing the marked increase averaging a 15p per sq ft rise.
Modest
Looking ahead, Gerald Eve says: “We expect modest prime rental growth over the next three years with the greatest increases expected in locations in London and the East and West Midlands.”
That is not to say that developers are not putting forward sites for planning. Gazeley has been very acquisitive recently and secured land totalling 100 acres in Crick from vendors Barwood Developments and RREEF.
The site is situated at junction 18 of the M1 in the heart of the logistics ‘golden triangle’ and has outline planning granted for 1.5m sq ft of logistics space. Planning consent was secured by Barwood and RREEF during 2006.
The deal is subject to a delayed completion until November 2008, following which Gazeley hopes to commence redevelopment of the site.
Gazeley was advised by CBRE while Burbage Realty and M3 advised Barwood and RREEF.
Gazeley has also secured 21 acres in Meir, Stoke-on-Trent from Johnson Matthey, a materials technology and chemicals company. Dolan says the company is in the process of working up a planning application on the site, which could accommodate up to 450,000 sq ft. He says it would look to offer built-to-suit.
Gazeley is also completing due diligence on an 11 acre site in Nuneaton formerly occupied by UPS. The building would be redeveloped and planning is being put forward for a 220,000 sq ft scheme.
Kilmartin Property Group has obtained detailed planning consent for a warehouse development at Vernon Park, the former Nightowl Truckstop, following the submission of a second application.
Kilmartin plans to develop the 14-acre site into four new-build industrial warehouse units, comprising a total of 244,500 sq ft. Construction works are scheduled to start on site this summer (2008) and the development is due for practical completion by Easter 2009.
Unemployment
Jim Bryan, director of Kilmartin, says: “We have worked closely together with the council to ensure that the needs of the local area are considered. We are confident therefore that our scheme, which is projected to bring 400 much needed jobs into an area highlighted as having one of the UK’s highest unemployment rates, will provide long-term benefits.
“Vernon Park strongly complements our existing development portfolio and, with its location fronting Junction 1 of the M54 motorway, offers one of the best connected industrial and distribution sites in the region. We have already received good interest from occupiers and look forward to announcing initial pre-letting activity in due course.”
Acquired with vacant possession, Vernon Park was one of three former truck-stop sites acquired by Kilmartin in 2007 from owner-occupier Nightowl, the UK’s largest truck stop service provider, following the park’s closure.
