Logistics Property Regional Focus NORTH WEST & NORTH WALES
Shed loads of deals
David Thame reports that warehouses in the North West are about to get harder to find and cost a lot more.
age. That means just 1.2m sq ft of grade A space remains in the region and, with 2m sq ft of deals in the pipeline, very little is expected to remain past the summer.
DEPLETION OF AVAILABLE SPACE
The consensus among the region’s logistics property experts after a hectic six months of deal-making is that tenants will
no longer have the whip hand in negotiations with landlords - and that this will cost them. This is because whilst the rest of the UK logistics property scene flatlines, the North West roars ahead. A string of attention-grabbing deals, including Jaguar Land Rover’s decision to take 400,000 sq ft at Hooton, have eaten into the region’s modest supply of newly-built modern warehouse space. That in turn could mean an end to the 20- year standstill in North West warehouse rents. Stuck at between £4.75-£5.50 a sq ft since the early 1990s, experts now predict a steep rise to £6-7 a sq ft for newly-built floorspace. Research from DTZ reveals the market dynamics. Its figures show that take-up in the first three months of 2012 rose to 1.7m sq ft, 20% higher than the quarterly aver-
40 July 2012 Storage Handling Distribution
Supply is already tight. Data from Jones Lang LaSalle’s UK Big Box Indus- trial and Logistics Market research report shows that in 2008 there were 21 new speculatively built units over 100,000 sq ft available for occupation. Today there are only three, totalling 425,000 sq ft at sites in Chester, Winsford and Knowsley. JLL has floated the idea that business park sites – traditionally reserved for office developments – might be ideal locations for new warehouses. The pace of deals shows no sign of slow- ing. Recent signings include Parcelforce signing for 300,000 sq ft in Chorley, Torque Logistics taking 99,000 sq ft in Wigan, Yodel taking 105,000 sq ft at Stakehill, Middleton and Hut Group signing up for the 140,000 sq ft Stobart-owned unit at Link 6/56, Stretton Distribution Centre. Tony O’Keefe, director, industrial agency at DTZ in Manchester, explains: “The ‘availability squeeze’ in the North West is evidenced by increasing demand for pre-let transactions.” Although O’Keefe expects rents to remain at a standstill, thanks to the gloomy economic pros- pects in the UK during 2012 and 2013, he detects signs of movement. The range of incen- tives on offer to potential tenants – from rent-free periods, to easy-in easy-out deals, through to capital contributions or help with fit-out costs – is said to be reducing, especially on smaller units.
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Others are predicting a sharp rise in rents. They point to requirements of more than 2m sq ft which will quickly reduce the North West’s supply of newly-built warehouses to zero. Meantime, design-and-build deals continue apace with Amazon’s agreement with Prologis to take a 1.5m sq ft ware- house near Widnes leading the way. The pressure on supply is already find- ing an outlet at Miller Development’s mighty Omega site. Stalled, thanks to the recession, Omega could be on the brink of a 300,000 sq ft pre-let to Brake Brothers. Neither Miller nor its letting agents, Jones Lang LaSalle and GVA, would comment on the rumour – but if confirmed it could be a significant turn- ing point for the North West shed market.
BIG DEALS IN THE PIPELINE
Big deals are also on the cards at a number of other prominent North West distribu- tion sites. Wilson Bowden is understood to be talking to a number of occupiers look- ing closely at its Kingsway site, Rochdale. The site has already scooped deals with Asda, who took 600,000 sq ft, and JD Sports who signed up for 850,000 sq ft. John Sullivan, associate director at Manches- ter surveyor Lambert Smith Hampton, says the shortage of supply may prompt speculative development, and refurbishment of older ware- house space. He says: “The North West has seen some speculative development principally in Rochdale and Heywood, albeit relatively small-scale level. Both these schemes at Crown Business Park in Rochdale and Birch Business Park in Heywood will complete imminently, and
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