Logistics Manager Analysis: East Midlands property focus…bigger and better?

It seems that warehousing in the region can only go from strength to strength, reports Liza Helps, with take up in the East Midlands up to the end of September 2019 above its five-year average according to research by Cushman & Wakefield.

Indeed, Robert Taylor, associate partner at DTRE, says: “In terms of numbers the East Midlands is on course to have a very good year [regarding take-up].”

Yet while the amount of floorspace taken was up the actual number of deals was down, which, says Simon Lloyd, partner at Cushman & Wakefield: “Indicates a degree of Brexit related nervousness among many occupiers. Overall enquiries are down a bit year-on-year but take up is similar to last year with ecommerce making the market tick.”

Rob Rae, principal managing director at Avison Young, says: “Demand for bigger units is there and enquiry levels for those have held up.”

For Jonathan Wallis, development director at Tritax Symmetry, the sentiment is the same: “What we are seeing generally is that while some of the smaller occupiers are holding back on decisions until they see where things are going, the larger ones are prepared to move forward and take space.”

He cites Eddie Stobart pre-letting the entire first phase speculative build programme at developer Panattoni’s Panattoni Park in Northampton.

Panattoni is developing three buildings for Eddie Stobart totaling 623,000 sq ft comprising 309,630 sq ft, 221,570 sq ft and 92,170 sq ft. The units are let on a 15-year lease, which will commence on practical completion that is expected in September 2020.

The investment has been sold to Gazeley for a figure rumored to be above £80 million, allowing Panattoni to submit reserved matters planning applications for the second phase of the Park, offering occupiers the three remaining plots with units from 260,000 sq ft to 780,000 sq ft. Joint letting agents are Burbage Realty and Savills.

Pre-let activity

John Sambrooks, partner at Gerald Eve, notes: “There has been a lot of pre-let activity in the last few months which support the premises that smaller occupiers are holding back while larger ones continue.”

IM Properties has seen the whole of its 238-acre Appleby Magna scheme between Tamworth and Ashby-de-la-Zouch in Leicestershire, pre-let to two occupiers: DSV, which has taken 27 acres  for a 450,000 sq ft campus, and Jaguar Land Rover for a 2.94  million sq ft global aftermarket parts distribution centre.

It is anticipated that the development of the site of would start in Q2 2020 with the first unit completing May 2021. Jaguar Land Rover would begin transferring operations to the new facility in early 2022 with full completion by early 2023.

IM Properties acquired the land at Appleby Magna in 2016 and identified the opportunity to bring forward the site near Junction 11 of the M42 motorway, as part of its long-term strategy for delivering high quality, large scale employment parks, attractive to major national and international companies.

Supply levels are still relatively tight despite there being a good amount of space available.

According to Avison Young research there are 29 Grade A units above 100,000 sq ft totalling 7.36 million sq ft immediately available in the region – 14 units of 100-200,000 sq ft, seven units of 200- 299,000 sq ft, two units between 300 – 400,000 sq ft, two units of 400 – 500,000 sq ft and four units of 500,000 sq ft plus.

It is rumoured that two of the 500,000 sq ft plus warehouses in the region are under offer. It will only take a few such deals to conclude before there starts to be a shortage in supply and this might get to be a more pointed issue as there is evidence that while speculative development plans are being pushed forward, actual construction starts are slowing.

Mark Webster, partner at DTRE, says: “The burgeoning speculative development pipeline has suddenly stalled due to the geo-politics, but take-up continues.”

Sambrooks agrees: “The foot has been taken off the gas a little in relation to speculative development given the uncertainty but there is very strong pent up demand.”

“Latent letting activity,” says Ed Cole of JLL, “is remarkably strong and once we get out of the political uncertainty there is likely to be a surge.”

Pent-up demand

It is this pent-up demand which could be cause for concern in the near future. Tom Fairlie of DTRE says: “If deals are still happening and there is no immediately available stock coming out of the ground there will be a lack of Grade A product going forward.”

“At present there is choice, says Simon Lloyd of Cushman & Wakefield, “but it tends to be at the larger end of the scale.”

Indeed, there is Prologis’ DC535 at Prologis RFI DIRFT. The cross-docked facility has two 55m yard and 21m eaves. It has 78 dock and seven level access doors, 147 trailer and 415 car parking spaces.  It has a power supply from 1.5Mva. In addition, it has been designed for and capable of expansion up to 940,000 sq ft. Joint letting agents are Burbage Realty, JLL and Savills.

There is also IM Properties’ 532,000 sq ft warehouse at Hinckley Park, adjacent to Junction 1 of the M69 motorway being let by CBRE, Avison Young and Wells McFarlane. It is thought that this is one of the two units under offer along with AEW’s 525,000 sq ft development in Nottingham.

Real estate asset managers AEW and Allianz, are building the 525,000 sq ft cross–docked warehouse at the East Midlands Distribution Centre (EMDC), which it acquired with planning permission from CWC Group.

It seems all the big developer have 500,000 sq ft plus speculative schemes under construction. Panattoni is currently speculatively building a massive 550,000 sq ft cross-dock facility at its Panattoni Park Nottingham scheme near Junction 26 of the M1 motorway. It is due to complete shortly.

The developer is also rumoured to have secured a plethora of other sites in the region, which it intends to speculatively develop. It has recently secured the remaining land at Goodman’s Derby Commercial Park. The developer is currently negotiating changes to Plot L at the site which could provide a 530,000 sq ft cross dock facility which would have 15m eaves, 56 dock levellers as well as parking for up to 389 cars and 114 trailers on a secure 26.5 acre site. It is thought the developer has secured land to provide a further 300,000 sq ft building on the site.

Other buildings immediately available include Prologis’ DC7 unit at Prologis Park Pineham in Northampton totalling 211,304 sq ft, which is being marketed by Burbage Realty, Cushman & Wakefield and CBRE.

There is also Logicor’s 225 at Interlink facility just off Junction 22 of the M1 motorway in Leicestershire. The property totals 225,690 sq ft and joint letting agents are CBRE, Burbage Realty and JLL.

Further up the M1 motorway at Junction 28 Richardsons Capital and Thorngrove Land & Property have Nickel 28 – a 261,000 sq ft high bay distribution warehouse on the South Normanton Industrial Estate in Derbyshire. Savills and Commercial Property Partners are joint letting agents.

Developer Liberty Property Trust and Equation Properties have just launched Liberty 196, a 197,216 sq ft warehouse, which was developed on the former Howard Smith Paper site on the Brackmills Industrial Estate.

While on the secondhand front there is the Quantum unit at Magna Park, Lutterworth; SEGRO’s 418,000 sq ft ex-Primark facility, which is being marketed by Avison Young and JLL with a quoting rent of £6.25 per sq ft.

Nothing going on but the rent

“Rent levels in the region are strong,” says Rae. “We are now seeing rents pushing £7 per sq ft for the bigger warehouses certainly in the prime areas such as Lutterworth.”

Jaime Catherall, associate partner at DTRE, notes: “There is a push in headline rents in areas such as Milton Keynes where companies are quoting £7.95 per sq ft – which is considered pretty punchy.”

However overall rent levels, says Cole, “are not jumping as they did say 18 months ago.”

Land prices on the other hand are strong with rumours of sites going for more than £1.1 million an acre.  Cole says: “We are not seeing many land deals but when we do they are competitively tendered.”

Land prices in Milton Keynes are up to £1.3 million an acre with the likes of Baytree and Griffin paying such sums for sites they have acquired.

Mark Webster of DTE says: “There is a huge weight of money looking for well let logistics product and certain funds and investors happy to take the development risk to secure an edge on the market.”

Developer investor Gazeley has been particularly bullish in its home territory having secured a 220-acre plot of land from Tritax Symmetry to the south of its Magna Park Lutterworth scheme allowing it to create what is considered the largest dedicated logistics park in Europe in one ownership.

A spokesperson for Gazeley said: “Following the receipt of outline planning permissions for up to 7.5 million square feet of logistics floorspace at both Magna Park and Symmetry Park in Lutterworth, Gazeley has bought Symmetry Park from Tritax Big Box REIT plc’s dedicated logistics developer, db symmetry.”

The combination of all three sites Magna Park Magna Park North and Symmetry Park – now known as Magna Park South – totals some 1,360 acres and could eventually have 15.8 million sq ft of buildings

In August this year Gazeley submitted detailed proposals for four warehouses on Magna Park South ranging from 100,000 – 755,000 sq ft.

The largest warehouse, known as Building 8, is set on a 31-acre plot and looks to total 755,831 sq ft. It is proposed that it will have 18m eaves as well as 100 dock and eight level access doors, parking for 150 trailers and 557 cars.

In a planning statement regarding the new mega shed and the intention to raise its external eaves height to 21m, Gazeley said it wished to “proceed as swiftly as possible following a grant of planning permission” on the scheme. DTRE and Burbage Realty are advising.

This feature originally appeared in the December 2019 edition of Logistics Manager: click here to subscribe to the print edition