Spec sheds return: 8m sq ft underway

A total of 43 distribution warehouses over 100,000 sq ft have been constructed, or are underway or planned, in the UK this year delivering a total of approximately 8.2 million sq ft, according to the latest research from Strutt & Parker.

Nick Hardie of Strutt & Parker said: “The return to speculative development in the logistics sector following the downturn was initially a slow and cautious one. A significant increase in land and construction costs meant that only development in key locations with limited supply and proven demand was going to be viable for most developers. In mid-2013 as the supply pipeline constricted, to as little as six months of stock in some areas, speculative development in the sector slowly recommenced.”

Strutt & Parker cited the completion of 12 units since speculative development began again this cycle, delivering 2.05m sq ft, of which eight have been let. A further 21 distribution units are currently under construction, due for completion by summer 2016 and will deliver 4.2m sq ft of space. To date, three of these units have secured tenants prior to completion.

Strutt & Parker identified a further 1.9m sq ft of proposed speculative development; of this 900,000 sq ft has planning consent and 1m sq ft is currently being considered. Construction on some of these sites is expected to begin imminently with delivery anticipated for 2016.

While the volume of speculative development is encouraging, Strutt & Parker points out that the sizes of the projects being undertaken haven’t reached the proportions they did in the previous cycle. Hardie said: “This current wave of development has not yet seen the ‘mega shed’ that was common place in the mid to late 2000’s where a number of projects upwards of 500,000 sq ft were undertaken on a speculative basis. Occupiers requiring units larger than 350,000 sq ft are now more likely to seek pre-let agreements where they can have involvement in the specification.”

Currently Prologis’ DC7 Grange Park in Northampton is the largest shed built in this cycle providing 340,000 sq ft. The majority of projects (15) are in the 100,000 sq ft to 150,000 sq ft bracket while there 12 units in the 150,000 sq ft to 200,000 sq ft category and 11 sheds in the 200,000 sq ft to 300,000 sq ft size range with only five logistics units breaching the 300,000 sq ft mark.

According to Strutt & Parker, the Midlands accounts for 46 per cent (3.8m sq ft) of all speculative development being undertaken in this cycle, with development in the South East accounting for 31 per cent (2.5m sq ft). Yorkshire and the North West lag behind slightly, with six and five projects being undertaken in each region respectively, and the South West is yet to see any speculative activity so far.

Hardie said: “The concentration of development in the traditional logistics hotspots of the Midlands and the South East re-emphasises the caution that developers are taking in delivering logistics properties.”

He concludes: “Developers who committed to speculative development are having their confidence rewarded. Two thirds of the completed units have secured tenants and the ones under construction are enjoying strong levels of interest. Success is also being achieved in terms of rental levels which are increasing. IM Properties’ Plot 2 Birch Coppice in Tamworth achieved £6.15 per sq ft when they let the 152,000 sq ft unit to UPS while Prologis secured £6.35 per sq ft at Prologis Park in Midpoint, Birmingham where Syncreon has signed up to take the 127,500 sq ft unit.”

“While we haven’t returned to the heady heights of speculative development that were prevalent in the previous cycle, where at one point approximately 15m sq ft was available, we are benefitting from an established supply pipeline for which there are strong and continuing levels of demand.”

Source: logisticsmanager.com
Portal: logistik-express.com

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