New Road drives industrial demand

After a steady performance in 2010, the industrial market in Bedford is likely to benefit substantially from the new bypass around the town which links the M1 to the A1. “The road has become a real plus point for the town,” said Andrew Clark of Douglas Duff, ”and we hope the general expansion of manufacturing in the region will add to this positive trend.”

There has been an expansion of “demand for large industrial buildings and those suitable for trade counters. We are currently hoping to achieve the letting of a property of 12,449 sq.metres (134,000 sq.ft.).” The majority of the deals are around 1,858 sq.metres (20,000 sq.ft.) in a market which topped 69,675 metres (750,000 sq.ft.) in 2010. That is well ahead of the previous year although down on the 111,480 sq.metres (1.2 million sq.ft.) of 2009.

James Haestier of Colliers International said: “The market has been tough, but, because there has been some quality stock available, there have been deals. However, supply has dried up in the past 18 months. Now, occupiers will struggle to find a building of 18,580 sq.metres (200,000 sq.ft.) or more.”

The problem lies in the lack of speculative building which is due to the government’s empty rates legislation as well as developer caution in the face of a slow economic expansion. Even so, Bedfordshire is likely to see some sizeable schemes soon, driven by pre lets. Gazeley, with ICP Asset Management, for example, has a 32 acre site at Boscombe Road, Dunstable that could take a 69,675 sq.metres (750,000 sq.ft.) shed. Haestier says the bulk of the demand for larger sheds is coming from food and discount retailers.

An analysis by Capita Symonds highlights a resurgence of the small and medium enterprises (SMEs) in the manufacturing sector on the back of a competitive rate for the pound.“These smaller more nimble enterprises are competing on a global scale with both speedier delivery and lower costs,” it said. It notes that such companies are spread throughout the country and are not always in the strongest established industrial areas, helping rural areas and other industrial markets, a point made by Andrew Clarke of Douglas Duff for Bedfordshire.

Rail stations spark deals

Another major scheme adjacent to a railway station is by Solum Regeneration, a joint venture of Network Rail and Kier Property around Walthamstow Central Station. The £20 million project will create a new station square together with a hotel and shops.

There will also be 69 residential units and improved access to the station which serves 2,500 stations throughout the UK. This includes a new pedestrian link towards Queens Road Station. Peter Hughes of Solum commented: ”We are beginning to deliver what are often complex regeneration sites.

This is our second project to secure approval and work is well underway on our first scheme in Epsom. We are advancing plans for a number of other station sites.”

Plans for the regeneration of the sanofi-aventis site in Dagenham have moved forward with the appointment of Savills as advisers on the scheme. This is a major project on

108 acres and Mark Bass of sanofi-aventis said: “Our focus throughout the process of creating a lasting legacy has been to work with proven experts in regenerating commercial/scientific premises in an effort to transform the site into a facility that offers long term benefits to the people of Dagenham.”

Savills’ Neil Rowley commented: “Our master planning expertise will deliver a planning consent that enables such a legacy to be delivered.” Overall management of the regeneration (the existing operation ends in 2013) is with SOG Ltd. Another company, ARCADIS, has already commenced the routine clean up of the manufacturing site.

A master plan for the regeneration process is being drafted with an emphasis on creating new jobs and new business opportunities. Multiple uses are under consideration including office space, laboratory/research & development facilities, manufacturing, warehousing, retail, health and leisure. Once a major manufacturing area dominated by Ford, Dagenham has widened its business horizons. For example there are large sheds for the logistics business. Wolseley, the plumbing business, leased a 13,011 sq.metres (140,000 sq.ft.) shed in Choats Road recently. Driven by the upcoming Olympic Games, there has been considerable development in the area. Another scheme is for a Creative Industries Quarter on an industrial site close to Barking town centre on Abbey Road.

This will have a mix of residential and commercial space developed in two phases around a series of courtyards and riverside spaces that have direct links both to the existing urban developments to the east and the future sites to the west. The plans also encompass the proposed East London transit bus route and a new bridge over the River Roding.

The development, which is designed by Cartwright Pickard Architects, is due to go on site this year. It will have four blocks of 272 units of residential housing together with commercial/office, retail and creative industries uses, new ublic amenity space and a riverside walk.

Ransted takes space

The expansion of the recruitment business has become one of the new growth points for the commercial property market. One of the more aggressive of these recruitment companies appears to be Randstad which has centralised its operations in Hertfordshire into Rosanne House, Welwyn Garden City, Randstad’s Rudi Verhaak said: “The position and configuration of Rosanne House provided the ideal centralised facility for consolidating a number of newly acquired companies into the group structure. It will provide a platform for developing our established businesses locally.” Rosanne House now has only a small amount of space available following the refurbishment by Eagle Welwyn LLC advised by Brasier Freeth and Davies & Co.

In another deal Randstad has taken space in Imperial Court, Luton, a 1,533 sq.metres (16,500 sq.ft.) property which Valad has now sold to Kingston Estates. Valad’s Rob Howe said: “The sale of the last two units brings the development project to a conclusion for us.

Industrials beat offices

In Watford the market for offices is confined to the smaller sizes, while demand in the industrial sector is more broadly based. That is the experience of Peter Brown of Brasier Freeth. The agency has recently let two 929 sq.metres (10,000 sq.ft.) offices in 41-43 Clarendon Road, the type of deal that is the staple diet of the market.

Brown said: “There is more activity but the supply of Grade A offices is declining. The industrial market is more active and we have recently sold September Properties’ 5,853 sq.metres (63,000 sq.ft.) Eclipse after refurbishment which is now fully let.”

Cambridge on the up

The demolition of an existing building on Station Road, Cambridge ahead of a new 7,153 sq.metres (77,000 sq.ft.) building being developed by Brookgate for Microsoft Research is a symbol for this thriving university town.

Apart from anything else, it is such a prominent site that it casts a spell over the area, where there is already some refurbishment occurring. On top of this it is the first new office block in Cambridge for 25 years and the rent of £317.42 a sq.metre (£29.50 a sq.ft.) beats most parts of the UK apart from central London. Underlining the force of the scheme is that Orchard Street Investment Management has bought it for £37 million. Orchard Street’s Gary Felce added to the arguments for Cambridge by saying: “It sets a new tone and standard for the next wave of development to follow.” The student blocks, which are part of the scheme, have also been sold in a £40 million deal with LaSalle Investment Management.

An upbeat view of the market comes from Duncan Quig of Lambert Smith Hampton who points to “the imbalance between demand and supply and the increasing rental tone for offices which is allowing speculative construction.” An example of this is Pace Investments’ 4,831 sq.metres (52,000 sq.ft.) Botanic House, Hills Road where rents could touch £349.70 a sq.metre (£32.50 a sq.ft.) when it is completed in a year’s time. But the top rent could be achieved before then because Pace is apparently negotiating for floor by floor lettings. In any case there are potential

occupiers seeking new space, such as the law firm Mills & Reeve.

Static rents

Static headline office rents in Leeds could affect the timing of new development. At the moment they are set to stay at £258.24 a sq.metre (£24 a sq.ft.) for the rest of 2011, said Knight Frank. This is below the peak of 2009 because of a decline in demand illustrated by the 45% drop in take up last year, said KF’s Alex Munro. Even so, an interesting pointer to the future in Leeds will be when BAM decides to go ahead with its 10,684 sq.metres (115,000 sq.ft.) building adjacent to IVG’s No1 Leeds, which is slightly larger.

King Sturge has joined Knight Frank in letting this property. The firm’s Richard Thornton said: “The building offers large floor plates as well as part floors and is ideally placed to capitalise on various occupier break clauses and lease expiries we have identified this year.” Also being launched is the mixed use property, Indigo Blue, located at the junction of Crown Point Road and Hunslet Lane. It has residential units and 945 sq.metres (10,173 sq.ft.) of offices. It has been developed by Merlin Properties and is being marketed by WSB Property and Sanderson Weatherall.

Manufacturing surge brings new factories?

Substantial changes are taking place in the industrial market as retailers and manufacturers rationalise their activities. The surge in manufacturing output over the past half year is clearly leading to a shortage of capacity as companies find themselves banging against their productive ceiling. Also, retailers are in a fiercely competitive market where cost savings are essential, hence new distribution facilities. The shortage of Grade A industrial space is becoming widespread throughout the country which is being aggravated by a lack of speculative development for the fourth quarter of 2010, said DTZ. Since then, the situation has worsened, judging from regional reports.

DTZ’s Mike Baugh commented: “The Yorkshire region, with its excellent infrastructure and labour supply, continues to be successful in attracting large scale distribution occupiers, With take up of speculatively built Grade A space continuing, and a lack of new developments, the window of opportunity for occupiers to secure significant incentives is closing. Consequently,it is likely that we will see a return to design and build leddeals.”

Take up of industrial space in the final quarter of 2010 in Yorkshire was 36,231 sq.metres (390,000 sq.ft.) bringing the annual total to 278,700 sq.metres (3 million sq.ft.). DTZ said non food retailers were dominant in 2010 with the

region pulling in national distribution hubs. “Yorkshire and Humberside also benefited from inward migration as higher rents and a shortage of supply in the north west pushed companies eastward.” The government is also giving a helping hand to the industrial property market opening up its supply chain to smaller organisations. Mike Baugh said: “The announcement that the government intends to award 25% of its contracts to small and medium sized businesses (SMEs) presents a major opportunity in the market where the supply chain has traditionally been closed to SMEs.”

He believes that this will provide a boost to the Yorkshire market “which in a number of areas is performing well, with supply becoming limited. It is likely to encourage demand and possibly a return to small scale speculative development.”

Green light for sheffield scheme

Although Sheffield and other northern areas were expected to be hit by the government drastically reducing its property requirements, the Yorkshire city still has a number of key developments. One example is that Devonshire Green Holdings has received planning permission for a £3 million mixed use scheme designed by Cartwright Pickard at Arundel Street. The privately funded scheme involves listed buildings being converted into retailing on the ground floor with offices above and a new build of 72 bed student units. It will be built around a central courtyard and is aimed to enhance the Victorian architecture in the Cultural Industrial Quarter.

Morrisons lease office

Having a major company headquarters in an area helps the commercial property market. Morrisons, the supermarket group, provides a classic example of this for Yorkshire. In its latest transaction, through Edward Symmons and Savills, it has leased an 807 sq.metres office at Great Eastern House, Junction 7 Business Park, M62 Leeds. The office is for Morrison Facility Services and is on a 10 year lease. Richard Corby of Edward Symmons said: “This is a sizeable letting for the Leeds out of town market at present and, coupled with the recent lease renewal of another existing tenant, it is clear that this business park remains an attractive location for occupiers.” That is proven by the fact that there is only one small building still available at the business park.

Classic Bruntwood

With its long history of refurbishing large offices, Bruntwood now proposes to revitalise the 11,148 sq.metres City House, Leeds. The plan is for a substantial rebuilding of the 14 storey building to construct a new entrance foyer and mezzanine reception with concierge style service. Bruntwood’s Craig Burrow said: “We are currently finalising our designs and expect to submit a planning application very soon. The specification will be Grade A as we target BREEAM Excellent rating but it will be priced to appeal to a wide range of occupiers. He added that Bruntwood had a 96% occupancy rate on its Leeds properties. “We aim to spot the potential that exists in parts of the urban fabric that others may disregard.”

Sheffield city region takes off

A test of the government’s new policies of promoting regional regeneration and economic growth could come in Yorkshire with Doncaster winning £18 million funding for its scheme. There was stiff competition for the government’s seed capital of £450 million and Doncaster got the cash for its Gateway to the Sheffield City Region project. It fits with past success in pushing regeneration and continues the policy of boosting economic growth and becoming a catalyst for attracting investment.

Part of the project is the construction of the Finningley and Rossington Regeneration Route Scheme (FARRRS) which is the infrastructure needed to unlock the project. Peter Dale of Doncaster Council commented: “This is tremendous news for Doncaster and the Gateway has the potential to deliver approaching 24,000 jobs in the area. The fact that we have received double the average successful bid of £9 million clearly demonstrates the confidence the Government has in Doncaster to deliver such an important scheme.”

One of the vital parts of the Gateway project is the expansion of Robin Hood Airport. Nigel Brewster, Doncaster Chamber President and Local Enterprise Partnership Board Member, said: “Improving access to the airport will have a transformational effect on the whole City Region. We must now capitalise on this by encouraging local businesses to trade internationally and encourage new investors to locate on the airport business park and other key sites within the City Region.” Brewster said a particular objective of the chamber was to “create significant positive momentum for economic growth in the area.”

The airport, which is owned byPeel, is considered to have considerable potential for increasing freight traffic and as a location for business parks. Howard Gannaway, also of the Chamber, said: “The next opportunity for the City Region will be around Enterprise Zones; we hope this announcement will dovetail neatly with any proposals to create additional opportunities for the area.”

£600m Sheffield retail scheme

Another major scheme, a £600 million retail led development in Sheffield city centre by Hammerson, has moved forward with funding for compulsory purchase of the site. £10 million has been provided by Sheffield City Council towards the cost of buying the 20 acres while Hammerson will pay £15 million and the interest on the council loan.

Such is the enthusiasm for the project that the Home and Communities Agency has paid £30 million towards the enabling works and allowed Hammerson to defer paying that money until the shops are open. The original design for the Sevenstone development envisaged a 79,894 sq.metres (860,000 sq.ft.) scheme with more than 36% of the space devoted to a John Lewis department store. On top of this, Hammerson has submitted a planning application for the Eastgate Quarter’s retail scheme in Leeds. There are other major plans for developments in Sheffield with British Land and London & Stamford planning to extend the Meadowhall Shopping Centre.

Data centres funding

Encouragement for the government policy of creating new enterprise zones, which have been so successful in Yorkshire, has come from Highbridge raising £263 million to fund its Cobalt Data Centre Campus near Newcastle. Highbridge will use the money to build two data processing centres of 5,760 sq.metres (62,000 sq.ft.). The money has been raised by Taurus Asset Finance and Harcourt Capital through two Limited Liability Partnerships.

Guy Marsden of Highbridge commented: “We look forward to delivering two facilities as part of our long term strategy to develop quality and competitive data centres at Cobalt Park.” In the past, former coal mining areas, such as the Dearne Valley, have been given a new lease of life through becoming enterprise zones and they could be the model for the next tranche, bringing in new investment and creating employment. Marsden said finance is available for the right projects.

Training companies set pace

In a slowly recovering market in Leeds, there is evidence of a shift in demand that has pushed training companies into seeking more space. That is good for the local economy and indicates a reaction to increased employment prospects but it also has a further significance, suggests Jeff Pearey of Jones Lang LaSalle. “It shows that what training companies provide is essential and that is recognised by the government who have, in effect, privatised part of the service to ensure that school leavers and older people are catered for.” He added that this is a good time for any occupier seeking space because there are “attractive deals available.”

Unlike some other parts of the UK, Leeds is not running out of prime office space. Figures from JLL show that take up in the first quarter was only 3,530 sq.metres (38,000 sq.ft.) with smaller sized deals continuing to dominate. “There will be an improvement in the second quarter,” said Pearey, ”because there are several significant deals coming through. The market feels better than a year ago and there has been an improvement in viewings.” The national picture has improved considerably with the second half of 2010 seeing a 36% rise in lettings in six top regional markets to a total of 510,950 sq.metres (5.5 million sq.ft.), reports JLL.

Training companies also featured nationally as seeking more space. Savills’ first quarter figures for development activity in the UK show that a large part of the country is considerably less active than London and the south east and that March saw a significant decline. The decline in development is mainly due to the public sector reducing its activity. According to Knight Frank in Leeds, prime rents will remain at £258.24 a sq.metre (£24 a sq.ft.), a decline of just over 10% since the peak of 2009. Alex Munro of Knight Frank commented: “Take up last year was 26,291 sq.metres (283,000 sq.ft.) or 45% below the ten year average.

New Grade A space available in the city centre was about 51,095 sq.metres (550,000 sq.ft.), which gives a vacancy rate of 11.6%, unchanged in the fourth quarter over June-September.” There is, however, a positive aspect to the figures because active demand is put at a healthy 39,018 sq.metres (420,000 sq.ft.).