Cashing in at Cabot

The Crown Estate is cashing in on the successful Cabot Park, Avonmouth by selling a third share to Axa Real Estate acting for a client.

The 33 acre site will be developed by the Co-operative group as a regional distribution centre. The Crown Estate will retain the other 64 acres on the park, which is used by Honda for storing its vehicles. The park wasdeveloped by a joint venture of Gallan and Stoford with DJ Deloitte acting for the Crown Estate.

The Crown’s regional portfolio includes shopping centres, retail parks, industrial estates and business parks across the UK. Its portfolio is valued at over £7 billion.

Avonmouth is at the heart of an active industrial market that benefits from good transport links. This brings a steady stream of deals, such as Flights Hallmark taking 3,467 sq.metres (37,317 sq.ft.), through Lambert Smith Hampton (LSH), in Silverton Investments’ Port Edward Centre. The building will be used by a fleet of buses serving the region. LSH’s Tim Beare commented: “The Port Edward Centre is now a fully occupied estate, further demonstrating that Avonmouth
continues to be a target destination for a broad range of high quality occupiers.”

The strength of the Avonmouth market makes refurbishments such as the Croudace Properties’ unit at Third Way Corner (which is being marketed by DTZ and Jones Lang LaSalle), profitable. Research by DTZ shows that the south west has the smallest amount of industrial space available in the UK, now below 10% of total availability.

The firm’s Philip Cranstone said: “The refurbishment of the unit is a good example of the emerging Grade B battleground in the south west and results in some of the best quality refurbished space in Avonmouth.”

A foretaste of how the market is going is provided by Central Park, Bristol getting its first pre let with the pallet distributor CHEP taking 4,645 sq.metres (50,000 sq.ft.) for a 15 year lease. It will be operational in the second quarter of 2012.

Swinging Edinburgh's way

The swing of the pendulum between the Scottish cities appears to have moved favourably for Edinburgh but less so for Glasgow while Aberdeen powers ahead on the crest of an oil wave. Even so, the level of activity remains weakened by the recession that started in 2007 and has hit confidence hard throughout the UK.

That is only part of the picture. The other is of a more resilient industrial sector and the impact of such improvements as the regeneration of the Clyde and the new M74 link.

According to the Registers of Scotland, commercial property transactions are down to the level of 2007 with a total of £890 million in the first half, which is £200 million below January-June 2010. David Melhuish of the Scottish Property Federation said: “Generally the market is bumping along the bottom.” As far as investment is concerned, in the first half it totalled £165 million, down from £180 million in the preceding six months. Half of this was accounted for by Glasgow and Edinburgh.

Campbell Docherty of CB Richard Ellis said: “There is still good demand from UK institutions and significant interest from overseas investors, specifically German open ended funds, in the prime regional office market although a severe lack of investment products and a shortage of development pipeline is hampering deal volume.” The CBRE report on the market highlights the stronger performance of industrial property compared with offices so far this year. Ryden’s Alan Gilkison said: ”The mid sized market, up to 3,716 sq.metres (40,000 sq.ft.), has been quiet while the smaller sector as well as larger sheds has improved.”

He noted that there had been a shift in demand for space from distribution to manufacturing. “The level of requirements is encouraging and we expect deals in the larger space to improve in the next few months.” What is clear from Gilkison and other property professionals in Glasgow is that the new M74 extension, which completes the ring road, is having a significant impact on business including opening up brownfield sites for development.

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Space shrinks

Bristol’s industrial and distribution market performed strongly in 2010 with 193 transactions totalling 213,670 sq.metres, the highest total since a peak in 2007. The driving forces were improved manufacturing and distribution space for retailers.

Chris Miles of King Sturge, Chairman of the Western branch of the Industrial Agents’ Society, said: “The industrial and distribution market in Bristol remains relatively buoyant. It is very encouraging to note that the UK manufacturing sector finished strongly and indeed the last quarter of 2010 saw it record its best trading conditions for 16 years.” DTZ’s Simon Lloyd said: “The South West continues to have the lowest availability of stock in the UK with a limited amount available to occupiers.

The market was, however, buoyed by a number of larger transactions in retailers Morrisons and the Co-op but these were land acquisitions.” Avonmouth is the key location for distribution which is why the Co-op wanted a distribution facility here. This is now being funded by AXA Real Estate Investment Managers. The 40,412 sq.metres scheme is being developed by Stoford and Gallan Group. Stoford’s Dan Gallagher said: “In the current economic climate, forward funding is one of only a few forms of development capital available and we are pleased to work with AXA and continue our long term relationship with the Co-op Group.”

Big sheds dominate

Major distribution facilities are at the heart of a vibrant industrial sector which has emerged strongly from the recession. That is because geographical necessity plays a significant role. That applies to Swindon where the Japanese car firm Honda performs so well and could play a bigger role in the immediate aftermath of the earthquake in the home country.

Its key location brought DIY firm B&Q into a massive 74,007 sq.metres (796,649 sq.ft.) shed on Gazeley’s G Park, South Marston, which was completed two months early. That is a change from the phased occupation that was originally planned. The site has the capacity for two more large sheds, although smaller than B&Q’s, at 40,876 sq.metres (440,000 sq.ft.) and a quarter of that size.

Gazeley’s Charles Blake commented: “Deliverability is the key. The buildings have planning permission and the roads are going in because of B&Q.” In this case the DIY firm bought the freehold. Another substantial development is by UBS Triton Property Fund which has demolished the former Woolworth shed and, working with Graftongate, is seeking planning permission for a 41,805 sq.metres (450,000 sq.ft.) facility although it might opt for a solar photovoltaic park. Also at South Marston, RO Developments (ROD) has sold a 384 sq.metres (4,136 sq.ft.) unit at South Gate for £340,000. Richard Bourne of ROD said: “RO24 Swindon continues to prove popular with local businesses and private investors. We only have 5 units remaining and we expect these to go soon.”

Meanwhile, there has been an improvement in the office market in Swindon, said Kenington’s Jeremy Sutton, with an increase in enquiries in the first quarter and more buildings going under offer. “There are opportunities in lease renewals and companies are now looking to move to better space. This is mainly smaller occupiers although there are some more substantial enquiries in the market.” He expects the totally rebuilt Station Square office property, which at 4,645 sq.metres(50,000 sq.ft.) is one of the largest in town, to do well.

Active Hayes

With its proximity to Heathrow, Hayes is a popular location for a wide range of companies. It also has an active market in terms of letting and investment. One of the latest, and largest, potential transactions is the multi let 20,066 sq.metres (216,000 sq.ft.) Hyde Park office development which LaSalle Investment Management has put up for sale through Jones Lang LaSalle for over £26.65 million, a yield of 8%.

Another deal in Hayes is the letting of Highcross‘ 3,319 sq.metres (35,723 sq.ft.) distribution unit at Clayton Road to the logistics company Circle Express through Colliers International in conjunction with BNP Paribas and King Sturge. Joshua Pater of Colliers said: ”We are positive that this represents a sustained increase in demand for flexible warehousing along the Heathrow Corridor.”

Colliers was also involved in the sale of another nearby property, the 4,155 sq.metres (44,724 sq.ft.) warehouse at Hampton Farm Industrial Estate, Middlesex to Dewhurst, a supplier of components to the lift, keypad and rail industries.

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Small is beautiful

Apart from a shortage of prime offices, industrial property is also under increasing pressure because of a lack of new speculative schemes. The most acute problems are in the smaller and medium sized units because the big shed market is now quiet. “Demand in the smaller end is there but there is a requirement for more units up to 2,787 sq.metres (30,000 sq.ft.),“ said Alan Gilkison of Ryden.

One of the problems is the difficulty of prising funding out of banks, he added, noting the fact that demand from manufacturing companies has become more prevalent. Gilkison quoted the example of two engineering companies who have brought production back from the Far East to Glasgow because of the need to improve quality.

One scheme that caters for current demand is at Clyde Gateway East, a development of three units totalling 5,620 sq.metres (60,500 sq.ft.) At Bathgate, J Smart has bought a 6.05 acre site close to Junction 3A of the M8 motorway from Scottish Enterprise to build 4,665 sq.metres (50,218 sq.ft.) of distribution, business and warehouse space.

Bryce Stewart of Colliers International, joint letting agent with Ryden, said: “There is increasing activity in the smaller sized market, with the industrial sector currently more robust thanothers.” One manufacturing company expanding in Scotland is Rearo Laminates which has opened a new 1,022 sq.metres (11,000 sq.ft.) plant in Govan. In addition it has opened a new depot on the Longman Industrial Estate, Inverness, complementing existing outlets at Rosyth, Glasgow and Tyne & Wear.

Rearo’s Graham Mercer said: “In addition to the Inverness depot, an opportunity arose to expand our manufacturing business within Glasgow and the property at Drumoyne Road will allow us to do this fairly readily with little or no disruption to our production lines and, as importantly, our staff.”