A Warning of Shortages

While the industrial property market in the region has displayed admirable stability, the lack of new development means that shortages are already occurring.

That is the message from Mike Baugh of DTZ who said: ”As the market improves and take up of vacant stock continues, we move closer to the situation where there is a shortage of some sizes of units. This is intensified by a shortage of land and a limited number of developers holding back speculative development.”

He suggested that the problem in Leeds was for companies seeking units of below 1,394 sq.metres (15,000 sq.ft.) bringing a ”hardening of rents and a reduction in incentives.” Even so, Yorkshire offers a higher proportion of Grade A industrial space than most of the UK.

Baugh said: “The window of opportunity for occupiers to secure an attractive deal is closing and they will have to be more organised and forward thinking in their search for new premises.”

Nationally, reports Jones Lang LaSalle, occupier demand in the first half for big sheds weakened and this continued in the three months to 30 September. But “investor demand is strong, concentrating on prime stock let to strong covenants on long leases.”

Two examples of recent industrial deals come from Knight Frank. It acted for Havells Sylvania who sold a 12,727 sq.metres (137,000 sq.ft.) warehouse in Shipley to Card Factory. At Harley Business Park, Bradford it has let 1,858 sq.metres (20,000 sq.ft.) to Barrett Steel.

Another significant industrial transaction in Yorkshire is provided by the bus manufacturer Optare which is amalgamating its three factories in Leeds, Blackburn and Rotherham into one 13,006 sq.metres (140,000 sq.ft.) unit at Sherburn Distribution Park, Sherburn in Elmet. This will be the first new bus assembly plant in the UK for 40 years.

Paul Mack of DTZ said: “The latest addition demonstrates the capabilities of the area as a hot spot for manufacturing and distribution in the Yorkshire region. The Sherburn Industrial Estate benefits from a huge power supply which is the key to the manufacturing sector.”

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.

Manufacturing sets the pace

The message from many parts of the region is that manufacturing is leading the way in the improvement in the industrial market.

That is what the government wants to hear, but it has come naturally without the help of the public sector. It is hard to know how far this trend can advance but it is certainly highlighted by DTZ in its research on the UK market with the comment that “manufacturing has been at the heart of much of the positive news during the quarter.” While that applies to the wider UK, other comments from the Thames Valley bear that out.

Tunde Adegbemile of DTZ said: “The Heathrow and West London markets tend to provide a good indicator for Greater London and the south east, and there are some signs of confidence becoming more established with some speculative developments likely to commence in the second half of the year.” Adegbemile added that “from a logistics perspective, demand continues to be dominated by the food retailers, although there are signs of improving activity from the health and pharmaceutical sector.” One of the largest deals for manufacturing capacity is by Albion Land, advised by Jones Lang LaSalle and White Commercial, for Goodrich CTG, a leading carbon fibre technology firm, to take 12,774 sq.m. (137,500 sq.ft.) at Network M40, Banbury.

The £9 million facility will allow Goodrich, part of the US Goodrich Corporation, to expand extensively and develop new products. This follows Albion Land pre letting the slightly smaller nearby property to First Line and forward selling it to a pension fund client of Whitmarsh Holt Young for £8.65 million. Simon Parsons of Albion Land commented: “We identified the site as one of the few locations between London and Birmingham able to accommodate these large units. On the strength of demand we are keen to consider other opportunities along the M40.”

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