Much is made of the shortage of office supply and homes in Cambridge and its surrounds. But industrial occupiers need space too in order to service businesses in the city.
Shed supply has been gradually shrinking – industrial sites have fallen victim in recent years to high residential values and have been sold off for housing development.
“There are only seven or eight industrial estates in and around the city and a couple of those could go residential in the short to medium term,” says Bidwells partner Russell Catley.
Industrial space is also under threat from increasing demand from the science sector and the buoyant R&D office market. According to Bidwells research, availability stands at just 5% of total stock.
Catley says that live industrial requirements within a 10-mile radius of Cambridge amount to 1.8m sq ft, up from 1.6m sq ft a year ago.
Industrial rents in Cambridge are £9-£10 per sq ft but trade counter operators are seemingly happy to pay 20-30% more than standard industrial occupiers. Bidwells is predicting rents will continue to rise, reaching £12.25 per sq ft in 2019. Options for industrial occupiers are becoming limited. Big Yellow Self-Storage, for example, recently paid £9m for a former Royal Mail sorting office on a two-acre site after searching for space for several years.
Both Cambridge city council and South Cambridgeshire council’s draft local plans are not seen as particularly encouraging for industrial development. “They are not allocating enough industrial land in Cambridge and South Cambs,” says Catley. “Rural land on the outskirts is not necessarily attractive to developers.”
Because they cannot find investment stock, developers and even some funds are thinking about spec development in the Cambridge area. Catley says: “I would not be surprised if it happens in the next 12 months. We might start seeing some limited spec development where land is available. Where developers need 15,000-20,000 sq ft or more, occupiers are going to have to consider prelets or presales, whereas previously there was always enough available through natural churn.”
William Rose, director of industrial and logistics at Savills in Peterborough, says the market has gone from feast to famine. “Within six to nine months spec development will be back with a vengeance. Yields have fallen dramatically over the past 18 months. I have never seen them so low, and it is pushing on for D&Bs and spec development.”
What seems certain to play out is that industrial B2 occupiers will be forced to either pay more rent or move out to the market towns surrounding the city, such as Ely, Huntingdon and Newmarket.
Cheffins director Phil Woolner expects some interesting warehousing opportunities around the now dualled A11 corridor from Mildenhall towards Norwich. “What we will see is fewer of the really big sheds but more smaller, 40,000 to 60,000 sq ft regional distribution centres. Amazon has had a major expansion drive, acquiring generally smaller warehouses across the country to enable faster, next-day delivery, and others are following that model.”
Woolner cites the 13,000 sq ft taken by Countrywide Farmers at Plot 8, Newmarket Business Park at £7.50 per sq ft as evidence of strong rents, and the 60,000 sq ft Plot 9 now in planning and receiving enquiries.
Felixstowe’s big shed ambition
Big things are happening at Felixstowe, as the UK’s largest container port seeks to modernise and keep ahead of the pack.
Felixstowe Logistics Park, a joint venture between Hutchinson Ports and developer First Industrial, will create 1.4m sq ft of B8 space inside the 700-acre port complex in two phases. Planning consent for East Anglia’s most exciting big sheds development is expected by the autumn and work will begin shortly afterwards.
The site is being developed in tandem with the development of Berths 8 & 9, which will be capable of working the world’s largest container ships. Single buildings of up to 800,000 sq ft will be developed and agent Bidwells is expecting quoting rents to be in the region of £6-£7 per sq ft.
“We have already had interest from potential occupiers outside the port as well as existing users,” says Bidwells partner Patrick Stanton. “The plan is to approach supermarkets and retailers to get it on their radar.”
The logistics park is not the only major sheds project at Felixstowe. Hutchinson has spent £40m on a new state-of-the-art rail facility, while Uniserve plans to build a 500,000 sq ft, 40m-high common-user facility at Trimley Estate, which will have three mezzanines.
Stanton says: “We are all intrigued to see how much it will cost to build a 40m eave shed with three mezzanines that need to be load-bearing and whether it will be built without occupiers, or who they will be and what rent they will pay.”
Meanwhile, Peterborough and the A1 corridor is said to be seeing more interest, given the dearth of sheds around the M1. “Occupiers who would rather be located near the M1 are attracted to its rental levels of £3.50 per sq ft, as opposed to £5.50-£6 per sq ft,” says Stanton. “North London occupiers in places such as Enfield are also looking at Peterborough, Huntingdon and Bedford owing to rents being much cheaper than the £8-£9 per sq ft demanded in and around the M25.”
