Big Swan: Astral Developments’ 300,000 sq ft speculative development at Swan Valley park outside Northampton
As Britain’s shed capital, Northampton has seen off more pretenders to its throne than it can recall over the past 20 years. Its central location and excellent motorway links have long made it the Golden Triangle’s key urban centre.
However, having survived the challenges of upstart locations such as Staffordshire, the West Midlands and, most recently, South Yorkshire, Northampton faces a rival much closer to home.
Rising land prices and labour shortages have led to the emergence of a fast-growing distribution corridor to the east of the county, between Kettering, Corby and Wellingborough.
The shift is reflected most sharply by changing land prices as these locations grow in popularity. At the end of the 1990s, land around Corby was dirt-cheap, with prices as low as £50,000-£60,000 per acre. Not any more.
“Even four or five years ago, you could acquire land around Corby for under £100,000 per acre,” says North Rae Sanders director Andrew Jackson. “Today, you’re looking at £300,000-£350,000 per acre.”
With Northampton’s prices among the highest outside the South East, at £425,000 per acre and more, it is the kind of differential that developers love to see – especially with interest rates on the way up.
The rental gap has also narrowed.Rents for prime space in big sheds in Wellingborough, Corby and Kettering are now around £4.75 per sq ft, and although Northampton still commands a decent premium for similar space – at around £5.75 per sq ft – the differential is less than it once was.
Perceptions are clearly changing as quickly as land prices. “You always had to offer occupiers looking at Northampton and the M1 a discount to consider Corby and Wellingborough. They had to be coaxed over there,” says Jackson. “Now you’re actually getting people who start their search by looking at sites in those towns.”
Despite the market changes, it would be a very brave developer who believed that Northampton’s lure was fading, and that Corby, Kettering and Wellingborough were the places to be.
The biggest developers are operating in both camps, and in a significant way. ProLogis let more than 1m sq ft in the county last year, with its sites along the Kettering to Wellingborough corridor heavily in demand.
Progress expected
Significant progress is now expected during 2007 at its Pineham scheme in Northampton, where it already has outline permission for 2m sq ft.
Astral Developments is another to recognise the need to operate in both the long-established Northampton market and its newer rival.
Its Swan Valley park, developed with Morley Fund Management outside Northampton, has Big Swan, a speculative shed of 300,000 sq ft on offer. The developer is now drawing up plans for a major mixed-use scheme on 25 acres at the same site, believing that a hotel and retail space will enhance the appeal of its next phase of sheds.
At the same time, it has formed a joint venture with Alfred Buller’s Bee Bee Developments to start work at a 225-acre site in Corby’s Stanion Lane, where it already has outline permission for 3.5m sq ft of distribution space.
In keeping with the trend already noted in the East Midlands (see p140), the site will be rail linked.
Director Simon Spencer hopes that detailed consent for the first 1m sq ft phase will be won this summer, and expects to start with prelets for two sheds of around 300,000 sq ft.
Astral’s proposals underline the continued rental gap between Northampton and the Corby-to-Wellingborough corridor. It is asking for £5.75 per sq ft for Big Swan, but will be probably be looking at less than £5 per sq ft in Corby.
Spencer agrees that the differential is narrowing, but admits he was never convinced by doom-mongers who suggested the Golden Triangle’s lustre was fading.
“The amount of available space and land supply will vary everywhere from year to year. One quiet year doesn’t mean that an established location has had its day,” he says.
Considerations about lower wage and land costs in new distribution hot spots are always tempting, but they involve significant risks.
“Some people who buy land at high prices in new areas will end up disappointed, whether it is Doncaster or elsewhere. You’re always safer in well-established locations,” says veteran shed agent John Burbage of Burbage Realty. “There’s a shed of 625,000 sq ft in Ellesmere Port that has been standing empty for two years. If that was in Northants, it would be let without a problem.”
Given that Burbage’s agency is based in Northampton, it could be said that he is talking up his own market, but he has always operated nationwide. His comments also bring swift agreement from Chris Kershaw, head of Gerald Eve’s Birmingham office, who has been in the distribution sector for more than 25 years.
“People sometimes highlight differing wage rates, but supply-led issues are always key,” he says. “Some observers did have negative thoughts about the market in Northants, but then developers came along with the confidence to put up new, big brassy sheds, and suddenly we’re seeing record rents.
Peripheral markets, away from the centre of the country, are always a little more fragile. Perhaps the first people to enter do well, but latecomers are always likely to encounter problems, whether it’s land costs, labour supply or potential occupiers.”
Appeal diluted
Ironically, the success of locations along the Corby-to-Wellingborough corridor must ultimately dilute their appeal. If land prices and rents continue to converge, developers and occupiers might as well stay in the Northampton market.
The most likely outcome – for 2007 and further ahead – is that differentials will remain, but that the presence of major new locations, such as Corby’s Stanion Lane, will enhance the county’s appeal for the distribution sector.
It looks like the Golden Triangle’s success is set to continue, even if it is getting just a little bit wider.
