There was a time when the road was king for industrial occupiers. The closer the warehouse was to the main arterial routes – preferably those around the motorway junctions of the golden triangle around Coventry, Leicester and Northampton – the better.
No more. Industrial occupiers, like many businesses today, have become increasingly cost conscious. Key elements like cheaper rents and labour are directing occupiers away from the prime pitches to sites that only five years ago would have been off the industrial radar. And now Yorkshire is bleeping loudly on that radar.
Some commentators say the trend for occupiers such as B&Q and Tesco to take substantial space in Yorkshire is “old hat”, and has been talked about for the past two years. True, it has. But from talk it has become reality, says Mike Haigh, Knight Frank’s industrialpartner in Leeds.
Danny Miller, associate director with Jones Lang LaSalle in Leeds, agrees. He says this trend is continuing, and that costs and labour are still important issues when it comes to the relocation of distribution facilities.
Flexibility and costs
Miller adds that this is the reason Yorkshire saw two of the country’s biggest shed deals last year (see panel).
“It is no longer a case of ‘location, location, location’ when retailers or their logistics companies are looking for sites for their big sheds,” says Haigh. “They are increasingly concerned about labour supply, flexibility and costs, and slightly less about the proximity to major routes.”
Typically, most distributors are operating at the edge of their margins, with as much as 40-50% of turnover being accounted for in the wage bill.
“Having to pay a higher hourly rate can therefore have a real effect on the bottom line, and this problem is compounded by the shift towards big sheds operating a three-shift pattern, working 24 hours a day, which requires even more staff,” says Haigh.
Compared with the Midlands, Yorkshire has a much larger supply of labour to staff distribution facilities. Knight Frank research, based on government statistics, has shown that areas such as South Yorkshire are prime locations where the demographic indicators score highly for distribution companies.
Rents are another attraction. They are still rising in the Midlands and goldentriangle – but in South Yorkshire, in contrast, levels are both lower and more stable.
It is not only the shortage of labour and cheaper rents that have forced some occupiers further north. Lack of development land in the Midlands for the now requisite larger sheds is an another factor.
“The fact is, we have the sites around Doncaster and Sheffield, and we can build these bigger units,” says Paul Crabtree, associate director at King Sturge.
Gladman’s massive developments at Barlborough and Sherburn-in-Elmet in North Yorkshire – providing more than 500,000 sq ft and 1m sq ft respectively – are prime examples of developers meeting requirements for large sizes, ranges and appearances.
Interest from occupiers has also spurred on speculative development, such as Shepherd Developments’ and Scarborough Development Group’s 123,000 sq ft Aspect project at junction 4 of M18 near Doncaster.
So does this occupier interest mean that, in five years’ time, Yorkshire will become the new golden triangle, with similar rents and a growing scarcity of developable land?
Land coming forward
Commentators have different opinions. While Haigh says occupiers in South Yorkshire are now paying 10-15% more in rent compared with 2002, he does not believe they will ever reach the level of the Midlands, where they topped £6 per sq ft.
Land values in Yorkshire are also still relatively low, at £300,000 per acre, compared with the East Midlands, at £375,000 per acre, and the West Midlands at £475 per acre.
Crabtree agrees that Yorkshire is not set to become the new golden triangle. “There’s still a lot of land coming forward, so we won’t have the shortages seen further south,” he points out. For example, he says 300 acres are available for development at Centreport, Goole, near junction 36 of the M62.
Others suggest that the EU’s working time directive, which came into effect in March 2005, and which restricts lorry drivers to a 48-hour weeks, could affect the relocation of distribution facilities. As CBRE’s annual Distribution warehouses report for 2004 states, “This is likely to force many occupiers to re-evaluate the location of existing and future distribution hubs.”
However, there is still no sign that the working time directive is affecting occupiers’ decisions to relocate. Miller believes it is possible that, in five years’ time, Yorkshire could start to rival the Midlands as a regional distribution hub. He says developments around Doncaster could be the harbinger of things to come.
Occupiers are still keen to take space in Yorkshire. Even if the area does not ever rival the industrial golden triangle of the Midlands, it is still a valued location in the distribution network.
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B&Q’s decision to take 800,000 sq ft at the National Distribution Centre, Doncaster, and Next taking space in the same town, surprised industrial agents. B&Q property director David Childs says it chose Doncaster because of the workforce and cost of property. The deals followed two of the biggest deals in the country last year, when retailer Peter Black and printing firm Polestar each took 300,000 sq ft, in Leeds and Sheffield respectively. Following B&Q and Next are Tesco and baker Warburton. Both have signed for space in Gladman’s Barlborough site in South Yorkshire. Tesco’s deal, for a 500,000 sq ft site, is expected to be completed in the next few months. Warburton is poised to move into its premises soon. Mike Haigh, Knight Frank’s industrial partner in Leeds, says two large local manufacturers are looking for sites too. |
