Staying local: Plans to capitalise on the region’s status as an international shipping gateway may have been delayed, but developers are working up plans to take advantage of the demand for extra distribution space
The East of England is well placed to capitalise on its status as a key gateway for international shipping, but has seen planned developments delayed by the recession. In all, just 500,000 sq ft was let in the first half of 2009, according to data from Jones Lang LaSalle.
“There has been very little activity in the East of England,” says Simon Lloyd, head of industrial agency at DTZ. “Demand is driven by access to the East Coast ports, but over the past 12 months the amount of freight coming through has declined.”
Unlocking space
The economic slowdown has meant that Hutchinson Ports is yet to complete its reconfiguration of the southern side of the Port of Felixstowe, which would unlock space for warehousing.
An upturn in imports could also prompt the company to develop a container facility at Bathside Bay in Harwich, while Gazeley has the ability to develop 530,000 sq ft at its Felixstowe Portside scheme.
Nevertheless, agents believe that the economics of development are slowly improving because of the region’s historic lack of supply, coupled with stabilising yields and falling development costs owing to lower land prices and labour.
Inland, developers have concentrated on obtaining planning consent for their sites. In June, F&C REIT Asset Management won consent to make Network 46 the largest distribution park in Lincolnshire. It will be enlarged from 1.1m sq ft to almost 2.2m sq ft, including a single warehouse of up to 630,000 sq ft.
“We are aware of the regional demand for new distribution space and Network 46 will fill the gap,” says Maurice Fitzgerald, development director for F&C, which this year built a 100,000 sq ft warehouse for print firm Danwood at the 65-acre park.
At the smaller end of the market, Newlyn Property Developments has won consent for a £10m mixed-industrial scheme at the former Berol pens factory on Hardwick Industrial Estate in King’s Lynn, Norfolk. The scheme is expected to provide 50,000 sq ft of light industrial space by 2012.
However, the future of other development sites remains uncertain. At Interchange Park in Bedford, Southall Estate has seen its development partner pull out of an 8-acre scheme, leaving the company to seek owner-occupiers to develop the site.
Also in Bedford, Chancerygate has taken a step back from a speculative industrial scheme and is considering offering its Telford Way site to other developers.
Despite the slowdown in development, the amount of vacant space in the region stood at 5.1m sq ft, according to King Sturge research for the first half of 2009 (see panel). This was partly because of retail failures – Legal & General Property is seeking a tenant for its 425,000 sq ft unit in Bedford that was formerly let to Woolworths.
Company collapse
The automotive industry has also seen casualties. Visteon, a supplier to car manufacturer Ford, collapsed in April. It signed a sale-and-leaseback deal with ProLogis for its plant in Basildon in 2007.
Units on the market include more than 1m sq ft owned by ProLogis, which can accommodate 550,000 sq ft in Peterborough and Kettering, and has smaller units in Corby and Huntingdon. Gladman has vacant units of 140,000 sq ft and 60,000 sq ft at Saxham Business Park in Bury St Edmunds.
Prime rents have fallen from by 5-15% across the East of England, in line with falling demand from occupiers (see panel). Rents in Norwich and Ipswich are £4.75 per sq ft, down from £5 per sq ft and £5.25 per sq ft, respectively. Peterborough and Huntingdon have been hit the hardest, with rents falling from £5.75 to £5 per sq ft.
Key statistics
Nearly a fifth of available space is new stock
Availability Change on June 2009 December (m2 000s) 2008 (%)
East of England total 473 1.5
East of England new 100 8.3
UK total 23,309 2.8
UK new 3,419 -2.9
Source: King Sturge
Industrial rents
Hypothetical new-build premises (July 2009)
Location Prime rent Prime rent (£ per sq ft) (£ per m²)
Peterborough 5 53.82
Huntingdon 5 53.82
Norwich 4.75 51.13
Ipswich 4.75 51.13
Assumes minimum of 10,765 sq ft (1,000m²)
Source: King Sturge
