Some of the East of England’s key locations are showing signs of spluttering back to life after the recession. But demand is unlikely to be strong enough to convince developers to build speculatively.
Cambridge, Ipswich and Norwich, for example, all saw increases in take-up in the first six months of the year, according to Bidwells’ Commercial data book. Ipswich recorded a take-up of 104,000 sq ft – close to its 10-year average – after seeing it fall to only 12,000 sq ft in the second half of 2009. Norwich achieved a 35.6% increase to 242,800 sq ft, while Cambridge experienced a more modest rise of 10.1% to 145,000 sq ft.
Many deals involved smaller properties, but now medium and larger sheds above 20,000 sq ft are coming to the fore. This is particularly the case in Cambridge, where there were 10 requirements of this size at the end of Q2. “Demand for buildings above 20,000 sq ft is accounting for a significant element of the improving occupational picture,” the report says. There were a further eight larger requirements in Norwich, while Ipswich had four.
Largest deal of the year
The region’s largest deal of the year involved the 460,000 sq ft former Woolworths warehouse at Marsh Leys in Bedford, owned by Legal & General. This was let to Sainsbury’s on a 20-year lease. Others were on a slightly smaller scale, such as the 40,000 sq ft let to First Bus at Lansdowne Road in Norwich.
Although speculative development is unlikely to be seen in the short term, the major shed developers can offer bespoke buildings and are positioning themselves to benefit from any significant pick-up in demand. For example, Gazeley gained planning consent in May for a single building of up to 765,000 sq ft at Boscombe Place in Dunstable. It also has sites in Biggleswade, where it could build a 530,000 sq ft shed, and Bedford, where it could build warehouses of 40,000 sq ft upwards. In the longer term, it plans a rail-connected distribution park, near Peterborough.
Other developers are taking a similar approach. ProLogis has a site for a 265,000 sq ft development in Basildon, and plans to develop a 100-acre site at Century Park in Luton, but has first to resolve access issues.
In the absence of speculative development, some developers are turning to refurbishments. ProLogis completed two buildings of 85,000 sq ft and 105,000 sq ft at Marston Gate in Bedfordshire in August, while Canmoor has refurbished five units totalling 200,000 sq ft at its Woodside estate in Dunstable.
Although there is no shortage of available space in the East of England, the lack of development means there is limited choice for those seeking new buildings. For example, availability is at a three-year high in Cambridge, but Bidwells estimates that 83% of the space is second-hand, with half of that considered poor quality. Norwich has only one new building above 20,000 sq ft.
Bidwells predicts that rents will remain static over the next year, but there is some movement in yields, which have contracted from 8.25 to 7.75% in Ipswich and Norwich, and from 7.5 to 7.25% in Cambridge.
A major attraction of the region for larger occupiers is its proximity to the ports of Felixstowe and Harwich. Both are owned by Hutchison Port Holdings, which has ambitious plans for expansion over the next few years. The first phase of Felixstowe South, which will create 1,285m of additional quay, capable of accommodating the world’s largest container ships, will be completed next year. It will be followed by a second phase adding another 730m quay. This would increase Felixstowe’s capacity by one million containers a year. Once it is built, Hutchison has consent for a new container port at Bathside Bay in Harwich, which could handle a further two million containers.
