After a tough few years, there are fledgling signs of recovery in the North West’s industrial sector. Opportunistic deals by occupiers at bargain rents have seen a slew of empty sheds finally taken up. Expert Logistics’ September letting of 360,000 sq ft at ProLogis’s Crewe 360 at an undisclosed rent was the latest in a spate of lettings that have soaked up the most glaring examples of empty stock.
“The perception is that the North West is oversupplied with sheds but, one by one, they have all gone,” says Howard George of B8 Real Estate.
Now the market is buzzing with talk of a wave of prelet deals, while agents also point to signs of recovery at the smaller end of the sector, based on demand from local manufacturing firms.
“We are seeing the market move towards design-and-build,” says Robert Dunston, senior director with GVA. “There is plenty going on out there.”
Asda recently struck a deal with Wilson Bowden which will see the supermarket develop a 633,500 sq ft distribution unit on 44 acres at Kingsway in Rochdale.
In the North West’s most talked-about potential deal, internet retailer Amazon is locked in talks with ProLogis for a 1m sq ft-plus, rail-connected facility at the 3MG scheme in Widnes, Cheshire.
Asda is also scouring the North for an additional 400,000 sq ft, while food distributor Brake Bros is in prelet talks with SEGRO for a 200,000 sq ft unit at Heywood Distribution Park. Also, online retailer The Hut Group is seeking 200,000 sq ft, and parcel delivery service TNT is seeking about 150,000 sq ft.
Jason Print, partner with Cushman & Wakefield, says retailers continue to drive take-up, with facilities for internet sales distribution especially in demand.
But for design-and-build to work, agents say the soft rents of as little as £3.30 per sq ft agreed during the downturn will become a thing of the past, in favour of at least £4.75 per sq ft. They say that with land values and build costs still high, developers need decent rental income to secure development finance.
“Deals on existing large sheds this year have been occupier-friendly,” says Colliers International’s Julien Kenny-Levick, while CBRE senior director Mike Walker adds: “Occupiers will now only get rent-free periods by entering into long leases.”
There is also evidence of a drive by developers to secure landholdings ahead of the next cycle. UK Coal’s property arm, Harworth Estates, is trying to find a partner or buyer for the 200-acre-plus Cutacre site near Bolton, which could accommodate up to 3.5m sq ft of industrial space.
“There are land opportunities in secondary areas, but developers are buying only oven-ready sites in proven locations,” says Daniel Burn, director with Jones Lang LaSalle.
Realistically, the number of major deals will remain limited for now. Instead, say some agents, it is the sub-100,000 sq ft market where the recovery will be first seen.
Hundreds of little deals
“Manufacturing does not come back in a big way overnight,” says Nolan Redshaw’s Paul Nolan. “But while the big deals are few and far between, there are hundreds of little deals going on.”
Agents provide anecdotal evidence of small, successful local firms expanding into quality shed space, but with fears of a double-dip recession growing, most admit that recovery remains patchy.
However, there is evidence of developers with their own cash resources banking on growth in the region’s demand. For instance, regional firms Barnfield Construction and Centric Properties are speculatively developing the first phase of a 260,000 sq ft business park in Rochdale.
But for most, development without a prelet is a distant prospect. Patrick Properties’ managing director, Andrew Dickman, says: “Developers are already thinking about building speculatively, but their funders are not.”
So, there are definite signs of improvement in the North West industrial market, but recovery remains fragile.
The power list
Who will be the key North West industrial players in the next cycle? In the agency stakes, the top five practices are ranked by disposals in the year to the end of September 2011, followed by a few notable mentions. Developers – although not ranked – are highlighted by the market as best placed to take advantage of the next cycle.
The top five agents
1. Jones Lang LaSalle (disposals: 4.9m sq ft, including 4.5m sq ft by King Sturge). Key player David Brooks
By virtue of its merger with King Sturge, which brought in big hitters such as Brooks and Steven Johnson, JLL is the undisputed heavyweight of the North West shed market. Most disposals were carried out by King Sturge.
2. CBRE (disposals: 3.9m sq ft).
Key player Mike Walker
CBRE lost three big names this year when letting agents Tom Davis and Howard George, and shed investment specialist Simon Wood, left to form B8 Real Estate. However, the former head of Colliers International’s Manchester office, Mike Walker, joined in April, and Liverpool-based Jonathan Thorne is also regarded as a prolific agent.
3. GVA (disposals: 2.9m sq ft).
Key player Robert Dunston
With a client list including Stobart Group, GVA has a lot of work on its hands. Dunston heads the team, with Andrew Pexton also a key player.
4. Colliers International (disposals: 1.1m sq ft).
Key players Julien Kenny-Levick and Steven Mitchell
Although Colliers’ Mitchell is based in London and covers a national remit, his client list, including Asda and JD Sports, has brought rich pickings to the firm in the North West over the past year, on the acquisitions rather than the disposals side. Following the departure of Mike Walker to CBRE in April, Kenny-Levick has taken up the reins of Colliers’ Manchester-based sheds operation.
5. Lambert Smith Hampton (disposals: 705,000 sq ft).
Key player Andrew Aherne
Few put Lambert Smith Hampton at the top of their list of key agency players, but the firm is credited with a high volume of under-the-radar disposals, which make it a strong performer. Among its clients is Tesco.
Notable mentions
B8 Real Estate The new firm, launched by former CBRE men Tom Davis, Howard George and Simon Wood, is based in Warrington. The trio formerly ran successful independent agency DGI Davis George, which they sold to CBRE for more than £3m in 2007.
p3 Property Consultants’ Paul Daye, the independent firm’s industrial specialist, has two of the region’s trophy instructions in Wilson Bowden’s Kingsway business park in Rochdale, and SEGRO’s Trafford Park.
Savills John Atherton and Stuart Murray are agents for the joint venture between ProLogis and Halton borough council which may clinch a 1m sq ft-plus prelet with Amazon. Cushman & Wakefield’s Manchester-based shed team, led by Jason Print, and DTZ’s team, led by Anthony O’Keefe are also mentioned by many alongside Savills.
Nolan Redshaw North Manchester specialist Nolan Redshaw is a well-regarded local player that deals with influential firms such as Seddons and Marshall CDP. Paul Nolan and Mike Redshaw are well-known figures.
The developers
The Peel Group The sheer scale of Peel’s strategic landholdings, including the Manchester Ship Canal and the Mersey Docks, makes it the region’s pivotal industrial player. Its £138m Port Salford project will create the UK’s first inland port serving water, road and rail.
ProLogis A potential 1m sq ft-plus deal with Amazon in Widnes looms, and the US giant is on the look-out for more land.
Gazeley Quiet at the moment, but the firm controls 45 acres in Liverpool and 25 acres in Skelmersdale, Lancashire.
Wilson Bowden The owner of the Kingsway development in Rochdale has snapped up JD Sports and Asda in the past two years, and has the region’s most readily deliverable site.
SEGRO The developer’s purchase of Brixton Estates in 2009 brought with it a 3m sq ft landholding at Trafford Park. Along with its 2m sq ft Heywood Distribution Park, it puts SEGRO in an important position.
Stobart Estates The Stobart Group’s property arm has plans for three distribution centres in Widnes, Cheshire. The group is a key player in the transformation of the so-called Mersey Multimodal Gateway.
Harworth Estates UK Coal’s property arm is seeking a development partner for its 200-acre Strategic Employment Park at Cutacre near Bolton. The winner will have the next Kingsway on its hands.
Miller Developments Plans for a major employment park at Omega in Warrington have never got off the ground. But with consent for more than 3m sq ft of distribution space at the junction of the M6 and M62, the Scottish company could capitalise with a good prelet.
Marshall CDP Based in Leeds, but with a long track record in the North West, Marshall CDP has a huge land bank in the region, money to spend and an in-house construction business.
The Seddon Group A regionally based private family firm, Seddon developed the 55,000 sq ft Axis Point scheme in Heywood with its own cash and has a war chest at its disposal.
Barnfield Construction The Lancashire-based firm is speculatively developing the first phase of an industrial park in Rochdale alongside Tim Heatley’s Centric Property. The latter, which recently merged with Capital Properties, is also tipped as an increasingly active player.
Patrick Properties The firm, co-owned by entrepreneur Brian Kennedy and its managing director, Andrew Dickman, recently secured £27m from Barclays Real Estate in a refinancing deal. It is on the look-out for assets.
Evander Properties The London-based firm sealed a 360,000 sq ft prelet with Waitrose in Chorley, Lancashire, this year. It has about 25 acres of land at Matrix Park in Chorley and is seen as an aggressive player.
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