The industrial and distribution property markets in the South West of England and Wales have their own momentum created by serving the local economy, but they are also important in supporting national firms which need a regional presence.
Most major schemes in the region are seeing high levels of activity from either developers or large-space users. However, at the smaller end of the market, there is frustration, particularly in Bristol, about the supply of suitable land.
In the South West, many major developments are in the Avonmouth area and are capable of taking large-footprint buildings. These include Burford’s 452-acre Cabot Park development and St Modwen’s 212-acre Access 18 scheme.
Earlier this year, Gazeley bought 50 acres from Redrow at the Western Approach scheme in Avonmouth and plans two speculative buildings of 350,000 sq ft and 500,000 sq ft. Dixons bought a 26-acre site from Redrow at the same scheme and is building a 370,000 sq ft distribution centre in two phases.
Joint venture
There are also development opportunities in South Wales, including 70 acres of development land in Magor at Loc8, a joint venture between AWG Developments and Gwent Europark, positioned just beyond the Second Severn Crossing. Existing occupiers include Tesco and Wilkinsons.
Agents say that interest from larger users throughout the region remains constant — as in other areas, retailers lead the demand — and that there is pent-up demand at the smaller end. In Bristol, the situation is particularly acute, with many industrial sites passing into office and residential uses in recent years. Supply in Bristol fell by 14% last year, probably why take-up fell by 20%.
Although land is available at Avonmouth, many buildings are too large for smaller users and agents say that many firms believe they will lose their workforces if they move outside Bristol itself. Unsurprisingly, many would like to see greater land allocation in Bristol, as well as in locations along the M5 such as Exeter.
Welsh agents are less pessimistic about supply, partly because of the Welsh Development Agency’s attempts to release land to attract inward investment. Developers are keen to realise the opportunities and, on the Zone 3 Deeside Industrial Estate in North Wales, developer Lancroft is building small freehold units from 2,500-10,000 sq ft. And Easter Group is due to complete a 90,000 sq ft unit on its Aquarius 3 scheme this month.
Not missed out
Swindon has not missed out on the boom in large-scale development, and Honda Logistics has signed with ProLogis for a 350,000 sq ft presale distribution centre adjacent to its car plant. ProLogis is also developing a 300,000 sq ft speculative unit. And Gazeley has entered the Swindon market at the 100-acre Triangle site, capable of accommodating 1.4m sq ft.
Rental levels across the region have shown only minor variations over the past few years. In Bristol, they are static around £7 per sq ft for prime properties from 5,000-10,000 sq ft, although the rents for large sheds would be only £5-£5.50 per sq ft. Swindon has seen rents around £6.50 per sq ft for several years and in Cardiff they have stuck around £6 per sq ft.
However, the strength of the freehold market has resulted in an increase from £50 to £65-£70 per sq ft for those buying properties from 5,000-10,000 sq ft in South Wales.
The region’s road network gives it good access to both the Midlands and the South East, and there have been improvements in Swindon and Newport. In Bristol, agents would like the southern ring road upgraded to release land and improve access to the airport.
Rail could become more important following the development agreement between HelioSlough, the WDA and Cardiff Council at Wentloog. This involves a 435,000 sq ft manufacturing and distribution park next to the existing rail freight terminal.
