Despite a long-term increase in freight traffic, industrial areas around the UK’s airports are experiencing mixed fortunes. While some act as magnets for occupiers and developers, others are either restricted by their geography or are not seen as suitable locations.
According to King Sturge’s Airport property market report 2005/2006, freight at UK airports grew by 7.4% in 2004, the last full year when figures are available, but a sluggish economy is currently acting as a brake on growth.
“During 2005, the off-airport UK industrial/warehouse markets experienced a stable year in terms of occupier activity,” it concludes.
In future, airports that offer dedicated freight services, rather than carrying freight in the belly hold of passenger jets, are most likely to generate demand among freight operators, the report says. Six out of the 10 fastest-growing freight airports: Cardiff; Luton; Stansted; Nottingham; East Midlands; Edinburgh; and Belfast, are able to do this.
Earlier research by GVA Grimley among industrial occupiers about their property preferences found that 52% thought being near an airport was becoming more important, a percentage beaten only by proximity to a motorway. Jim Whelan, an associate in GVA Grimley’s research department, believes this will create future land shortages around major airports and focus attention on regional airports. “There is going to be an overspill from the major airports to regional locations,” he says.
Land is certainly already scarce around Heathrow, which remains by the far the largest freight airport in the UK. This fact is partly behind Brixton’s planning application to build a two-storey warehouse facility, to be known as X2, next to the airport at Hatton Cross. The 240,000 sq ft building would be capable of division into several units and the upper storey would be accessible to heavy goods vehicles via a ramp outside the building.
Savills director Richard Sullivan says that the Heathrow occupier market is stronger than for some time, particularly for mid-range buildings. “The market that has suffered in recent years is the 50,000-100,000 sq ft size range, but many of the deals we have seen have been in that bracket,” he says.
On Bedfont Road, which is adjacent to the airport, Saudi Arabian Airlines has prelet a 70,000 sq ft warehouse to cargo firm Plane Handling at a record off-airport rent of £15 per sq ft. In Poyle, Exel has taken the 77,700 sq ft Cargo 777 building developed by Hines, and in Hayes, ProLogis has signed a 55,000 sq ft prelet with a BAA subsidiary.
Land shortages are also a feature of the market around Manchester International Airport, which, according to King Sturge, saw a 21.6% increase in freight movements in 2004. DTZ director Brian Birtwistle says there is little off-airport space and that firms are being forced to locate much further away than they would like.
“Companies which really need to be close to the airport are looking at Trafford Park, some 20 minutes’ drive away,” he says.
The availability of land at emerging regional airports varies, but some have major development opportunities. For example, at Peel Holdings’ Robin Hood Airport in Doncaster, which opened last April, there is 800,000 sq ft of former RAF buildings on the airport itself and an off-airport, mixed-use business park. This has planning consent for 1.1m sq ft and Priority Sites has acquired 10 acres on which it will begin development of a 90,000 sq ft industrial scheme in March.
There is also significant property development taking place at Peel’s Liverpool John Lennon Airport, where it has planning permission for 2.9m sq ft of mixed-use space at Liverpool International Business Park. Gladman has built a 610,000 sq ft speculative distribution building known as The Vault on the park and media group Bertelsmann is building a 650,000 sq ft printing facility.
Newcastle International Airport, owned by seven local authorities and Copenhagen Airports, has land available and plans a 500,000 sq ft air-related business park called Southside in conjunction with UK Land Estates. GVA Lamb & Edge partner Michael Cuthbertson says its aim is to attract major air freight integrators such as DHL and UPS.
“The airport ticks all the boxes because it is close to the A1 and has good access to the city,” he says.
Not all the UK’s regional airports will stimulate property development, however, according to King Sturge’s report, such as those specialising only in low-cost passenger flights. “The combination of short-haul routes and rapid turnaround times makes it uneconomical and unviable to transport freight,” it concludes.
Green belt land and poor surface transport infrastructure are further potential constraints, something the report says has so far held back commercial property development around Bristol, for example, despite a large increase in passengers.
While the growth in air traffic is likely to stimulate the industrial market around some airports, it seems that other markets will find it harder to accommodate sufficient space to reach a critical mass.
As consumers increase their reliance on imported goods such as refrigerated produce and manufactured goods, so are imports increasing from the Far East and beyond – and the UK’s ports are struggling to match demand for container capacity, writes David Taylor.
While this growth in container numbers and in the size of ships carrying them has led to a reduction in truck-based freight traffic, the regional ports are set to benefit, but more land is required. John Bowles, head of planning and environment at NAI Fuller Peiser, says the sector needs “to address a significant shortage of handling capability in UK ports, mainly in containers”.
By 2020 the shortfall is projected to be somewhere in the region of 7-8m containers pa. “That will become critical in the next few years if new ports aren’t developed,” says Bowles. Planning inquiries held in the past three years on where new container ports will go have had mixed outcomes. First, a new container port was refused at Dibden Bay near Southampton on environmental grounds. The second alternative was Shellhaven, the P&O London Gateway scheme in the Thames estuary, where P&O promoted a scheme for a large container port and 10m sq ft of distribution space. The government has indicated it will grant planning permission subject to P&O improving roads nearby and a final decision is expected by March.
Meanwhile, Dubai Ports World has come to an interim agreement to buy P&O’s ports business. “They’re seen as being a vehicle in which to ensure that the money is available for what would be a significant investment in that scheme,” says Bowles. “But I think there’s also an ulterior motive for them to have some influence in the way in which the major shipping lines are routing around the world.”
The last big scheme, with which Bowles is directly involved, is Hutchison Ports at Felixstowe & Harwich, with capacity for around 2.1m containers pa. Again, the government has indicated it will grant planning approval and Bowles believes the container shortfall in the South East will be met by these schemes.
Elsewhere, Associated British Ports – with 23 ports the biggest port operator in the UK – is investing in new facilities around the Humber, in particular for roll-on roll-off goods. Stephen Taylor, project director of the Humber Forum, says its central location is helping to stimulate demand for its imminent expansion: a new £35m terminal at Immingham; a new £35m container port in Hull; and a multi-modal facility at Goole.
Teesport, south of Hartlepool on the north-east coast, is also expanding. Grimley’s Owen Young points out that Asda and PD Ports have signed a deal with Gazeley to develop a new £20m deep-sea container facility there. However, the smaller ports such as Blyth, Seaham, Newhaven, Shoreham and others are losing out on their ability to cope with larger cargoes, with a knock-on effect to surrounding property.
But he feels there will still be healthy levels of activity around the UK ports in general, stimulated by port owners working their property assets. “If you add into the pot that there are still vast areas of property and land held by the port operators, you can see why they are considered a good takeover prospect,” he says.
