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Time to build?

Saxham Business Park: the Gladman-owned 12-acre site has planning permission for B8 use

If 2006 was the year of land acquisition in the East Anglia industrial market, 2007 will be the year that developers need to build that space and agents will be required to fill it.

Across Cambridgeshire and Suffolk, 1.4m sq ft sits in the development pipeline, and in Norwich, 87 acres are ready to go. But for the past few years that is where it has stayed. Now, with requirements trickling back onto the market, and a shortage of good-quality space, will developers start building?

Suffolk

Any developer casting its eye over Ipswich’s 2006 figures may think twice before starting schemes. According to Savills, take-up dropped 60% last year to 151,000 sq ft, and around 3m sq ft is in the pipeline, although none of it is under construction. Manufacturing output is predicted to fall in the region by 5%.

The figures, however, suggest healthy signs emerging (see box, p150). An 110,000 sq ft deal boosted 2005’s take-up, and last year’s decline was much more to do with the lumpiness of industrial take-up than a downturn in the market.

Top rents for larger distribution warehouses reached £5 per sq ft last year, registering a 25% rise over the past two years.

Nick Mager, associate director at Barker Storey Matthews in Bury St Edmonds, expects these trends to continue. He says that the wider Suffolk market around the A14 is an industrial lifeline.

“It runs through the region like the River Nile flowing through arid Egypt, fertilising every junction with shed sites and development opportunities,” he says.

Land values in Bury have risen from £150,000 per acre to £600,000 per acre during the past five years, says Mager. Rents have followed suit, and he now expects to see £5.75-6 per sq ft achieved over the next year.

Norfolk

On the face of it, any developer sliding the rule over Norwich’s numbers should be licking their lips in anticipation. In 2006, take-up was 346,000 sq ft – double that in 2005 – largely due to two sizeable deals totalling 100,000 sq ft. Rents of £6.50 per sq ft are being quoted on Gateway 11 at Wymondham. Yet, little speculative development is under way.

Broadland Unity Trust’s Broadland Business Park on the A47 has four plots available, but Caroline Morton at Savills, the agent on the scheme, says the developer will await a prelet. “There are no signs that the market is slowing down, but we have not seen the growth to allow speculative building,” she says. “We may achieve £7 per sq ft in a year’s time. Industrial development stacks up at £6.50 per sq ft. But it is a case of having the confidence that demand is there.”

She adds: “Developers don’t want to provide a building and find it is either not in the right location or an occupier wanted one either side of it, and then they end up stuck with it.”

One of the few speculative developments is the 11-acre Link 47 scheme at Longwater Business Park. A planning application is in for three units totalling 15,000 sq ft, with a speculative start imminent, says Sam Kingston, partner at Roche. Rents of £5.50-6 per sq ft are being targeted. “The first couple of deals will act as a catalyst,” he says. “You have to be pragmatic and realise you can’t make a 15-20% return on every deal.”

Prelets remain thin on the ground, says James Allen, partner at Roche. But he explains: “I know of several active enquiries for preletting at Broadland Business Park, and there is also a similar enquiry at Longwater Business Park.” One is in solicitors’ hands.

The main focus for industrial development near the city is the 5.5-acre site at Fifers Lane near Norwich International airport. Agent Bidwells recently asked for offers in excess of £1.75m, and reportedly received 22 bids. The site is next to a small office park, and Allen speculates that a change of use could be in the offing – hence the spectacular sums bid.

Cambridgeshire

The market is set to go from famine to feast in Cambridgeshire. Russell Catley at Bidwells lists several developers that are building space speculatively, including Wrenbridge, which is pushing ahead with 55,000 sq ft at Papworth Business Park, and an imminent start at Carisbrooke’s Buckingway Business Park, which has consent for up to 80,000 sq ft of sheds.

Around 9% of Cambridge’s stock is vacant. However, Catley says stripping out the poorer quality stock gives a more representative figure of 3-4%. He adds: “The development planned at the moment is fine, but developers see others building and get ‘sheep mentality’. It’s something we need to keep our eye on throughout 2008.”

There is strong rental growth in the city centre, and Catley forecasts a rise of 50p, to £10 per sq ft. However, he says that within a 20-mile radius of the centre the story is “not so great”. Catley predicts that rents will stay steady at around £8 per sq ft.

Further afield, Will Mooney at Jeffersons Commercial says that a lack of space is encouraging developers to move ahead with schemes. “Huntingdon, St Ives and St Neots have traditionally been good areas for industrial sites but less so for offices,” he says. “Now that there is little supply, developers have sought planning consent for industrial and warehousing use alongside existing B1 consents.”




Gladman to acquire more sites

Gladman is bullish about East Anglia. Having made its entry into the market in January, buying a 12-acre site on Saxham Business Park (pictured, p149) near junction 41 of the A14, it says it wants to acquire seven or eight industrial or office sites in East Anglia during the next 12 to 18 months.

Simon Turner, development manager at Gladman, says: “We’ve still got money from the office investment sales last year, plus we’ve got significant resources to tap into from turning properties.”

Its Saxham site has outline planning permission for B8 use, and an application for two speculative warehouses of 58,000 sq ft and 140,000 sq ft is imminent. It hopes to be on site by June. Six enquiries have already been made for all of the space.

While local agents bemoan the lack of land in East Anglia, the Cheshire-based developer believes that the situation is no worse than in the rest of the UK. “Land values in East Anglia are slightly cheaper than the South,” says Turner. “It has its hot spots, such as Cambridge, but as you go along the A14 it quickly tails off.”

Gladman is targeting £6 per sq ft for leasehold on Saxham and £95 per sq ft for freehold. Turner says the properties will not be held and will either be sold freehold or packaged as an investment.

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