Dean Thompson, Director and Head of Region for the North West at HBD, looks at the consequences that flow from a shortage of strategic sites. A critical period lies ahead.
Following the recent refusal by the Secretary of State to grant permission for the 630,000 sq ft Eddie Stobart national distribution centre at Barleycastle Lane in Warrington, the North West industrial and logistics market faces a critical few months. Key decisions are awaited from the minister in respect of a number of other high-profile locations, including Wingates Bolton, Symmetry Park Wigan, and the 230-acre former Parkside Colliery site in Newton le Willows.
The availability of such key strategic sites in the region is at an all-time low, when demand for space within the sector goes from strength to strength as the move to online retailing gathers pace. This trend has been in motion for a few years now, but the impact of Covid has accelerated it further. The market will therefore be holding its breath to see which way the Secretary of State’s decisions go.
There are a number of high-level factors behind this increase in demand:
o Increased online retail
o Occupiers looking to shorten long supply chains abroad to minimise potential border disruptions
o Increased onshoring due to the above
o Government Covid-related requirements for testing and potential vaccine/PPE storage
In Greater Manchester, there are only two sites with planning that are immediately deliverable and which could accommodate a unit in excess of 350,000 sq ft. While there are a few more options around Merseyside and Cheshire, supply is limited.
The supply of quality sheds in excess of 100,000 sq ft is also a problem, with only six spec sheds in excess of this size currently available for occupation in the region. Two or three of these are rumoured to be going under offer imminently. There are four spec sheds in excess of 100,000 sq ft under construction now, which will be ready for occupation in the next four to eight months, but in reality, these will probably just replace the existing spec sheds which are likely to have been let in the same time period.
This lack of supply of good quality accommodation also applies to small and medium-sized units. As existing speculative schemes become full, very few new spec schemes are being delivered to maintain the pipeline which has led to rental growth. Rents, prices and land values are increasing due to this supply and demand imbalance and, in recent months, we have seen a real sharpening of yields to levels previously unheard of for prime product in the sector.
Here at HBD, circa 70% of what we do nationally is within this sector, often in JVs with local authorities, fellow developers or landowners, but we are also happy to bid on our own for prime sites.
At present in the North West, we have bought 20 acres at East, Preston, in partnership with Barnfield, and have some exciting news coming out shortly regarding an initial speculative phase of development to kickstart the scheme. We also have a further 62 acres optioned up in the Preston area, again with Barnfield, which we hope to bring forward in the coming months, although we are hungry for more. Securing further sites and opportunities within this sector, either in partnership or on our own, is a key part of our strategy for the North West region moving into 2021 and beyond.
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