A flurry of deals during the second half of the year helped boost annual take-up in the Midlands logistics sector, with a total of 5.75 m sq ft transacted across the region in 2012, a new report from CBRE has revealed.
After a slow start to the first half of the year, the sector put in a strong performance in the final six months, with more than three million sq ft of deals completed to bring the year-end total to a similar level achieved in 2011.
Among the deals to complete during the second half the year was the one million sq ft purpose-built facility at Prologis’ Daventry International Rail Freight Terminal (DIRFT II) to Sainsbury’s – the largest transaction in the UK in 2012 – and a 300,000 sq ft turnkey unit at Prologis Park in Ryton to Network Rail.
According to CBRE’s Logistics MarketView report, the deals mark a shift in the market between the first and second halves of the year. In the first six months, transactions were exclusively on existing buildings, but in the latter half of the year the build-to-suit market returned to the Midlands as the level of available stock decreased.
“We have long expected that design and build transactions would begin to dominate the occupational market as the availability of new speculatively built buildings diminished,” said Richard Meering, senior director in the industrial agency team at CBRE in Birmingham.
“This trend began up to twelve months earlier in other regions, but is now emerging in the core Midlands market and we expect it to remain buoyant in 2013.
“At the turn of the year, Dachser Transport was close to agreeing a new 300,000 sq ft facility from Roxhill at Brackmills Point in Northampton. In addition, we are aware of a number of other significant design and build deals in the pipeline, at various stages in the negotiation process, most of which are likely to complete in the first half of this year.”
According to Mr Meering, the demand for design and build is being fuelled by a lack of new buildings within key infrastructure corridors, particularly along the M1 in the East Midlands.
In total, at the end of 2012, there was 6.89 m sq ft of available logistics space across the Midlands, of which one-third is classified as new. 44 per cent of overall availability in the Midlands is within the East Midlands. Furthermore, just five new buildings can accommodate more than 300,000 sq ft,.
“We know the demand is there, but we’re quickly running out of stock to satisfy it, particularly as a number of units are already subject to strong interest,” said Mr Meering.
“For growing sectors, such as the automotive industry, where there has been a lot of take-up activity recently, particularly from component suppliers and logistics companies linked to the expansion of Land Rover, property is still very much in strong demand.
“For example, CBRE has been retained by a leading component company to acquire 100,000 – 200,000 sq ft in the Birmingham and Solihull area and we’re aware of a number of other suppliers that have similar requirements. For the success of the region’s automotive manufacturers and the businesses in the supply chain, it’s critical that we can provide the required space to support what is an important industry for the region.”
Ian Gascoigne, a director in CBRE’s lease consultancy team in Birmingham, said: “There is no doubt that stock of good quality accommodation has markedly diminished. This reduced supply is beginning to impact upon decision making when leases are up for renewal, with landlords able to be much more robust on terms and incentives. We may also see some positive rental growth from the nadir of 2009.
“Those businesses that undertake their strategic their strategic planning in good time will be nest placed to ensure they can obtain the right property for them, at the right rental level, rather than waiting and potentially paying more.”
