The announcement by global developer Gazeley of the biggest distribution warehouse deal of the year in the West Midlands is more evidence of confidence returning to the industrial property sector, according to Lambert Smith Hampton (LSH).
The letting of the 383,000 sq ft warehouse development at Blue Planet, Newcastle-under-Lyme, Staffordshire, on a 20-year lease to JCB is a clear sign that the market is responding to the improving economy, according to the leading national commercial property consultants.
Steve Williams, national head of industrial & logistics at LSH, said the much anticipated return of speculative development in the industrial and logistics sector this month was just one of the indicators that the market was beginning to improve. The Blue Planet deal was further evidence that the market is beginning to move, he said.
LSH was appointed alongside CBRE and Bulleys to market the Blue Planet distribution warehouse – the world’s first BREEAM outstanding logistics building. Gazeley this month (July) announced it had exchanged an agreement to lease with the giant construction equipment manufacturer. Completion is anticipated to take place in October.
The JCB distribution hub – which could create around 300 jobs – will be the receiving centre for supplier-bought components used in the manufacture and assembly of its machinery. The company has also signed an option to purchase an adjacent 7.7 acres of land from Newcastle Borough Council to facilitate future expansion.
The key to the deal has been investment from the Government’s Regional Growth Fund, which is contributing £2.9million to fund job creation and training programmes on the site.
Blue Planet was speculatively developed by Gazeley and combines a highly specified logistics warehouse with cutting edge sustainable technologies, each designed to deliver significant savings to operational costs and reduced carbon emissions.
Alex Carr, director of industrial & logistics at LSH, said: “This is a landmark deal and it is very satisfying to see a world famous Staffordshire-based manufacturer commit to such a major investment and long-term lease. As the world’s first ever BREEAM outstanding logistics building it really does deserve a tenant of JCB’s stature.
“Securing a 20-year lease on 383,000 sq ft represents the deal of the year for Gazeley and sends a clear signal to the market that it could be time to begin building more space of such high quality.”
In LSH’s recent West Midlands Industrial & Logistics Market Review, Alex said the announcement by investment and development company IM Properties that it is beginning the speculative development of two logistics units in Tamworth was a major breakthrough for the region.
Construction work is set to begin this month (July) and complete in January 2014. There has been no speculative construction of distribution units over 100,000 sq ft since 2008.
He added: “This was the first major sign of a return of confidence the industrial and logistics market had been waiting for but there are many other indications that the situation is improving. Gazeley’s deal with JCB significantly reinforces that message.
“With continued occupier demand for grade A industrial space, developers are facing increased pressure to consider speculative development as remaining space rapidly declines. Meanwhile, landlords of key existing buildings in the region are holding out for strong headline rents and longer leases. Incentives have also hardened with some landlords now unwilling to offer in excess of six months’ rent free on a five-year lease.
“There is a notable difference between the north and south of the West Midlands region with higher rents, take-up, and investment to the south, along with lower yields and availability rates. Close proximity to the golden triangle motorway network and key automotive hubs in Birmingham, Wolverhampton and Coventry is of significant importance to occupiers. It is here that we expect to see the most rental growth and the majority of any speculative development in coming months.”
Alongside the disposal of Blue Planet, LSH has completed three of the largest occupational transactions within the first half of the year in the West Midlands. In June LSH completed the 336,488 sq ft acquisition of part of the Tamworth 594 facility on behalf of Hermes Parcelnet and, earlier in the year, the 302,693 sq ft acquisition of the Duke in Burton on Trent for Clipper Logistics. Other significant transactions in the region include the 367,500 DC5 unit at ProLogis Park, Minworth, pre-let to The Pallet Network; the 148,915 sq ft sale of the Altitude building, Birmingham, to Minor Weir Willis; and the £25million purchase of DC2 at ProLogis Park Ryton, Coventry, by Network Rail.
Gazeley was selected by Advantage West Midlands to develop the £50 million Blue Planet shed on 31 acres of former colliery land. The deal marks the first significant piece of business since Brookfield Asset Management bought Gazeley in June. LSH, CBRE and Bulleys acted for Gazeley. GVA advised JCB.