Steve Perriton, Partner, Bulleys Chartered Surveyors reports a strong finish to 2013 and in the first few weeks of 2014 enquiries have continued to pace. Whilst this is very good news for the commercial property market which has struggled over the last 5 years during the recession, this welcome return to activity brings with it a reminder of the lack of awareness of companies of the limited availability of modern built and available commercial property stock.
This is a legacy of the recession which saw the majority of speculative development and new building stop, as the recession took hold in 2007/2008. This legacy has meant that the majority of the existing commercial property is outdated and unsuitable for current requirements for large modern facilities. Companies are starting to find it difficult to secure new space as availability has been consistently and steadily decreasing and the lack of existing suitable stock has seen the re-emergence of the “design and build” solution where a new building is constructed on a cleared site to meet a company’s specific requirements.
This can be clearly evidenced by the successful transactions at i54 South Staffordshire with completed sales to Jaguar Land Rover (in excess of 1million sq.ft.), Moog Aerospace (208,000 sq.ft.), Eurofins (50,000 sq.ft.) and International Security Printers (70,000 sq.ft.).
Almost half the businesses in the Black Country are foreign owned and therefore key decisions are undertaken by international boards and typically a number of international locations are being considered for an inward investment decision. The lack of awareness of the limited “shovel ready” site opportunities for new development by companies means that they are completely unprepared for the time required to construct a new facility once the site specific constraints are alleviated. This means that the lead in times are sometimes too long to secure a successful inward investment particularly in the current climate when business decisions are being made on a just in time basis.
It remains highly unlikely that speculative developments will commence on large facilities which were last seen during the height of the previous commercial property boom in the near future. Goodman’s Citadel Junction at Bilston (322,954 sq.ft). is the largest single new available building presently in the Black Country. This leaves companies resorting to design and build solutions and we have seen more enquiries on this basis in the last 6 months than in the last 5 years. In speaking to a number of prominent Black Country landlords and West Midlands developers, all are looking at site availability to satisfy existing tenants’ future expansion demands or other inward investment opportunities. We expect further demand to increase from automotive component suppliers as the new Jaguar Land Rover engine plant approaches completion, becoming operational in December this year.
The opportunity and the effect of Jaguar Land Rover’s engine plant at i54 cannot be understated for the Black Country region and whilst the previous 5 years have been difficult for manufacturing companies, there are now real enquiries either working directly or indirectly in the supply chain looking to secure sites or a new facility in the Black Country which meet their required criteria. Whilst some of the smaller requirements will be satisfied by existing stock typically requirements of 20,000 sq.ft., larger requirements over 100,000 sq.ft. will find the lack of choice and available Grade A or good quality Grade B existing industrial buildings a problem. This will result in them looking for development sites of over 5 acres to undertake a design and build. Even larger requirements of 400-500,000 sq.ft. will require 20 acres and will find site identification and delivery within a realistic time frame difficult. It is easy to forget that i54 South Staffordshire was able to secure Jaguar Land Rover because site preparation work had been undertaken to make the site “shovel ready” for development, meaning that the completion of the facility could be achieved within the companies required timescales. Businesses expect construction of a new facility within a 12-15 month timescale and manufacturers are not willing to accept long lead in times especially as supply chain companies experience an increase in volumes and therefore a requirement for further space. Another good example of what can be achieved with available good quality Grade A buildings or a site was demonstrated last year when JCB took the 383,036 sq.ft. building known as Blue Planet, Chatterley Valley from Gazeley. This letting was secured with the help of RGF grant funding.
The recent successful application by the Black Country LEP to the government, for City Deal funding, recognises the urgent need to bring sites forward and will hopefully provide an important contribution to ensure that these development sites are made “shovel ready” for development. This will secure further high value manufacturing jobs and companies within the Black Country area. In the global market within which international companies now operate, it is just as important to ensure existing occupiers are retained and reinvest and relocate to new modern premises within the Black Country area, as it is to secure new inward investment. To finish 2014 has started with much promise and expectation.