A strong resurgence in the North West’s industrial sector has led to a significant upturn in the small build sector and, according to new research from CBRE, whilst big sheds often steal the limelight, it’s the ‘forgotten market’ of sub 50,000 sq ft units where the message is clear; “build them and they will come”.
Steve Capper, Associate Director of Industrial Agency at CBRE Manchester, said;
“There has been much talk in 2015 about the strength of the North West’s industrial sector with a particular focus on the speculative development of the larger logistics units of 100,000 sq ft and above. Whilst it is true that there has been strong recovery in this sector with almost 2.5m sq ft under construction and an additional 1.5m sq ft planned, we should not ignore the significance of the sub 50,000 sq ft and multi-let market which is where developers are turning their attention.”
CBRE’s research shows that the smaller build sector was badly affected by the downturn in the economy with occupiers becoming increasingly risk averse and cost sensitive. With demand reducing and supply increasing the market experienced softening rents and increasing incentives which heavily favoured the tenant. With the odd exception, this supply and demand mismatch put an end to speculative development for several years with no high-profile multi-let industrial estates until 2013 and the development of Chancerygate’s S:Park in Stockport.
The development of S:Park coincided with a change in the market. Built over two phases and providing units ranging from 1,500 sq ft to 20,000 sq ft, the 20 unit development at S:Park now has just two units remaining of approximately 9,500 sq ft each with sales prices achieved in excess of £90 psf.
The scheme wasn’t alone in its success and CBRE’s own enquiry statistics showed that units of less than 50,000 sq ft accounted for approximately 60% of annual enquiries last year.
Following the success of S:Park and with exceptionally strong occupier demand, South Manchester will soon see the development of two prime speculative schemes.
Airport City has secured planning for six industrial units which will be built adjacent to the 271,000 sq ft unit being built by Mountpark / Stoford. Works are expected to start early in the new year with a good number of occupiers already showing strong interest in the units ranging from 17,500 sq ft to 35,000 sq ft
In Stockport, the Council has submitted detailed planning for the speculative development of 146,000 sq ft at the former Gorsey Bank site which has now been renamed Aurora Stockport. The scheme will provide 10 industrial units ranging in size from 8,500 sq ft to 46,000 sq ft. Consent is expected by early January 2016 with works due to start shortly thereafter.
Scarborough Developments may also build a stand-alone unit of 40,000 sq ft and a terrace of industrial units within their proposed mixed use scheme at Orbital One, Stockport.
However development is not limited to South Manchester as has been proven by Capital & Centric who have speculatively developed 40,000 sq ft at Foundry on Ordsall Lane in Salford. Completion of the scheme is imminent with 8 out of the 12 units already under offer. It is a similar story further north where Roundhouse Properties and Seddon Developments are building multi – let estates comprising of starter units of sub 5,000 sq ft in Bamber Bridge and Chorley respectively. Both schemes have most of the available units under offer prior to completion with sale prices now in excess of £100 psf.
In Warrington, Patrizia is developing three units of 15,000, 17,500 and 21,500 sq ft at Birchwood Park which again will provide high quality accommodation including 11% – 15% office accommodation. CBRE understands that the 17,500 sq ft unit is now under offer close to the quoting rent of £7.50psf.
Capper continues; “There is now a significant weight of demand in the smaller industrial sector which is currently showing a shortage of supply of good quality modern products. A number of developers are already seeking to take advantage of the market shift and we estimate that in the North West there is now approximately 650,000 sq ft of multi-let and smaller stand-alone units already committed.”
CBRE claims that location is key, with developments currently focusing on industrial strongholds. For example at Trafford Park Russells Construction are on site with the development of The Boxworks (29,000 sq ft), Harbert are close to completing North Point (61,500 sq ft) and DTZi/Graftongate are developing Unit M Ashburton Point (62,000 sq ft).
At Heywood distribution Park Harbert are developing a 68,000 sq ft unit and at Haydock a lease is understood to be close to completion on Morley’s speculatively developed unit of 72,000 sq ft. Whilst these units are slightly larger, they predominantly fall within the same market sector.
Capper concludes; “Whilst the development of small sheds is an area which has largely been ignored in recent years we are now seeing developers and investors keen to take advantage of the strong occupational demand which is leading to rental growth, reducing incentives, reducing voids and hardening yields. Although this risk profile will not suit all, with demand likely to continue to increase, it will be those developers who are able to bring forward opportunities now who will take advantage of this buoyant market sector.”
