Newspaper article The Journal (Newcastle, England)

Surge of Big-Shed Developments; Development in the Big-Shed Marketplace Are Seeing the North East Make Up Ground on What Has Been Developed Elsewhere in the Country, Says Mark Proudlock

Newspaper article The Journal (Newcastle, England)

Surge of Big-Shed Developments; Development in the Big-Shed Marketplace Are Seeing the North East Make Up Ground on What Has Been Developed Elsewhere in the Country, Says Mark Proudlock

Article excerpt

LAST year saw further growth in the number of large-scale 100,000sq ftplus distribution warehouses built speculatively nationwide with a substantial increase (a reported 46%) on the number available only 12 months earlier.

Developers which continue to dominate the market include Prologis, Gazeley, HelioSlough and Rockpoint (which acquired Gladman's stock).

This growth has been reflected in the North East where a similar surge of development of large distribution sheds has occurred.

Rents for large distribution sheds in the North East clearly vary according to the size of the unit but are generally in the region of pounds 4.25 to pounds 4.50 per sq ft.

In spite of the North East being firmly on the distribution shed map, a quick review of the market in other areas of the UK indicates the gulf that still exists between our region and those more traditionally accepted as distribution locations.

The Midlands, for example, has been long-established as the logistics centre of the UK and in spite of a slight decline in take-up of units of over 100,000sq ft in 2007, the sheer size of deals is in a different league.

Tesco acquired 850,000sq ft at Fradley Park in Lichfield, north of Birmingham, in 2007, while 530,000sq ft was let to Sainsbury's at Pineham, Nottinghamshire.

The achieved rents were reportedly pounds 5.50 and pounds 5.25 respectively, over pounds 1 per sq ft more than quoting rents for significantly smaller sheds in the North East. Proximity to the UK's major road networks, including the M1, M42 and M6, is all too apparent in these occupiers' choice of location, added to which the amount of population and stores (in the case of retailers) that can be reached from those locations is infinitely greater.

The South East is naturally also a major location for distribution fuelled by both the dense population and the airports which drive demand for distribution space.

Rents of up to pounds 15 per sq ft are achieved at Heathrow, indicating the strength of demand. Developers in those regions have shown ongoing confidence acquiring sites and building large sheds, many on a speculative basis.

However, the picture that emerges is one where the pre-let market for large warehouses is strong, something that is significantly less prevalent in our region.

Further north, Yorkshire has experienced significant growth in terms of the development of distribution sheds over the course of the past few years, fuelled by high levels of relatively low-cost land, low labour costs and access to motorway infrastructure and sea ports such as Hull and Immingham Docks.

Not surprisingly, the area has also experienced substantially larger deals over the course of 2007. Deals of over 100,000 sq ft plus are commonplace and the development pipeline remains full. …

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