Industrial property market remains strong - trends in the north west explained
Over the past decade Network Space has delivered over 500,000 sq ft of small and mid-box industrial development across the north of England, with the majority speculatively developed and self-financed.
Stephen Barnes, Managing Director at Network Space Developments said: "As one of the region’s longest standing industrial and logistics developers, we have honed and refined our approach over many decades. Whilst market and occupier demands change over time, the principles of good development remain constant and this is demonstrated by the enduring popularity of some of our earlier schemes.
"We deliver flexible, good quality industrial accommodation that can be easily adapted to meet individual occupier needs and we have always sought to provide space that has a broad appeal to as large a cross section of the market as possible. Our designs always focus on ‘future proofing’ to ensure longevity, with these developments either being held within Network Space’s own investment portfolio or by our investor partners."
Mere Grange in St Helen’s is a good example. Here Network Space speculatively developed some 90,000 sq ft of high-quality multi let industrial space alongside 72,000 sq ft of space which was designed and built for occupiers Synergy and Ormazabal. The final phase completed towards the end of last year and the site is now 90% let to companies such as Dresser Natural Gas Solutions, Kilwaughter and a national online retailer, alongside Synergy and Ormazabal, creating some 300 new jobs.
The approach was simply to deliver the best product possible, providing an exceptional business park environment, brought in improved access provisions, high power and services capacities, superfast broadband and achieved high BREEAM environmental standards. In terms of design; high eaves heights, as well as generous yards, floor loadings and office provision, were all included.
This attention to detail appeals to occupiers and investors alike. Having let the vast majority of the space, Network Space recently sold this asset to InfraRed Capital Partners Ltd (IRCP), on behalf of the InfraRed Urban Logistics Income Fund. IRCP recognised the quality of the product, the location and the tenant line-up which all perfectly aligned with the aim of expanding their urban logistics portfolio.
The company replicated this approach most recently at our £8million speculative Element scheme at Alchemy Business Park in Knowsley, securing the first letting to a major on line retailer. Here three detached units of 23,000 sq ft, 35,000 sq ft and 45,000 sq ft were developed, providing grow on space for the SMEs occupying the adjacent, smaller fully occupied scheme. Again, the approach aims to ensure that product aligns with current market appetite but always with an eye as to what future demands might be.
Barnes continues: "We are currently progressing further speculative industrial and logistics schemes across the North West, utilising either our own capital or developing for others. We are currently on site at Ravens Lock in Salford which will provide 172,000 sq ft when it completes early next year. The scheme comprises three self-contained, detached warehouses offering 29,500 to 61,000 sq ft alongside a terrace of three units of 11,000 to 19,000 sq ft. This site was for many years overlooked, but now finds itself perfectly placed to support last mile urban logistics, being well-located within the Greater Manchester conurbation and served by the M61 and M60.
"Similarly, we completed Central 23 early this year - a 23,500 sq ft warehouse with integral offices, with the urban logistics market in mind. This is a rare development being a modern detached urban logistics facility located within walking distance of the city centre.
"Our sector has undoubtedly benefitted from the growth of on-line retailing which has driven demand and take up, but has also fuelled investor appetite. In the North West, this has helped push industrial rents and values to support development in areas which, until relatively recently, weren’t viable.
"However, the appetite for larger logistics development, which generally command higher returns, has also put pressure on many medium sized urban sites that traditionally would support small and mid-box development. This has also driven higher land values across our sector which is fine at the larger end of the scale but serves to restrict the delivery of smaller footprint schemes.
"In the small shed market, land and build costs remain disproportionately high whilst lower values, attributed to smaller riskier occupiers, serve to exacerbate the challenges. The result of this is that very little new space under 10,000 sq ft is being delivered at the moment, with occupiers in that market occupying increasingly old and outdated premises. We currently have a number of schemes that seek to address this ‘gap’ which we aim to deliver over the next couple of years.
"In general, the sector and our region remains in very good shape but with some obvious headwinds to contend with. Whilst the on-line and distribution sector of the market will continue to drive demand and pricing, other more traditional occupiers are facing more challenges in today’s difficult economy and, as a result, the sector will need adopt some caution."