Big Box Bulletin Half Yearly Update of Distribution Activity H1 2019
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Scotland RESEARCH Big box bulletin Half yearly update of distribution activity H1 2019 View > Occupier Market Key stats Investment market Investment data Business Rates / Outlook Map Contact East Midlands West Midlands London, South East & East North West South West & Wales Yorkshire & North East Scotland E-commerce dominates demand There has been a stronger level of take-up for big sheds during the UK GRADE A BIG SHED TAKE-UP (OVER 100,000 SQ FT) second quarter of 2019 as requirements have increased following a Million sq ft slow start to the year. Activity has been particularly dominated by the 35.0 e-commerce sector, with take-up concentrated along the length of 30.0 the M1 corridor, with Yorkshire, the East Midlands and the South East accounting for more than 90% of activity. 25.0 5 year average Take-up of grade A warehouses over 100,000 sq ft totalled 9.5 million sq ft during 20.0 H1, which is 16% down on the five year six monthly average of 11.2 million sq ft. 15.0 The retail (non-food) sector was by far the most acquisitive during the first half of the year, accounting for 62% of take-up (with internet only retail companies 10.0 ANDREW JACKSON accounting for almost half of take-up). The largest deals of the year so far have 5.0 Principal & Managing Director been to a retailer who took a 1.75 million sq ft pre-let at Summit Park, Mansfield, Industrial along with two other significant lettings of 500,000 sq ft plus at Doncaster and - 2014 2015 2016 2017 2018 H1 2019 Milton Keynes. The structural changes in the sector and projections for growth are seemingly off-setting the political uncertainty. TAKE-UP BY SECTOR Take-up of grade A Further deals in the retail sector include 579,000 sq ft to VF Corporation at warehouses over Bardon, Leicester and 500,000 sq ft to Lidl at Belvedere, London. In the third 100,000 sq ft totalled party logistics sector Eddie Stobart has taken three speculative units at Panattoni H1 9.5 million sq ft during 2019 Park, Northampton, with 4PX and Ceva Logistics also active. Conversely the H1, which is 16% down manufacturing sector has seen much less activity, with the Brexit uncertainty on the five year six monthly average of having a greater impact on this sector. 11.2 million sq ft. Three year average 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Retail - Non food/Wholesale 3PLogistics Manufacturer Retail - food Other Occupier Market Key stats Investment market Investment data Business Rates / Outlook Map Contact East Midlands West Midlands London, South East & East North West South West & Wales Yorkshire & North East Scotland There has been a wide variation in activity across the regions. During the first half of the year TAKE-UP BY REGION more than 90% of activity was focused in 3 regions; the East Midlands (38%), London, the South East and East (35%) and Yorkshire and the North East (20%). There was an unusually H1 low level of take-up in the West Midlands, North West and South West regions, although the 2019 deals pipeline for the rest of the year indicates significantly improving demand in some of these underperforming locations. A significant amount of speculative space has completed over the past 12 months, providing wider choice in the market in terms of location and size of unit and subsequently Five speculative take-up has increased to 23% of total take-up this year. As a result occupiers year have taken less design and build product compared to the past two years. average This increased speculative development means supply levels (including space under construction) have risen to 29.5 million sq ft. This amounts to 16 months take-up based on 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% average demand for the past five years. East Midlands London, South Yorkshire & North West Speculative supply currently makes up 58% of total supply (36% completed and 22% under East & East North East construction), while secondhand space accounts for the remaining 42% of the total. The West Midlands Scotland South West & Wales size of speculative developments has also increased over the past year as developers are responding to the larger requirements of ecommerce retailers, with examples including AVAILABILITY BY REGION AND TYPE (END OF JUNE 2019) Prologis’ 535,000 sq ft development at DIRFT and IM Properties’ 533,000 sq ft at Hinckley Park. 8,000,000 Existing build Upward pressure continues on rents for distribution property. According to MSCI, rental growth over the 12 months to July was 3.6%. We expect a continuation of low vacancy rates 7,000,000 Spec build and rental growth of around 3% pa for all distribution property for 2019, moderating to just Speculative under 6,000,000 construction over 2% in 2020. 5,000,000 4,000,000 3,000,000 2,000,000 1,000,000 0 East West North West London South Yorkshire & South West Scotland Midlands Midlands East & East North East and Wales Occupier Market Key stats Investment market Investment data Business Rates / Outlook Map Contact East Midlands West Midlands London, South East & East North West South West & Wales Yorkshire & North East Scotland SUPPLY BY SIZE BAND 8,000,000 100,000-200,000 sq ft 7,000,000 200,000-300,000 sq ft 300,000-400,000 sq ft 6,000,000 400,000-500,000 sq ft 5,000,000 500,000 sq ft + 4,000,000 3,000,000 2,000,000 1,000,000 0 East West North West London South Yorkshire & South West Scotland Midlands Midlands East & East North East and Wales KEY DEALS – H1 2019 Scheme Sq ft Occupier Summit Park, Mansfield 1,750,000 Confidential iPort, Doncaster 731,000 Confidential Mountpark, Bardon 579,000 VF Corporation Altitude, Magna Park, Milton Keynes 574,000 Confidential Belvedere Wharf, Belvedere 500,000 Lidl Peterborough Gateway, Peterborough 432,000 Confidential Former Coty Premises, Seaton Delaval 370,282 Vbites Leicester 335, Leicester Commercial Park 336,635 4PX Northampton 310, Panattoni Park 309,631 Eddie Stobart Logic 233, Dagenham 232,965 Eddie Stobart Northampton 222, Panattoni Park 221,571 Eddie Stobart Occupier Market Key stats Investment market Investment data Business Rates / Outlook Map Contact East Midlands West Midlands London, South East & East North West South West & Wales Yorkshire & North East Scotland GRADE A TAKE-UP H1 2019 KEY OCCUPIERS TAKE-UP BY BUILDING TYPE INTERNET RETAILER 3.3 million sq ft 764,000 sq ft 43% 31% 25% 9.5 million sq ft DESIGN & BUILD EXISTING BUILDINGS SPECULATIVE 16% DOWN ON 5 YEAR AVERAGE 579,000 sq ft 500,000 sq ft TAKE-UP BY SECTOR THREE REGIONS DOMINATE TAKE-UP SUPPLY 29.5 million sq ft 62% 24% (16 MONTHS’ SUPPLY BASED ON PAST DEMAND) RETAIL - NON-FOOD THIRD PARTY LOGISTICS EAST MIDLANDS 38% 42% 22% LONDON, SOUTH EAST 35% AND EAST SECONDHAND UNDER CONSTRUCTION 8% 5% 36% RETAIL - FOOD MANUFACTURING YORKSHIRE AND 20% THE NORTH EAST COMPLETE SPECULATIVE BUILD DISTRIBUTION RENTAL GROWTH DISTRIBUTION INVESTMENT DISTRIBUTION YIELD KEY PURCHASERS H1 2019 3.6% 5.66% 12 MONTHS TO JULY 2019 (MSCI MONTHLY INDEX) £1,005 million (MSCI MONTHLY INDEX - JULY) 40% DOWN ON 5 YEAR AVERAGE 5.50% IN MARCH Occupier Market Key stats Investment market Investment data Business Rates / Outlook Map Contact East Midlands West Midlands London, South East & East North West South West & Wales Yorkshire & North East Scotland East Midlands KEY AVAILABILITY Type Scheme & Address Town Size (sq ft) Total take-up for the first six months of 2019 amounted to 3.6 million TAKE-UP sq ft across the East Midlands. While this is down on 2018’s record Spec Build Nottingham 550, Panattoni Park Nottingham 551,031 level, it is 21% up on the six-monthly average. Under construction DC535 Prologis, DIRFT III Daventry 534,744 The East Midlands has seen the UK’ s largest letting so far this year, the pre-let Under construction Hinckley 532, Hinckley Park Hinckley 532,500 of 1.75 million sq ft to an internet retailer at Summit Park near Mansfield; a Under construction EMDC 525 Castle Donington 521,520 joint venture development between partners Peveril Securities and Sladen H1 2019 5-year six-monthly average Estates. Among other key deals in the region, American clothing retailer VF Existing Build Quantum, Magna Park Lutterworth 411,613 3.57 m sq ft 2.92 m sq ft Corporation took a 579,000 sq ft pre-let at Mountpark Bardon Phase II. These two deals alone account for 50% of the design and build space taken across BIG SHED TAKE-UP the UK this year, emphasising the comparatively low level of D&B activity. Million sq ft SUPPLY 7 Elsewhere, logistics specialists 4PX took 336,635 sq ft at Leicester Commercial 6.7 m sq ft (26 units, average 259,554 sq ft) Park on a 10 year lease and Eddie Stobart has committed further to the 6 Midlands, taking three speculative units of 309,631 sq ft, 221,571 sq ft and 40% 5 Under construction 93,000 sq ft at Panattoni Park, Northampton. Gazeley has recently agreed to buy the investment from Panattoni for a reported £80 million. 4 3 Supply of grade A stock (above 100,000 sq ft) in the East Midlands currently HEADLINE RENT LAND VALUE PER ACRE stands at 6.7 million sq ft, an increase of 15% over the past year. This is (NORTHAMPTON) (10 ACRES) 2 predominantly due to increased speculative supply and there is now an £6.65 psf £1.2 million even split between secondhand supply, completed speculative space and 1 buildings under construction.