Internet shopping giant Amazon alone dispatches over 70 million packages across the UK each year – with the number set to rise. Online shopping increased by a hefty 16% last year.
Another factor driving the need for industrial space is the continued growth in the UK’s still significant manufacturing sector, which in turn boosts the thousands of smaller companies who supply the manufacturers, all of who require space to work and operate from.
Recent take-up in the West Midlands has been dominated by businesses linked to the automotive sector with many forming part of the Jaguar Land Rover supply chain.
The demand for industrial and logistics space is concentrated broadly across the centre of the UK, significantly matching our own commercial office network.
The area bounded by the M1, M6 and M42 motorways is so popular among industrial and logistics companies it is known in the industry as the Golden Triangle.
Yet supply of floor space hasn’t kept pace with demand in recent years. That is partly because local authorities perceived the need for new housing as more urgent than assigning land for industrial or logistics use.
Furthermore, residential development has provided higher returns, so the development of new industrial buildings has been limited, particularly at the smaller end of the market.
Now the situation appears to be changing and there could be exciting opportunities for developers, landowners and investors in commercial property, particularly those involving land in or around the Golden Triangle.
The strong demand for employment land has pushed industrial land values up considerably and in some key areas of the country, prices have reached almost &600,000 per acre, rivalling or even exceeding residential land values.
This is potentially good news for those with land holdings, who have found their plots couldn’t be developed for housing.
Location is key with easy access to a motorway and other transport facilities a must.
Also, proximity to an urban area is often important to ensure the companies who locate there have an adequate labour supply, and good public transport so workers can easily get to and from work.
A super-sized 1,000,000 sq ft national distribution centre, such as one occupied by Amazon, is likely to need almost 50 acres, with an absolute minimum of 5 acres for one large building of 100,000 sq ft.
We have considerable experience in bringing forward strategic development land, and are currently advising landowners across the Midlands on sites that have industrial and logistics development potential.
There is an emerging story across the West Midlands, and along the M1 corridor in places like Doncaster and Leicester, where we are seeing developers competing for land and therefore paying strong prices.
And for landowners who want to create a long-term asset, the upsurge in demand for industrial space also presents real opportunities, as commercial developers have been reluctant to build smaller buildings (less than 50,000 sq ft), resulting in a real shortage of this type of stock.
One of the advantages of these smaller units, as well as small industrial estates, is that they can be more resilient to wider economic fluctuations.
The covenant strength of the occupiers may not necessarily be as strong, but there will always be a steady turnover and a flow of new businesses emerging.
Rob Champion – Partner
rob.champion@fishergerman.co.uk