New warehouses in demand to keep online commerce on the road

New industrial building activity has emerged as one the more promising sectors for the industry. Although activity was held back last year as projects were delayed following the EU referendum, it is set to rebound this year, driven partly by continuing strong demand for new warehousing and logistics space. Glenigan is forecasting a 9% rise in the value of underlying new work project starts in the industrial sector during 2017 and a further 7% rise in 2018. The industrial building sector is benefiting from the strength of manufacturers’ confidence in the wake of the upswing in global markets. A recent second quarter manufacturing outlook survey from the Engineering Employers Federation pointed to a further expansion in output in the second half of this year, helped by a lower pound and improving export markets. But a major spur to growth in the sector remains the rise of online retailing which has created the need for large warehouses close to the major road network which serve as distribution bases for products bought online. Glenigan data shows the value of warehousing & logistics work rose four-fold to £1.5 billion between 2009 and 2015. The sharp rise in the value of industrial starts so far this year – which are up 32% in the five months to May, compared to last year- has been partly thanks to growth in regions which are favoured for distribution and logistics space such as the East Midlands (up 98%) and the West Midlands (up 16%). Rather than spending heavily on new stores, major retail groups are investing in new logistics centres to enable them to deliver goods speedily to consumers at home. The contrast in fortunes between the industrial and retail property sectors was highlighted earlier this month when the publicly quoted industrial developer Segro - which currently has almost 800,00 sq m of new space approved or under development - was promoted to the FTSE 100 index. At the same time, Intu Properties, owner of some of the country’s largest shopping malls including the Trafford Centre in Manchester and Lakeside in Essex, was relegated from the FTSE 100. Today, developers are sufficiently confident in the underlying prospects for industrial/warehouse space that they are planning speculative schemes. Last month, London-based Salmon Harvester Properties unveiled plans to speculatively develop a £12 million, 68,000 sq ft warehouse and industrial scheme in Sawston, south Cambridgeshire. Known as Cambridge South, the scheme’s first phase of 11 warehouses will range from 1,650 -22,000 sq ft and will be built on four acres of a seven-acre site with construction set to start this Autumn. The scheme will provide warehousing space in one of the more prosperous parts of the country close to the M11 and the A11. The developer has been encouraged by what it describes as a “…striking imbalance between supply and demand of new industrial units in the Cambridge region,” and expects very strong occupier interest. It hopes to pre-let a number of units, ahead of completion. Meanwhile another developer, Jaynic, has recently won consent for 2 million sq ft of business space at Suffolk Business Park outside Bury St Edmunds, which includes the potential for a 750,000 sq ft ‘big box’ distribution warehouse. The scheme is likely to attract logistics groups serving exporters as it offers good access to the A14 which links the Midlands to the country’s largest container port at Felixstowe.