Small build sector on the up – CBRE

A STRONG resurgence in the North West’s industrial sector has led to a significant upturn in the small build sector and, according to new research from CBRE.

While big sheds often steal the limelight, it’s the ‘forgotten market’ of sub 50,000sq ft units where the message is clear – “build them and they will come”.

CBRE Manchester’s associate director of industrial agency Steve Capper said: “There has been much talk in 2015 about the strength of the North West’s industrial sector with a particular focus on the speculative development of the larger logistics units of 100,000sq ft and above.
 
“Whilst it is true that there has been strong recovery in this sector with almost 2.5 million sq ft under construction and an additional 1.5 million sq ft planned, we should not ignore the significance of the sub 50,000 sq ft and multi-let market which is where developers are turning their attention.”

CBRE’s research shows that the smaller build sector was badly affected by the downturn in the economy with occupiers becoming increasingly risk averse and cost sensitive.

With demand reducing and supply increasing the market experienced softening rents and increasing incentives which heavily favoured the tenant.
 
With the odd exception, the supply and demand mismatch put an end to speculative development for several years with no high-profile multi-let industrial estates until 2013 and the development of Chancerygate’s S:Park in Stockport.

The development of S:Park coincided with a change in the market. Built over two phases and providing units ranging from 1,500sq ft to 20,000sq ft, the 20 unit development at S:Park now has just two units remaining of approximately 9,500 sq ft each with sales prices achieved in excess of £90psf.

The scheme was not alone in its success and CBRE’s own enquiry statistics showed that units of less than 50,000 sq ft accounted for approximately 60% of annual enquiries last year.

Following the success of S:Park and with exceptionally strong occupier demand, South Manchester will soon see the development of two prime speculative schemes.

Airport City has secured planning for six industrial units – branded Alpha – which will be built adjacent to the 271,000 sq ft unit being built by Mountpark/Stoford.  Works are expected to start early in the new year with a good number of occupiers already showing strong interest in the units ranging from 17,500sq ft to 35,000sq ft.

Scarborough Developments may also build a stand-alone unit of 40,000sq ft and a terrace of industrial units within their proposed mixed use scheme at Orbital One, Stockport.

However development is not limited to South Manchester as has been proven by Capital & Centric who have speculatively developed 40,000sq ft at Foundry on Ordsall Lane in Salford.

Completion of the scheme is imminent with 8 out of the 12 units already under offer. 

It is a similar story further north where Roundhouse Properties and Seddon Developments are building multi–let estates comprising of starter units of sub 5,000sq ft in Bamber Bridge, near Preston and Chorley respectively.

Both schemes have most of the available units under offer prior to completion with sale prices now in excess of £100 psf.

In Warrington, Patrizia is developing three units of 15,000, 17,500 and 21,500sq ft at Birchwood Park which again will provide high quality accommodation including 11% – 15% office accommodation.  CBRE understands the 17,500sq ft unit is now under offer close to the quoting rent of £7.50psf.