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Yorkshire’s on fire

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Yorkshire’s warehouse land prices are soaring, rents are moving fast, and developers are racing to catch up. David Thame reports on a hectic shed scene in God’s Own County.

It is too easy to get blasé about the scale of demand, and potential supply, in the Yorkshire shed scene. Requirements that, 24 months ago, would have set the world on fire are now merely routine. Developments measured in millions of square feet are just hum-drum ordinary projects. Sudden shifts and lurches in availability in some locations are unremarkable.

The news that Howdens, the joinery group, is on the hunt for a 750,000 sq ft Yorkshire warehouse might have been a major talking point in any year except 2021. As it stands, the 2 million sq ft of known requirements in West Yorkshire, and as much again (or more) in South Yorkshire, mean it doesn’t feel so significant.

Yet it surely is significant in a market with a profound lack of imminently new warehouse supply. In West Yorkshire this shortage is acute.

Developers are putting plans together. Firethorn Trust has a 37-acre site close to junction 42 of the A1(M) and to Sherburn Enterprise Park, where they plan a 600,000 sq ft. Nearby occupiers include Eddie Stobart, Sainsbury’s and Clipper Logistics.

Haworth Group, ever at the forefront of development plans, are pushing on with Phases 2 and 3 of its Gateway 36 employment development, located close to Junction 36 of the M1 in Barnsley. The scheme has been granted planning consent for up to 1.1 million sq ft of new employment space across 95 acres of land, to be brought forward in two phases.

Sitting next to the Dearne Valley Parkway, the major regional arterial route, the proposed units in both phases will almost certainly let rapidly.

All three phases of Gateway 36, alongside nearby employment and residential land, have been unlocked as part of a £17.1 million funding package from the Sheffield City Region Investment Fund, suggesting that industrial development in the area has yet to make complete financial sense every time. But that is changing fast (see below).

It is surely no surprise to anyone that Amazon has been leading the occupier charge in Yorkshire, as it has elsewhere in the country.

As the summer lurched to a close Amazon signed up for Panattoni’s speculative Wakefield515 scheme. The warehouse is – you guessed it – 515,000 sq ft, but with the addition of mezzanines is likely to rise to 2 million sq ft.

It is next to the TK Maxx Regional Distribution Centre at the to-die-for logistics location where the M62 meets the A1(M). It is a very happy result for developers taking a calculated risk.

Tom Asher, director at Savills in Leeds, says the deal is emblematic of a market in a feverish (and hungry) state of uncertainty. You can see this most clearly in and around Doncaster.

“Speculative schemes in South Yorkshire that have set empty for two or three years are all suddenly letting. This year we’ve seen them go one after the other, it’s been like shelling peas. And remember this is a market in South Yorkshire that doesn’t typically see so many deals,” he says.

The inevitable result of a spate of deals has been a surge in rents. South Yorkshire has a lowish-value shed market so rental growth to £5.95 a sq ft may not feel like a lot. But growth from £5.25 a sq ft in the course of a single year represents a steep upward curve.

This uplift has given developers the confidence to launch yet another wave of development, including schemes of real mammoths. As it happens GLP has chosen Mammoth as the name of its 602,000 sq ft unit at G Park Doncaster. The unit will sit on a 32-acre site including  two 50M service yards, 20M clear internal height, 79 dock levellers, 8 large dock levellers, 8 level access and4 van level access doors with visibility from the M18.

Down the road in Rotherham, Panattoni develop its largest yet UK speculative logistics scheme. The 630,000 sq ft facility will sit on a 40-acre site next to junction 1 of the M18 motorway.

“So far everyone says they are building speculatively, and they are either on site building now, or will be soon, whilst others are dusting off older plans for South Yorkshire sites and deciding what size to build,” says Asher.

The upbeat vibe is apparent everywhere in South Yorkshire, but the vibrations are stronger in some locations than others. Traffic congestion on the M18 and the enormous recruitment problems created (for everyone else) by Amazon have combined to produce a slightly less fizzy mood in some Doncaster locations.

Since Doncaster has long been Yorkshire’s most marginal logistics location – the last to go up, the first to go down – this is probably no surprise. There’s no sign of concern that Doncaster is about to resume the downward curve of its up-and-down journey – demand is strong and consistent – but developers with more marginal plots and more congested or conflicted locations may find their units let more slowly.

West Yorkshire is a different kettle of fish. Whilst developers through themselves into speculative schemes in South Yorkshire, they generally haven’t in West Yorkshire. There is just one big scheme coming out of the ground – Tungsten’s 236,000 sq ft project due to complete early next year – and agents report a real lack of good quality plots along the M62 corridor.

This explains the slow pace of speculative development in West Yorkshire. Some sites are trapped in planning, others are stuck even further down the pipeline as local council’s move slowly on land allocation. Prime spots like Leeds and Wakefield are beginning to look seriously short of developable land.

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As you can guess, the effect of this supply drought is to push up land prices. Values around £1 million an acre have been achieved without much trouble, and there is speculation that one Stourton site of 28 acres sold for £1.4 million. Agents insist we haven’t yet reached Peak Land Prices and that there is scope for more growth, not least because investors (who ultimately put up the money) continue to regard logistics as a super-strong bet for solid returns.

Rents in West Yorkshire are more or less keeping pace with land prices, albeit with something of a lag. Top headline rents today are £7 a sq ft and above. Trend growth is about 5% annually.  Developers are appraising new schemes on the strength of rents that nobody has yet succeeding in persuading tenants to pay – and if that isn’t the sign of a bullish market, this writer doesn’t know what is. Who knows where rents will eventually settle?

“Every week things change. This is by far the fastest pace of change I’ve seen in my career,” says Savills’ Asher. 

The lesson seems to be: this Yorkshire roller-coaster ride isn’t over yet.

Downpager: the numbers game

Supply of Yorkshire warehouses over 100,000 sq ft is now at the lowest level ever recorded in the region, down to 2.45 million sq ft available across 17 separate units. This leaves just over three months’ worth of supply in the market, if it is measured against Savills’ three-year annual average take-up.

Just 5% of the available supply is classified as Grade A – a shockingly low proportion. About 30% of supply is effectively obsolete. Occupiers must either commit to built-to-suit units or look at moving to other regions.

Take-up is dizzying, but stable. The first half of 2021 saw take-up totalling 6.77 million sq ft through 10 separate transactions. This has already exceeded the average annual figure by 36% and is the strongest first half ever recorded in the region.

Of the space transacted, 43% was build-to-suit, 34% was speculatively developed space, and 23% was second hand.

The majority of activity in 2021 came from online retailers, who accounted for 43% of all take-up, and 3PLs, who accounted for 27%.

There are currently ten units under construction totalling 2.71 million sq ft.

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