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Commercial Property News For The Midlands - January 2012 |
To view our extensive range of commercial Office and Industrial properties that are available to buy, lease and rent in the Midlands area click here:
MIDLANDS REGION COMMERCIAL PROPERTY INDEX PAGE... |
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Look ahead
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| Now is the time to move away from the stifling worry about the economy and look ahead to a healthier situation of growth, That would seem to be the message from Birmingham where the council is going for a Big City Plan for future development in 2,000 acres of the city centre with one of the government’s new enterprise zones. Of course, the city has been pursuing an enlightened urban renewal programme for years, including using funds from the European Union for some projects. It is now applying for £20 million from the European Development Funds (ERDF) to help the development of business accommodation, office and industrial projects. There are a host of private sector developments in the pipeline, many of them stalled by the fragile economy. A new scheme is from Sahlia Investments of Kuwait for a mixed use scheme costing £150 million in the Beorma Quarter and is adjacent to the Selfridges store and the Bullring Shopping Centre. Sahlia is seeking funding for the scheme from Barclays Corporate for the 60,199 sq.metres (648,000 sq.ft.) which will have a 200 bedroom aparthotel and a 27 storey 31,603 sq.metres (340,183 sq.ft.) office block together with a refurbished cold store. The improvement in the urban areas are also a priority, hence the work on Church Street public realm in Colmore Business District (CBD). This high quality designed area will bring wider and new pavements, landscaping, trees and other associated works. CBD which is one of four business improvement districts in the city centre is contributing £250,000 towards the total cost of £750,000 for the project. Gary Cardin, Chair of CBD said: “The new square will add to the public realm improvements promoted by us across the commercial heart of Birmingham and be a showcase for high quality, pedestrian friendly open spaces.” These improvement plans come at a time when the city centre office market is only in moderate health, although the second quarter take up was 14,678 sq.metres (158,000 sq.ft.) mainly due to several large lettings, such as the Ministry of Justice for 3,530 sq.metres (38,000 sq.ft.) at Axis, But the Grade A stock has now fallen again, continuing the three year long process. Craig Satchwell of Colliers International said: “Grade A stock is now at its lowest level for three years. Worryingly, there is just one scheme with a speculative element currently on site, Hines and Ballymore’s Two Snowhill, which will not be completed until 2013.” He predicts that there will be an increase in refurbishment of existing properties together with pre lets for speculative schemes.
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Timing
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| Mike Slade of Helical Bar is renowned for the timing of his deals that catch the market on the move in either direction, up or down. So Helical Retail’s purchase of a 53,000 sq.metres site at Reddings Lane, Birmingham from Eaton Electric is a positive point for the city. This company is a joint venture of Helical Bar and Oswin Developments of Solihull. Helical Retail plans a 6,976 sq.metres (75,092 sq.ft.) Asda supermarket and a similarly sized retail park. This is part of a large (£50 million) regeneration plan which includes an industrial scheme being developed by Mucklow.
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Still buying
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| CB Richard Ellis (CBRE) makes the point that 77% of the take up in the first six months of the year was in second hand space. At the same time, the imbalance in supply worsened as second hand space took a larger proportion of the 259,293 sq.metres. CBRE’s Will Ventham said: “It is unlikely that, apart from Two Snowhill, any new speculative space will come to the market in the foreseeable future, albeit Goodman may be reviewing options at Eastside.” On the other hand, the appetite for investments is undiminished. CBRE’s Justin Marshall commented: “The appetite for larger, prime assets in the central business district from the UK and overseas funds should continue, while the stabilisation of rents and incentives should see the return of a number of funds and property companies to the market for more asset intensive buildings.”
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Highvross invests
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| One development that has started is the second phase of Highcross’ 3,406 sq.metres (36,665 sq.ft.) refurbishment of Livery Place. It is the largest refurbishment, costing £1 million, in Birmingham in 2011 and will bring the property up to Grade A status. This follows the first phase which cost £3 million on the 5th and 7th floors and common parts. Highcross is having real success with the property. The company’s Joe Curlett said: “Randstad, the human resources firm, has taken a floor of 836 sq.metres (9,000 sq.ft.), soon after Packt Publishing has taken further space. We will be offering a boutique suite soon.” CB Richard Ellis’ Theo Holmes said: “Tenants are turning their attention to good quality refurbished Grade A space, which generally can be acquired for up to £10 a sq.ft. cheaper than new space in the city centre.” CB Richard Ellis has been chosen as the sole letting agent by Ballymore and Hines for the 29,170 sq.metres (314,000 sq.ft.) in the second phase of Two Snowhill. The law firm Wragge & Co, will occupy virtually half of the scheme. CBRE is now also marketing 4,180 sq.metres (45,000 sq.ft.) in the Mailbox, recently bought by Brockton Capital. Brockton’s David Zimmerman said: “We have a significant capital budget allocated to maximise the potential of the Mailbox as a key destination in Birmingham. We are continuing our strategic review of the asset, the results of which will be the basis for developing our overall vision for its future.”
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InBrief #1
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| Northern Trust has bought the 1,467 sq.metres Octagon Business Park, Cannock. The park has six units and becomes part of Northern Trust’s portfolio of 743,494 sq.metres.
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All gone
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| At a time when many cities, including Birmingham, are seeing a decline in Grade A offices, the last speculatively built big shed in the UK has been let to Amazon. This is Gazeley/Met Life’s 65,030 sq.metres (700,000 sq.ft.) shed at G-Park, Rugeley, Staffordshire which was taken by the on line retailer on a 15 year lease. Known as Flair, it has been available since 2008. Such has been the pace of Amazon’s expansion that it has leased a number of large sheds in the UK at Doncaster and Peterborough as well as a massive warehouse in Dunfermline, Fife. It comes at a time when, said Colliers International, average prime and secondary rents in the Midlands have been static for 12 months. Colliers’ Simon Norton said: “I have a distinct feeling of dejavu reading the statistics. They are no different from 2010.” But he believes they are likely to increase now that the take up of prime space has eaten into supply. “The lack of speculative development due to the scarcity of funding and the general lack of confidence due to the recession have exacerbated the situation. For the first time in years, landlords are beginning to feel that they may have the upper hand and are holding out for better rental terms.” At the heart of the decline was the fall in land prices. For example, in the West Midlands lot sizes of 10 acres or more averaged £484 an acre this year compared with £221 in 2006. Where land is available for expansion, developers are increasing the size of existing estates, such as Hortons at Hollymoor Point, Rubery where it will build a new unit for NVC (Manufacturing) China’s largest lighting manufacturer, who already occupy a unit there, making a total occupied of 8,454 sq.metres (91,000 sq.ft.) at Rubery. Typical of many estates, Target Park, Redditch only has two units available after the sale of a 1,134 sq.metres (12,209 sq.ft.) warehouse to Heartbeat Manufacturing.
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Lively Telford
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| i2r Packaging, through Bulleys, has bought the 5,479 sq.metres (58,977 sq.ft.) former UK Greetings facility at Hortonwood 30. i2r manufactures a range of wrinkle wall and smooth wall semi rigid aluminium foil containers used throughout the food industry and have relocated to Hortonwood from Stafford Park. This is the second deal by Bulleys recently and follows the letting of the 6,712 sq.metres (72,245 sq.ft.) Premier House, Hortonwood 7 to the logistics company AMCO Services. Barry Lumsden of AMCO said: “Our partnership agreement with Force Protection Europe Limited has enabled us to finally put down firm roots in the Telford area, bringing new employment and establishing another AMCO 3rd party logistics facility.” Bulleys also acted for Prospect Estates in the first sale at its Epic Park, Halesfield Industrial Estate, where Western Power Distribution has taken 1,950 sq.metres (20,990 sq.ft.). Prospect bought the former Plastic Omnium premises and divided it into a separate industrial estate. Bradbury Commercial are joint agents. Matthew Tilt of Bulleys said: “We are discussing with a number of enquirers seeking large properties in Telford and we are optimistic that we will be in a position to report further good news in the near future.”
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Inbrief #2
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| Anthony Wiggins of Wiggins & Lockett notes that, after a flurry of enquiries in Telford, these have now levelled off. "The refurbished stock is now being let but incentives and reductions are still necessary to draw the enquiries to your property over others. To secure a good deal, tenants have become a lot more footloose and willing to compromise on location."
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Professionals take space
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| Although the regional office market was boosted by a number of large deals in the second quarter, such as the Ministry of Justice and Deutsche Bank in Birmingham, the lower end of the market is still the most active. That is the view of DTZ in a report that also highlighted the strengthening demand from smaller professional firms. Apparently some of these were on flexible terms during the economic downturn, but are now seeking to take advantage of the current market to upgrade to better accommodation. It could indicate an improved market for new developments in the Midlands in the main cities. Matthew Long of DTZ said: “Take up in Birmingham in the second half is forecast to reach 18,580 sq.metres (200,000 sq.ft.).” He reiterates the problem that Grade A stock will continue to fall so that rents will edge up in early 2012. In fact the new lettings are an important indicator of the market situation with the Law Society likely to move its Midlands headquarters to the 5,110 sq.metres (55,000 sq.ft.) 2 Colmore Square developed by Nurton; accountants Grant Thornton expected to take half that amount in Colmore Plaza and another accountant, Boomer Heaven, moving to Rutland House. Note that they are all professional service organisations. International players such as Hines have experience of when to move into markets. In the case of Birmingham its Pan-European Core Fund has bought the 3,998 sq.metres (43,040 sq.ft.) One Eleven Edmund Street from IVG for an undisclosed sum. It also owns Brindleyplace and Two Snowhill through other vehicles. Derby has also improved with a number of new developments. Tesco plans a large store at Allanton while at Sandiacre it will go for a mixed use scheme including a store. But the largest development is on a 15 acre site of the Derby Royal Infirmary for a Morrisons supermarket, hotel, offices and 400 homes.
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Barberry in Coventry
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| Another Royal Mail sorting office, this time in Coventry, is also to be redeveloped in a £50 million scheme by Barberry Developments. The mixed use Bishop Gate scheme is being funded by the Co-operative Bank in Birmingham and has already been granted planning permission. It will have a supermarket of up to 12,077 sq.metres (130,000 sq.ft.), a gym/leisure facility including a swimming pool and 585 car parking places. Steve Pamely of the Co-operative Bank said: “Our lending to Barberry proves the benefits of the Bank’s strategy of developing long term relationships with customers that have clear and proven corporate strategies.”
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Crowning Kings Norton
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| SEGRO’s King’s Norton Business Centre has proved that a well managed business park will pull in the tenants. This year has seen a steady stream of new occupiers. Recent growth in business has prompted Sterling Technical Engineering to consolidate its three existing locations into one unit. Similarly, a growth of business has sent Mechatronic Solutions, a civil and structural engineering practice, into a larger unit at the park. SEGRO’s Jane Leedham said: “We have invested in making the centre a pleasant and secure place to work and we’re confident that we provide the premium business space in south Birmingham.”
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In Brief #3
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| The last remaining unit (of eight) at Shayler Development’s Optical Park scheme in Aldridge, Walsall has been sold to GEC, which already has a unit there.
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Branson
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| Throughout the UK we are witnessing a decline in the availability of Grade A office and industrial space. When the economy starts growing again, the demand for this prime space will outstrip supply and cause problems for the economy. An example is provided in the Midlands where the lack of speculative development means there is growing scarcity of Grade A offices. There are, of course, some schemes, such as Two Snowhill but it is clear that given a reasonable growth in lettings there will be a shortage. That is fine for landlords because it means rents will rise and incentives decline. The supply of industrial buildings may be better but the letting of the only large shed available to Amazon is a reminder of the direction of the market. The government’s ridiculous ending of empty rates relief means fewer buildings available. It is that decision that affects development, not the planning laws. In fact the Midlands commercial property market is in reasonable shape, even if deals are slow. For example there have been a series of deals in Telford through Bulleys. The office market in Birmingham has also been moderately active, though as with so many cities the emphasis is on small deals even if the second quarter had a number of substantial transactions.
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