Demand from waste sector could fuel recovery in distribution

Waste and recycling occupiers in the UK require an estimated 50m sq ft of space by 2015, according to forecasts from property advisors BNP Paribas Real Estate.

Sara-Jane Preston, senior director of Manchester industrial agency at BNP Paribas Real Estate said: "EU rules will see landfill cut 75% by 2015 and eliminated totally by 2020. We currently have 300 landfill sites across the country but will require 3,000 other locations to meet recycling demand. This equates to at least 50 m sq ft of industrial space.

"Logistics properties are ideal sites as they boast essential storage space and transport links. With deals in the waste sector doubling rising from 2% of all industrial property deals in 2008 to 4% in 2009, clearly demand is on the up, which is great news to an otherwise beleaguered sector."

BNP Paribas Real Estate's research suggests that take-up in the waste sector will continue to increase in the years leading up to 2015 with at least 10m sq ft of space being required each year to accommodate the demand. Based on last year's take-up figures this will equate to a third of total annual take-up in the distribution sector. The UK is currently home to 139m sq ft of available industrial space according to BNP PRE and is currently experiencing decreased rental values and reduced lease lengths, as well as the burden of empty rates.

The North West has an adequate supply of industrial stock available to accommodate these potential requirements. The region is home to 18% of the total amount of supply in the UK equating to 25.3 m sq ft. There is a sufficient amount of both new and second hand stock and the region has ample available space in all size bands.

Preston continued: "There has been no trend set as yet in the types of deals that are being done with these types of operators in terms either size or price. We have witnessed transactions on units ranging from 30,000 sq ft to 300,000 sq ft at rents varying from £2.80/sq ft in Birmingham to £7.80/sq ft in London, so it is essential to have a wide range of stock available. However, we have noted that leases being taken on these units are increasingly longer than in other sectors of the distribution market with some deals being struck on 20-year plus leases.

"These types of occupiers are becoming increasingly popular to landlords, especially in light of their advancing technologies which mean that they are no longer viewed as being dirty and noisy neighbours."