Event Summary
North West Industrial + Logistics | Summary and photos
A sold-out crowd filled Manchester’s Bridgewater Hall for a lowdown on the industrial sector, a viability debate, and a close-up look at a scheme with strong sustainability ambitions.
The North West Industrial + Logistics conference launched with some impressive stats. Last year, 3.1m sq ft of extra large shed space was taken up in the region – the second highest figure on record, according to the latest Lambert Smith Hampton report.
So have the days of sky-rocketing lettings begun again, or will the market continue at a slower pace from the peaks of a few years ago?
The event on 16 May was sponsored by AEW Architects, Harworth, Waterman, Panattoni, Glencar, and Yardi. The charity partner was Regeneration Brainery.
Scroll down for a gallery from the event
Going to the polls
Julia Hatmaker, editor of Place North West, revealed a new bit of tech, with live polls to test the audience’s feelings on market challenges.
Asked which area had the most growth potential, Greater Manchester came out top, with Cumbria languishing in last place, as the Liverpool City Region, Cheshire, and Lancashire jostled for position in the middle.
The biggest obstacle to viability is sustainability, according to 63% of voters. Lack of imagination, technology, expertise, and demand all trailing far behind.
Meanwhile, a question about threats to the construction industry saw a neck-and-neck race between interest rates and inflation, and the cost escalation of materials and labour.
Stockport MDC’s Paul Richards, AEW’s Peter Bartley, and Network Space’s Catherine Chilvers spoke about their plans for Cheadle Eco Business Park during a conference case study. Credit: PNW
Cheadle Eco Business Park
Catherine Chilvers, development director of Network Space, cast the spotlight on this council-owned site she described as an ‘under-utilised asset’. Network Space is working with Stockport Mayoral Development Corporation to deliver the project, which has been designed by AEW Architects.
The result will be a 115,000 sq ft modern and market-facing light employment scheme designed to create jobs and rental income. There will be six units, from 8,000 sq ft to 40,000 sq ft, and the park has already secured planning consent.
Town Deal funding is involved, with Chilvers saying this cash will be used to enhance the building specification to deliver an environmental exemplar standard.
Paul Richards, chief executive officer for Stockport Mayoral Development Corporation, explained it was too early to predict the tenant mix, or how they will fit the site’s green credentials.
However, he added: “We know there is a tension. The grant funding is 20% and we have got to service the debt on the remaining 80%, so need some rent. How brave can we be in terms of holding the line as to what those businesses are?
“This is absolutely made for green tech businesses. With the drive to improve their sustainability, particularly from a CSR perspective, there is something about moving into this space that we think will be really attractive,” he said.
Peter Bartley, sustainability manager at AEW Architects, said: “We really had to delve into how you describe an environmental exemplar development and how we define sustainability, measure it, and know we’ve been successful in meeting those goals. We’ve looked at certain certifications and cherry-picked elements.
“The key one that we are pursuing is the emerging UK Net Carbon Buildings Standard that is coming out as a beta standard this summer. What it’s going to do is impose performance limits and then look at offsetting after that.”
Tilstone’s Henrietta Daniels, Asteer’s Alice Routledge, DTRE’s Andrew Lynn, Harworth’s Andrew Pexton made up the event’s first panel session. Credit: PNW
What occupiers want
Henrietta Daniels, asset manager for Tilstone Partners, said: “There is definitely a movement away from traditional manufacturing. There have been a lot of changes in the logistics market and, focusing on multi-let, you are seeing a lot of tech and life science facilities. On a multi-let estate, people are focusing on how occupiers are going to engage with each other. Gone are the days of car repair shops. That’s not what people want. It’s e-commerce focused.”
Alice Routledge, partner at Asteer Planning, said there was a “real blend” in applications, from existing tenants refurbing stock, alongside demand for big box developments.
Andrew Lynn, partner at DTRE, thought bigger box demand may have reverted to pre-Covid levels, while multi-let and mid-box requirements were good. He added: “Your big box voids are probably 7% in grade A space over 100,000 sq ft, whereas in the multi-let space you’re around 2% and 3% in certain locations.
“Occupiers don’t have massive options if they want to move. That helps the landlords as it keeps shifting rents on.”
Daniels said multi-let occupiers were phoning to say “I’ve heard so-and-so is coming out – can we take that unit” to get their bids in as demand is so great.
Andy Pexton, North West regional director at Harworth, said: “You have got to build the products that are right for the locality – in terms of the market but for the local economy as well. It’s getting big sheds there but also smaller units that feed the resilience of the marketplace.”
Tilstone’s Daniels spoke about the increase in interest for multi-let industrial. Credit: PNW
Powering up
Described by Hatmaker as the “PBSA of the industrial scene”, panellists were asked if they were seeing large demand for data centres.
Lynn said it was more focused in the South East, with sites that may have come forward for residential or pure logistics being “gobbled up” by data centre operations. However, Pexton thought data centres were going to be the next “big thing”, though he did highlight the sustainability disconnect: “Where is the power coming from? Are they bringing in green energy? Data centres don’t need square feet, they need megawatts.”
Power was a topic of much debate with regard to new and existing tenants, whether they were failing to choose sites because of the constraints on power installation, or because they didn’t want to get tied into standing charges for power they didn’t need.
Tilstone’s Daniels said she’d experienced operators moving in and taking power out to avoid an elevated standing charge, which caused headaches for the landlord and future tenants.
Aidan Bannon, estimating director for the North at Glencar, said: “There needs to be reform. The National Grid needs billions of pounds worth of upgrades before the end of the decade, which is feeding into delays.”
Dan Burn, head of development for the North West and Yorkshire at Panattoni, said: “I question whether it [occupiers’ demands for power] is a ‘want’ or actually whether they need it. Automation is becoming more efficient and using up less power.”
Where’s hot?
From a planning perspective, anything around motorway junctions and the M6 corridor is hot property, according to Asteer’s Routledge, while Daniels said Warrington remained popular, particularly Appleton Thorn where rental growth is “impressive”.
DTRE’s Lynn pinpointed the likes of Rochdale and Knowsley where “offshoots” of Greater Manchester were seeing demand go “through the roof”. Harworth’s Pexton said the M6 corridor of Lancashire was desirable, but the rest of the county offered some “tricky areas”.
AECOM’s Paul Camac, Panattoni’s Dan Burn, and Glencar’s Aidan Bannon joined Julia Hatmaker for a deep dive into viability. Credit: PNW
Business positivity?
Glencar’s Bannon said: “It’s the same cyclical things, like ensuring your supply chains are in a good position, that you are working with the right people, and that they’re the right jobs you’re going after. We can’t control the volatility of the market, who’s building and who’s not. You’ve got to keep your own house in order.”
Panattoni’s Burn largely agreed: “The sector is still well placed and there is positive demand. On the money side, things are a little bit trickier.”
Paul Camac, cost management director at AECOM, added: “We are seeing quite a lot of people planning for future development, especially from Europe and worldwide and, globally, there is a lot more appetite, but it’s going to be a few more years down the line.”
The biggest headaches?
Aside from power problems, Bannon said: “The bond market has been challenging over the last couple of years. Contractors have gone into administration which has caused sureties to pull out and put further jitters out which has impacted supply chain.”
Burn said planning is still a worry and added: “The current government seems to be using a stick approach to beat up local authorities to progress planning quickly. We would prefer more resources to be thrown at it. As it currently stands, you want a planning consent within 13 weeks but typically that’s taking 20 plus.”
Camac’s view was: “Infrastructure, aside from power. If you have to upgrade something, National Highways will always make sure that you are paying for their work. You may have to upgrade a roundabout which we think is a small amount of work, but with optimisational bias it’s 20% or 30% more and that will affect your viability on a scheme.”
Glencar’s Bannon was optimistic that costs for materials were levelling out. Credit: PNW
Controlling rising costs
A report by Gleeds highlighted how, year on year, material costs are up 21% and ready mixed concrete prices up 19.5%, while fabricated steel is down 33.2%, but that price is still dramatically higher, 45%, than before the pandemic.
Bannon showed some optimism: “I think it’s levelling out. In terms control, it’s about having more foresight on the jobs that are coming forward.”
Camac said: “Everyone says ‘Covid’ but energy costs going up was the main driver with steel.
“We are looking at alternatives like recycled steel – there are companies that buy steelwork and then store it and reuse it, so you’re getting that at a black steel price, it gets blasted and stamped and you can reuse it on your project. You have a sustainability win as well. But, obviously, that’s a limited supply and won’t manage the amount of work we have to do.
“The most important thing is keeping relationships with supply chains and contractors, making sure we’re aware of what the pressures are, and then design to those costs.”
Burn added: “Over the last 18 months, two years, the market has gone against us, so to make things viable there are only two areas that we could look at. For landowners, that’s the ultimate price we can pay for land, and for tenants that’s obviously increased rent.
“There is a drive for more sustainable buildings, people are looking to consolidate and want newer buildings but there is an implication for them in terms of the rent.”
The election issue
Asked what their demands would be for a new government after the general election, there were some common themes among the panellists.
Asteer’s Routledge wanted the Green Belt to be looked at differently to manage the “competing pressures” of housing and industry. “Politics comes into this heavily,” she said. She also wanted to push the educational benefits, like industrial parks with links to universities, and opportunities for job creation.
AECOM’s Camac would like to see the appointment of a construction minister who knows the industry, while Panattoni’s Burn wants the next government to show more interest in the sector, and its employment and opportunities: “That goes from the construction site to the consultancy side, through to what these buildings ultimately provide from an employment, skills perspective. People don’t want a big shed on their doorstep but the job opportunities are there.”
Meanwhile, Glencar’s Bannon came back to power, suggesting complete reform of strategies affecting costs and supply. He also called for better investment in skills and people: “It’s making sure we’ve got a good stream of competent workforce, that aren’t just bums on seats.”
The sold-out event was held at Bridgewater Hall in Manchester. Credit: PNW
What’s next?
Join Place North at one of our upcoming events:
Cheshire Development Update | 6 June
Education Property & PBSA | 13 June
Cumbria Development Update | 20 June
Yorkshire Industrial + Logistics | 15 October
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