placeexpo logistics 2020: jon sleeman, jll
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Jon Sleeman, UK head of research at JLL, on the big shed marketTRANSCRIPT
The UK and North West Big Box Distribution Market
Jon Sleeman, International Festival for Business, Liverpool 12 June 2014
Introduction
• Occupational market – demand, supply and new development
• Investment market – demand, yields, performance
• Conclusions and outlook
Occupier demand has been gathering momentum since last yearSupported by improving economic growth and logistics drivers
2007 2008 2009 2010 2011 2012 2013 Q1 2014 -
5,000,000
10,000,000
15,000,000
20,000,000
25,000,000
30,000,000
New Secondhand 5 year annual average
Take-up of Grade A units of 100,000 sq ft and over
Retailers accounted for half the floorspace taken up in the year to end-March 2014
50%
20%
13%
17%
Retail
Logistics
Manufacturer
Other
Grade A distribution take-up over the 12 months to Q1 2014
The Greater South East and Midlands accounted for 61% of space taken-up in the year to end-March 2014
22%
21%
18%
15%
10%
10%
4% Greater South East (South East, East & London)
East Midlands
West Midlands
Yorkshire & Humberside
South West & Wales
North West
Scotland
Grade A logistics take-up over the 12 months to Q1 2014
6
Recent deals - new units of 100,000 sq ft + taken up in Q1 2014
Rugby Gateway – 236,000 sq ft
Kingswood 127, Lakeside Business Park, Cannock – 127,000 sq ft
LPP Sheffield– 412,519 sq ft
Magna Park Milton Keynes – 938,449 sq ft
The Bridge, Dartford – 122,500 sq ft
Titan, Heathrow – 115,000 sq ft
Central Park, Bristol – 175,000 sq ft
Prologis Park Ryton – 231,000 sq ft
Birch Coppice, Tamworth – 168,900 sq ft
Northfleet site, Kent – 450,000 sq ft
00 Month, 2014 7
Selective North West distribution deals
Location Company Size (sq ft) Terms Comment
Maximus, Winsford Industrial Estate, Winsford Tiger Trailers 105,000 Leasehold Grade A unit.
Speke Boulevard Medlmmune 130,000 Leasehold Grade A unit.
Manor Park, Runcorn Rehau 132,796 15-year lease, £4.95 per sq ft Grade A unit.
The Cube, Preston Brook, Whitehouse Industrial Estate, Runcorn
Clarcor 151,769 Freehold acquisition Grade A unit.
Liverpool International Business Park, Speke Johnson Controls 150,000 15-year lease, with break option, £5.00 per sq ft
Brand new built to suit facility developed by Marshall.
Cutacre/Logistics North, Bolton Aldi 441,000 Land purchase New built to suit facility.
One 175 Winsford Industrial Estate, Winsford Howard Tenens 175,000 5-year lease Speculatively developed unit.
Northern Gateway, Knowsley Toyota Tsusho Assembly Systems
143,000 10-year lease Speculatively developed unit.
2013-2014
Deals exclude Omega at Warrington
00 Month, 2014 8
There is a pipeline of active requirements for large distribution facilities
• According to JLL market intelligence:
- There are currently 73 named requirements in the UK totalling between 22 and 27 million sq ft (based on minimum and maximum size requirements).
- There are currently 14 named requirements totalling between 4.4 and 4.9 million sq ft which are primarily focused on the North West region.
• But the market is quite patchy – good demand in well-established strong locations, weaker demand elsewhere. Still quite slow moving.
Current live requirements for distribution units of 100,000 sq ft and over
The availability of new and good quality distribution space continues on a downward trend
H2 2007 H2 2008 H2 2009 H2 2010 H2 2011 H2 2012 H2 2013 Q1 20140
5,000,000
10,000,000
15,000,000
20,000,000
25,000,000
30,000,000
New floorspace Good quality secondhand floorspace
The North West accounts for around a fifth of available space across GB
12%
14%
14%
12%
17%
21%
7%3% Greater South East (South East, East &
London)
East Midlands
West Midlands
Yorkshire & Humberside
South West/Wales
North West
Scotland
North East
End of Q1 2014
00 Month, 2014 11
The market is now seeing some speculative development
• 5 units completed speculatively since the recession.
• A further 9 are speculatively under construction at present.
• 12 of these 14 are between 100,000 sq ft and 200,000 sq ft.
• 1 is between 200,000 sq ft and 300,000 sq ft
• And 1 is over 300,000 sq ft.
12
However, recent speculative development has been very modest compared with the pre-recession boom
H1 2006 H2 2006 H1 2007 H2 2007 H1 2008 H2 2008 H1 2009 H2 2009 H1 2010 H2 2010 H1 2011 H2 2011 H1 2012 H2 2012 H1 2013 H2 2013 Q1 2014 -
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
7,000,000
Investor demand for UK industrial and distribution stock is strong
Q1 2010
Q2 2010
Q3 2010
Q4 2010
Q1 2011
Q2 2011
Q3 2011
Q4 2011
Q1 2012
Q2 2012
Q3 2012
Q4 2012
Q1 2013
Q2 2013
Q3 2013
Q4 2013
Q1 2014
0
500
1,000
1,500
2,000
2,500
Milli
ons
GBP
Regionally, the Greater South East and Midlands have attracted the strongest investor interest
39%
14%
14%
10%
8%
7%
5%
1% 0.6%
Greater South East (South East, East & London)
West Midlands
East Midlands
Yorkshire & Humberside
North West
South West
Scotland
Wales
North East
12 months to Q1 2014
Strong investor demand, and limited supply, have led to yield compression
Q1 200
4Q2 2
004
Q3 200
4Q4 2
004
Q1 200
5Q2 2
005
Q3 200
5Q4 2
005
Q1 200
6Q2 2
006
Q3 200
6Q4 2
006
Q1 200
7Q2 2
007
Q3 200
7Q4 2
007
Q1 200
8Q2 2
008
Q3 200
8Q4 2
008
Q1 200
9Q2 2
009
Q3 200
9Q4 2
009
Q1 201
0Q2 2
010
Q3 201
0Q4 2
010
Q1 201
1Q2 2
011
Q3 201
1Q4 2
011
Q1 201
2Q2 2
012
Q3 201
2Q4 2
012
Q1 201
3Q2 2
013
Q3 201
3Q4 2
013
Q1 201
4May
-14
3.50
4.50
5.50
6.50
7.50
8.50
9.50
Prime London Distribution Prime South East Distribution Prime Regional Distribution
Prime Distribution Yields: June 2014
London 5.00 - 5.25
South East 5.50
Regional 5.75
16
Distribution warehouse investment performance forecasts, 2014-2018
2013 2014 2015 2016 2017 2018 2014-20180.00
2.00
4.00
6.00
8.00
10.00
12.00
14.00
16.00
Rental Growth Capital Growth Total Returns
% p
er a
nnum
JLL forecasts (May 2014) of IPD distribution warehouse segment
Distribution warehouses, 10.0% pa ,compared with all property average of 8.9% pa
Conclusions and outlook
• The occupational market is supported by an improving economic outlook plus the positive impact of logistics drivers. But occupier decision-making still quite protracted and market conditions are patchy.
• The investment market is currently very ‘hot’ with strong demand and very little supply. Our forecasts indicate that distribution warehouses will outperform the all property average total return over the five years 2014-2018.
• The Greater South East and Midlands are attracting the largest shares of occupier and investor demand.
• The North West is an important distribution market. Demand has traditionally focused along the M6 ‘corridor’ but new transport infrastructure investment (Liverpool 2, the Mersey Gateway Project) will boost the Liverpool City Region.
COPYRIGHT © JONES LANG LASALLE IP, INC. 2014
Jon SleemanTel: + 44 (0)207 087 5515e-mail: [email protected]
Thank you