Yorkshire is at heart of industrial real estate revival, says report
YORKSHIRE is at the heart of an industrial real estate boom, which is being driven by the growth in online retailing, according to a report published today.
However, the report by law firm Addleshaw Goddard also warns that the region is facing a shortfall in space, with no speculative development expected in the region over the next year. It could be consumers who pay the price for this shortfall, the report argues.
The Addleshaw Goddard report says that demand from e-commerce brands is driving up the value of industrial property across Yorkshire.
The report states that councils need to make more land available for employment use, or risk undermining economic growth.
Logistics hubs like the rail-connected iPort at Doncaster have become prime targets for investors, who are encouraged by the willingness of firms like Amazon and John Lewis to sign 20-year leases on industrial property.
According to Leeds-based law firm Addleshaw Goddard’s report “How soon is now?: the future of logistics”, the growing need for online stores and delivery companies to have “last-mile” distribution hubs in expensive urban locations is fuelling a land supply crunch.
Jonathan Powling, a partner at Addleshaw Goddard, said: “A lack of new development and an overhang of inactivity since the recession have caused a growing supply-demand imbalance. This is pushing up rents and making industrial space far more attractive to institutional investors.”
The report calls for more land to be set aside for industrial space by the Government. Yorkshire has become increasingly popular as a national base for retailers such as Poundland and TK Maxx, due to its good road connections and the “relatively under-used” port at Grimsby, the report said.
The report calls on the Government to delegate more powers to local planners and harmonise access agreements for new rail connections to logistics hubs. It calls for action to boost funding for SME (small and medium-sized enterprise) development and further investment in skills in the construction sector.
Web sales are projected to make up more than a fifth of UK retail by the end of the decade. The demand for space is growing because of the amount of goods returned – which cost UK retailers an estimated £60bn last year, the report says.
The report estimates that 18m sq ft of logistics space – equivalent to 251 Wembley Stadiums – will need building annually in the UK to meet this level of demand, but only 3.5m sq ft of warehousing is due to be built over the next year, leaving a massive shortfall.
Mr Powling said: “E-commerce growth and an increased global flow of goods are big drivers of change, but if we fail to deliver new employment space, then the stark reality is that some retailers will not be able to expand their online operations and others will be forced to significantly raise delivery charges to meet the increased costs of warehousing. This will ultimately affect consumer choice and value.”
Andrew Gent, the director at property consultancy Gent Visick, said: “The Yorkshire sheds market is still typified by a lack of supply.
“The common analogy is that it is like a sweet shop that doesn’t have any sweets. Partly that is a legacy of the financial crisis, as there was a lot of oversupply from 2008 onwards.
“In contrast with the North West and the Midlands, where there has been a lot of development activity, there has been relatively little speculative development in Yorkshire.
“To unlock more logistics development, it is vital that we speed up and simplify the planning process and get certainty from the Government on what will replace existing EU grant funding for infrastructure projects.”
Delivery hubs should be incorporated into mixed-use or multi-storey urban developments, the Addleshaw Goddard report states.
The report calls for grant funding to be made available to stimulate industrial developnent. It also argues that local planners should be “empowered” .
The report said: “The complexity of the planning process, and the many contradictions between national policy declarations and local concerns, are exacerbated by the shortage of planning officials and lack of Government investment in the profession.
“Government should give greater delegated powers to planning officers so that non-contentious applications can be dealt with and approved without unnecessary delay.”