Flourishing trade parks in the North East suggests investors are being drawn towards them as an alternative property investment, leading agencies say.
Developers have enjoyed the opportunity to secure rental premiums over traditional industrial space – and the widening of use has brightened up both the appearance and business activity.
Roger Speirs, director and head of valuation services at Bilfinger GVA, Newcastle, says occupiers can also benefit, in terms of rent levels payable when compared to out-and-out retail parks.
There is no defined planning consent for trade counters and it varies between authorities but it generally falls within class B8, for wholesale warehousing – a classification that allows for up to 25% of the space to be used as retail trade counter.
And rents on smaller trade parks tend to fall at around £6 to £6.50 per square foot, rising to around £10 per square foot at prime locations such as Team Valley – considerably lower than retail parks.
“Investors also see this market as offering strong national tenants, generally with long leases and having significant potential for rental growth with funds taking a view of diversifying their property portfolios,” said Mr Speirs.
“The key is finding the right sites which are prominently located. There have been few true trade counter investment sales in the North East regional in the last 12 months but a number of industrial estates with trade elements have sold.
“The most recent has been the sale of part of the West Chirton Industrial Estate, North Shields, in February 2015, which was sold by the BBC Pension Trust to Threadneedle Property for £4.4m, reflecting a yield of 8.55%. In November 2014, Gateway West, Newcastle was sold by CBRE Global Investors to Cornerstone Real Estate for £12.728m reflecting an initial yield of 8.41%.
“In September 2014 Bilfinger GVA acted on behalf of Dunedin Property in the acquisition of a portfolio of industrial units in Blyth, Team Valley Gateshead and South Shields from City and Northern for £5.43m reflecting an initial yield of 8.06%.”
Mark Proudlock, partner, industrial agency, Knight Frank, says the trade park market has come back strongly post-recession.
“Generally demand is for units up to 5,000sqft but in more densely populated areas unit occupiers such as Screwfix will consider in excess of 10,000sqft.
“Evidence of demand is the recent completion of lettings at Blaydon Trade Park. Here we let three of the remaining units in a matter of weeks.
“Though rentals are usually higher than standard warehousing, occupiers pay for the prominence of the development as occupiers are effectively revenue-drive.
“There are fewer good units available on the market. Presently we are instructed by a private investor to let a prominent unit on Octavian Way, Team Valley, and also a unit on Tenth Avenue Trade Park, both of which are close to the busy Retail World development.
“We are also acting for Travis Perkins plc across the North East in relation to its property stock and locations for its brands which include Benchmarx, Wickes, Title Giant, City Plumbing Services, F&P and Toolstation. In this respect we have just acquired a prominent, 3,508sqft, trade counter unit on the Abbey Road Business and Trade Park, Durham City, for City Plumbing Supplies.”
Andrew Wright from Lambert Smith Hampton said the trade park sector continues to flourish, greatly assisted by the growth in the home improvement and construction sectors following the credit crunch.
“Electrical, plumbing, flooring, kitchen and bathroom operators continue to benefit from well positioned warehouse units with B8 planning consent rather than pay premium retail park rents,” said Mr Wright.
“Those schemes located in prominent roadside positions close to existing trade and retail outlets offering an existing critical mass still appear to be the most popular.
“For example Mandale’s Portrack Trade Park in Stockton on Tees has been successful due to its proximity to a B&Q superstore, other national retail outlets and excellent access from the A19.”
Mr Wright is aware of at least one other national occupier wanting representation on the Stockton scheme, which is currently fully occupied.
He added: “The national covenants which are normally represented on trade parks also offer an attractive proposition to investors, with good prices being paid even with relatively short term leases in place.
“For example, the Facilities Centre in Middlesbrough was recently sold for in excess of £1.1m off a combined rent of approximately £104,000 per annum, showing a net initial yield of about 9.5%, however two leases had only circa five years remaining and the other was approaching expiry.”