THE industrial property market in the North East is surviving the downturn better than many other areas, according to three of the region’s leading agents Paul Nicholson, director of agency at Atisreal.
DECLINE and closure are uncomfortable bedfellows, but any suggestion that the North East is suffering unduly because of the recession is inaccurate.
Some landlords are investing to improve schemes, property is on the market that will ultimately bring forward new space and lettings are taking place.
Though distribution is technically not embraced within the industrial sector, it is worth making the point that the present growth in online sales is making retailers rethink their supply chains strategies, with one important player forecasting growth in business of nearly 25% over the coming four years.
The North East, through its well known distribution hubs, is very well placed to serve the important regional centres.
So, gloom there is not, though the market has slowed down somewhat. However we at Atisreal, jointly with Knight Frank, have just completed three lettings at Morston Quays, Howdon, of units ranging from 5,191sq ft to 8,584sq ft at rents up to £4.80 per sq ft.
At present we are marketing the former Jaycare premises at Cramlington – a detached unit of 120,000sq ft – on behalf of Comunisis, so there are deals and opportunities about.
Industrial space is spread far and wide across the region and is not developed in clusters, as can be said of distribution space.
A reason for this is in part historical in that the old coal mining areas and rural communities prompted the development of support industries. Good examples include Bishop Auckland and Haltwhistle.
English Estates brought forward a spread of small industrial/distribution developments across the region, some in locations where the private sector would not have developed. This activity
included action through the DTI and the Development Commission. The private sector was also active in many locations built on the success of the public sector, though development has been and is taking place in the more accessible places.
The choice of locations and property on the market is good reason to remain quietly positive about the future.
Simon Hill, head of industrial agency at King Sturge's Newcastle office
THERE is no doubt that times have been difficult in the industrial and manufacturing sector, but companies have cut costs accordingly and many have seized the opportunity to acquire larger or more modern premises while some have rationalised and moved into smaller or secondary properties.
So, while the perception may be that the market has ground to a halt, the fact that the Newcastle office of King Sturge has been involved in transactions of more than 1.3msq ft of industrial and distribution property shows there is still healthy activity in the market.
While the retail sector has been under pressure during the past
12 months, we have still seen major investment in the region from the likes of the Co-op, Lidl, Asda
and Tesco, who have all made substantial investments in their distribution network within
the region and this is a sector we envisage will continue to grow throughout the coming months.
In manufacturing there have been some high profile closures and significant drops in output in certain sectors, but once again the region has shown its resilience with a number of companies continuing to trade strongly and new sectors, particularly renewable energy, beginning to grow significantly.
In the property sector one of the main effects of the current economic climate has been a considerable slowdown in speculative development.
This in turn has led to the beginnings of a shortage of good quality modern industrial stock as those schemes which were developed in the past two to three years are becoming fully occupied.
This scenario will lead to a challenge for the industry to stimulate and fund speculative development, which has always provided a good steady stream of modern space for new and growing companies, although we do
envisage that to overcome these restraints companies will look more to the design and build route to provide them with the space they require.
One of the advantages the region has is that there are a number of high profile well located sites ready for development which can offer occupiers fast-track design and build to ease some of the problems created by the lack of speculative development.
Keith Stewart, director of Naylors Chartered Surveyors
THERE have been encouraging signs that some users are willing to look at space once again after sitting on their hands for six to 12 months.
That said, general inquiries have dropped in the past few weeks to a level we hope has now stabilised. It is evident the void numbers on small industrial space in the region have increased in the market whereas six to 12 months ago space of this size, particularly in prime industrial areas, was hard to find.
Quite a number of tenants are going out of business or serving notice on landlords to quit under their flexible tenancy agreements.
The banking crisis has not helped the situation, with money not getting filtered through the system to keep small businesses afloat. We are confident though that void levels for this type will decline once money starts filtering back through the system and confidence comes back to the consumer.
The region’s industrial space over 20,000sq ft continues to be difficult and while some landlords and funds are particularly flexible on both rent and lease terms to secure a tenant, and in a lot of cases to mitigate the rates liability, some occupiers
are less enthusiastic as they do not know what lies ahead in the short term.
Rent reviews and lease renewals in some landlords’ portfolios will no doubt be damaged by what is happening in the current climate, but landlords and tenants are trying to see this difficult period through.