Commercial Property Monthly Greater Manchester – “in my view”

After two exceptional years in the industrial market, 2016 so far seems to have been subdued with apparently only one show in town, Amazon who are of course active across the country. The relatively restricted take-up of space this year however is largely a result of the lack of available space and indeed the tightening of immediately deliverable development land. I am afraid therefore the market still favours the landlord.

As a result, developers and funds have been busy addressing this shortage and delivering new high quality warehousing space to the market. It is notable that the first buildings to be released to the market have already been snapped up by the likes of Amazon taking Stofords 271,000 sq ft  building at Airport City and XPO for misguided taking Evanders 250,000 sq ft in Trafford Park. A number of speculative schemes identified in the table below have either just come on stream will be doing so over the next six months:

There are serious expressions of interest in a number of these and I therefore expect further significant deals to be announced prior to the end of the year as it is rumoured that GA foods have agreed terms with Evander for their 184,000 ft.² building at Revolution. The 110,000 ft.² Epic building in Wigan and the 60,000 ft.² Trafford Point building are also understood to be close to going under offer.

I also expect at least three design and build transactions to be announced principally for parcel distribution companies in the north and east of Manchester, which follows the prelet recently announced for Rhenus at Port Salford, but also a 70,000 ft.² design build for an advanced manufacturer in Widnes.

On the manufacturing side there has been significant investments this year including a major new build proposed by Alstom also in Widnes at HBC Fields, the purchase of 300,000 ft.² by Tetrosyl from PIN Property in Rochdale and the 110,000 ft2 lease for Corenso in Middleton also from PIN.

It would be remiss of me not to provide a view on the impact of Brexit. I believe on the occupational side the impact has been minimal in that significant transactions occurred in the run-up to the vote, such as The Tetrosyl transaction, and substantial investment decisions have been made since the vote such as the proposed 70,000 ft.² D&B in Widnes.

Where the impact has been most felt is on the institutional investment market where the introduction of uncertainty as a result of the vote and an initial spike in redemptions on property funds almost ceased activity in this sector. That said prime stock still trades such as the XPO warehouse in Trafford Park which is understood to have exchanged hands at a 5% initial yield and there is still good interest prime locations. Confidence is slowly returning to the market on the back of favourable macro-economic indicators and It appears that the initial shock redemptions is not as pronounced as first thought. We may well therefore see institutions coming back into the market as the industrial sector is still seen as a maturing and stable market with excellent growth prospects. See page 92 on the link below for the full article.

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