JUNCTION 28 – AN INDUSTRIAL AND WAREHOUSE PROPERTY REVIEW 2013

Industrial/Warehouse News

So, 2012, eh – that was fun, wasn’t it? We had a Ryder Cup win, gold medals galore and the return of national pride (during the Olympics and Paralympics, anyway), tennis grand slam victories, cricket success and Wiggo and his wonderful sideburns blazing a trail in the Tour de France. It couldn’t get better than that, could it?

Well, it could actually. If the property world had mirrored the last 12 months in the sporting world then our economy might be more of a champ and less of a chump.

Sad to say, property’s been more like England’s football team than its cricket team, displaying some inspirational flashes of brilliance…and then grinding its way to a draw.

But let’s focus on one of those flashes of inspiration. Up at Junction 28, we’ve seen real performance highs in the industrial and warehouse sectors – the kind of performance that echoes those Olympic medal moments and makes you think that commercial property might just have its own golden generation on the way through.

Without a shadow of a doubt, the top-of-the-podium gold medal performance goes to Castlewood, the 110-acre site alongside the A38 and the M1 motorway that has been brought to life by Derbyshire’s own Clowes Developments. And have they got a track record to be proud of!

It isn’t just the deals that have made Castlewood an eye-catching performer. If you’re a regular up and down the M1 around Junction 28, you will have seen over the past few months the Co-op’s 500,000 square feet food distribution centre rising majestically out of the ground. It’s not quite an Olympic stadium but it tells you something big has been going on.

In this case, it’s the consolidation of two separate warehouse operations into one, state-of-the-art distribution centre employing around 900 people. With Clowes making the running, it was no surprise to see the project race to the finish line on time and in budget. And it represents a performance of national standing: deals like this don’t come along often (though in Clowes’ case it was a medal double, following on from another giant distribution project for M&S at Castle Donington).

The Co-op project is more than just a physical landmark, though. The scale of the scheme and the jobs it brought are testament to the fact that Junction 28 is now part of the warehouse and distribution big league – a place where fantastic transport links and a readily available labour pool make it a prime location for logistics. It has been a real boost for the regional market. 

The Castlewood site has a whole has had a great year, giving a real shot in the arm to the property market and the local economy. In 2012 the site has also sees a 60,000 square foot design-and-build project for Meridian Lightweight Technologies, a world leader in the supply of advanced, lightweight alloys to the automotive industry. It was the first built-to-suit project at Castlewood and one of the first the Notts market has seen in years. 

While we didn’t have to wait as long for this design and build scheme as Andy Murray did for his US Open Grand Slam win, it was still a cheer-them-on breakthrough deal: as the supply of readily available industrial property continues to dwindle this looks like being the trend for 2013, with ongoing discussions with potential occupiers about further D&B at Castlewood. 

As we go into the New Year, the shortage of modern, well-specified buildings (particularly over 20,000 square feet) continues to be an issue. The flipside is companies like Meridian looking at D&B solutions. However, those businesses who may not be able to wait for a structure to come out of the ground are being held back by this lack of supply. They literally haven’t got the space to stretch their legs. 

This probably seems bizarre to those businesses who see an economy only jogging along and think it’ll be a buyer’s market. But it’s true – there’s a shortage of space and it’s been felt keenly in the last few months because there’s been no speculative construction for years and existing stock has simply been eaten up. If the economy is to get up to speed in 2013 then we need more property to come on to the market so that businesses can expand and get moving. 

True competitors always stay positive, though, and you have to take the fact that we are seeing more enquiries and more deals being agreed as a positive sign. 

Let’s try and make a positive even out of the England football analogy: if demand is overtaking supply then it feels like we’ve solved the market’s defence but can’t find a striker who knows how to score!

Parking sporting metaphors to one side, what can we really look forward to in 2013? Well, for businesses who are genuinely serious about making that move, design and build looks like the best way forward, especially if they are keen to secure high-calibre property in a well-connected location. 

In the market for existing stock, if the competition for space continues at its current level then the difficulties in finding space will be exacerbated. Deals will stumble because of a lack of supply, not a lack of demand. 

The glory days of speculative construction are still some way off because many developers face the same financial challenges that all businesses have faced since the crash. And they lack the Big C – confidence! 

I think this holds the key to the property market 2013, and I’m going to conclude by returning to that golden summer. So many of our Olympic and Paralympic stars succeeded because of a fundamental self-belief – they had that will to win. In property terms, then, businesses need to be saying to themselves that 2013 is going to be their gold medal-winning year. Their business is in good physical shape because it’s trained hard and worked hard. It knows how to win – so to make the move all it really needs is that self-belief. 

The difference between staying put and going for it can sometimes be no more than the ‘shall I-shan’t I’ mentality. Businesses need to have faith in their relationships, their order books and their own skill and determination. They need to vanquish those demons of doubt and if the right property can be sourced take the plunge. 

If they start doing that, the market will gain confidence, new stock will be created and suddenly the whole picture begins to look more positive. 

In the same way that athletes have to find performance in themselves, you can’t manufacture self-confidence in a business. But property values are low, and the performance of locations like Castlewood has shown that we can make it happen. We’re good sports at FHP and our prognosis is that 2013 can be that Olympic year for property, whether you’re bringing a site to market or trying to find the place that let’s your business compete. Let’s go for it!