THE logistics sector is suffering a chronic shortage of “big sheds” with only four currently available in the North West while the office market in central Manchester is also becoming squeezed.
This is according to real estate company Colliers International director industrial and logistics Julien Kenny-Levick and director national offices Peter Gallagher.
Kenny-Levick said the result of the shortage of warehouse facilities above 200,000sq ft was likely to see upward pressure on rents “for the first time in my whole career”.
“Already, we have seen incentives in terms of rent-free periods coming right down by two thirds,” he said.
“There is a shortage in all ranges of logistics space, when you are talking about quality accommodation from 500 to 5,000sq ft, but the shortage is more pronounced in the big sheds sector.”
Kenny-Leverick pointed the OMEGA development at Warrington which still has capacity on its south side and the Harworth Estates Logistics North development of more than one million sq ft on the former Cutacre open cast mining site at Bolton as examples of the sort of development required.
But he said addressing the shortage of available space was a long term problem.
“Building warehouses is a long drawn out process, once the shortage problem has been identified,” he said. “Developing a site involves planning, infrastructure and funding which can take a long time.”
Although not as acute there are similar shortages of supply, and particularly choice, in the office sector in central Manchester.
Gallagher has said occupation in the city increased by 432,538 sq ft in the first quarter of 2015, with total occupation levels surpassing 86% for the first time since 2008.
“There is a reduced supply and there is a massively reduced choice which is going to persist for some time,” he said. “This is because, with the best will in the world, whilst there are a number of people now scrambling to put development stock in the pipeline, mid 2017-18 is the earliest they can get there.
“What is driving the market at the moment is the trading in old standing buildings for refurbishment. Everyone is involved in the race to bring stock back to the market. There is a very active market with a huge weight of money wanting to invest in Manchester.
“The reason for this is that people are finding it more and more difficult to find value in London. And they sort of ‘get’ Manchester. We constantly hear that expression that ‘we get Manchester’.”
Gallagher said the upturn was approaching 2007 pre-crash levels.
“People are talking about the possibility of speculative funding again,” he said. “It’s not quite 2007, but it’s not a long way off it.
“But it feels more controlled this time because last time it was fuelled by the casual availability of debt. The tourist developer concept came into being – where anyone who could buy a train ticket to Manchester could do a development.
“Now, it feels a lot more sensible and there is much more institutional involvement.”