Nick Atkinson, director at Newcastle-based HTA Real Estate, discusses his views on the North East industrial market…
The industrial market in the North East continues to be a tale of limited supply and strong demand.
Nissan’s announcement last autumn that it will build the new Qashqai and X-Trail at its Sunderland plant has only helped to further strengthen the market.
So at a time when there is understandable caution regarding the effects of Brexit, it is significant that we have a genuinely ‘strong and stable’ automotive sector in the region. Not only does it represent a shot in the arm for North East manufacturing, but as a direct result – our industrial property sector too.
At HTA we are seeing the Nissan supply chain continue to grow into what is now an established network of North East manufacturing and logistics businesses, many of whom are tied to time critical supply contracts. The lack of immediate availability in the South Tyneside and Sunderland localities is driving the way for speculative development across Tyneside, and already we are seeing that developers are being rewarded for their speculation.
UK Land Estates is in the process of delivering large sheds across its land holdings at Team Valley and Tyne Tunnel Trading Estate and already have two of these under offer.
Given the current market dynamics I strongly believe that where developers can speculatively build a large shed of a good specification and in a strong location, a letting will follow very soon.
It is questionable whether a contract with Nissan can enable a firm to enter into a 10 to 15 year lease for a brand new shed. However, the strength of the automotive sector is eating away at the availability of existing stock, which means that in many cases, the only choice available to other businesses is to take a brand new unit from a developer.
For Tier 1 suppliers, the location and bespoke nature of their requirements will lead to further design and build projects taking place in and around Washington and Sunderland.
Another issue is the need for grant funding and we have seen that the North East LEP have supported developers who provide new build development to accommodate manufacturing businesses. This is something which will need to continue to secure future speculative development.
The North East is well served with development opportunities to accommodate occupier demand but only a handful of sites have the connectivity and ability to turnaround development in a timely manner to make them viable propositions.
One location we expect to thrive is Jade Business Park, County Durham which is located immediately adjacent to the A19 and can offer units of up to 100,000 sq ft. The 22-hectare site has outline permission for over 700,000 sq.ft of B1, B2, B8 development, so given its location 10 miles due south of Nissan it represents a key opportunity for the automotive sector.
Another is Turbine Business Park, which is located directly south of Nissan and is already home to Vantec, who provide warehousing of car parts to Nissan. With fully serviced land ready for development, the developers, Barmston can accommodate a bespoke unit of up to 70,000 sq ft which can be delivered within a short time frame.
Merchant Park at Newton Aycliffe has already attracted Hitachi and now offers infrastructure to accommodate a significant level of further development.
At Follingsby in Gateshead, we have had a great deal of success in recent months with a number of lettings and we are now diverting interest into design and build pre-lets.