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Cracking on with developments

21 March 2024

Kier Property is continuing to develop warehouses for the crucial Mid-box market despite noteworthy recent headwinds, as Kier Property Senior Development Director Nick Scott outlines.

IT’S NO secret that the broader economy and the property market have been challenged over the last 18 months, but occupier demand remains buoyant and Kier Property is attentive to this, as Nick explains.

“We’re taking a cautious approach to development and we are cracking on in a number of locations at the moment. For example, we started on site at a Logistics City development in Bracknell in January. Logistics City is Kier’s brand name for mid-box warehouses. We are being cautious about our development process but where we feel there is an opportunity to get on site, in a strong location and be ahead of the curve we are doing that.

“The spec side has slowed down as a consequence of high costs running through the financial side, higher construction costs, and yields moving out. These three factors have created a perfect storm making it more difficult to deliver viable schemes.”

The occupational market has held up well in recent years, although it tailed off towards the end of last year as occupiers took a more cautious approach to taking on new space.

Nick adds: “The fundamentals are still strong in terms of occupier demand, there is still right sizing going on, there is still a movement to improve occupier ESG credentials and there is still a limited supply despite the vacancy rate having increased. This should continue to fuel rental growth albeit at a more sustainable level. It’s looking good going forward, albeit the market has had its challenges over the last 18 months.”

With supply constrained, demand remaining resilient and rents rising – albeit at a slower rate than in the past – could a resurgence in small and mid-box development be on the cards for 2024? It certainly seems so from a developer/investor perspective.

“That’s why we have continued to develop. To give occupiers options. Over the years Kier Property’s industrial team has delivered 50+ schemes (6.7m+ sq ft). Our sweet spot is Mid-box and last mile urban locations.”

Right now the small to mid-box warehouses sector is facing a shortfall in supply that researchers estimate is costing the economy an estimated £480 million Gross Value Added a year. Around 95% of the industrial and logistics property market operates out of small to mid-box warehousing units sub 100,000 sq ft, employing some 2.1 million people delivering £124 million GVA into the economy each year – 7% of the total economy in terms of GVA.

With this in mind, it’s great to see developers such as Kier Property pressing ahead with developments. Here’s more detail on its upcoming Bracknell development. The Longshot Lane site features one 104,034 sq ft flexible unit, which is being built with sustainability in mind and finished to a high standard, including electric loading doors, an impressive floor loading capacity and grade A fitted offices. The building is expected to be ready for occupation in the second quarter. Agents for the scheme are CBRE and Hatch.

“ESG has become an extremely important factor in any development,” says Nick. “Occupiers are demanding strong ESG credentials, and from a development perspective, we are very keen on promoting this. In terms of Bracknell, we are targeting a Net Zero carbon-enabled building, BREEAM Excellent and EPC A. The funds backing warehouse projects are also very keen to ensure buildings are sustainable.”

Kier’s Trade City brand is also worthy of note. These facilities contain smaller units targeting trade and SMEs. Kier is currently working on a Trade City development in Manchester. The units in these facilities are typically 3,000 sq ft to 10,000 sq ft and provide a destination for comparable occupiers.

Now is the time for warehouse occupiers to act. With space available, there are options for occupiers. However, in the coming months and years, this may not be the case as there will be an inevitable lag before spec builds come on stream again.

Nick concludes: “That’s why we have continued to develop. To give occupiers options. Over the years Kier Property’s industrial team has delivered 50+ schemes (6.7m+ sq ft). Our sweet spot is Mid-box and last mile urban locations.”

For more information, visit www.tradeandlogistics.co.uk

 
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