Fizz bucks the trend

If you think the manufacturing sector is dead in the water and that distribution is the way forward, then a visit to the south coast is in order. Like much of the country, the south coast has recently seen a polarisation between the fortunes of manufacturing and distribution. But, unlike the M1 corridor and many other former industrial heartlands, demand for manufacturing property along the M27 is up, while the distribution and warehousing market is less strong. “The shed market has become dominated by manufacturing – not primary industries but skilled, hi-tech uses supplying to niche markets,” says Matthew Small of Fareham-based Young & Butt. “Recent lettings supporting this trend have been to companies producing smart cards, point-of-sale technology and contact-lens manufacture,” he adds. The reason for less interest from distributors is straightforward, say agents. “It comes back to the fact that we are so near to two ports,” says Irene Spencer of Vail Williams. “You aren’t going to drop goods a few miles from a port when you can drive up the motorway to Milton Keynes.” Richard Sturt of King Sturge agrees that sites close to ports are not seen as optimal for warehousing: “Truck drivers don’t want to stop immediately after getting off the ferry – it’s just not an obvious thing to do.” Maybe not, but this has not stopped Slough Estates speculatively developing five sheds at Nursling on a site with historical B8 planning restrictions. More than a year after completion of its Southern Cross scheme, the developer has found out the hard way that industrial property trends in this part of the UK contrast starkly with those seen elsewhere. One of the buildings – the 17,000 sq ft (1,580m2) Unit 120 – was let to Coca-Cola in the early part of last year. But at leastfour-fifths of the development, which is being marketed by Fuller Pieser and London Clancy, including the 38,000 sq ft (3,530m2) Unit 210, still stands empty. “The fact that it’s a pure warehousing location and there is no consent for industrial uses puts people off. They are concerned that this could limit their future growth potential,” explains Andrew Archibald of Humberts. Other agents offer a variety of alternative explanations for why the scheme is still hanging around. These range from the obvious – such as the economic slowdown of last year – to the rather less so, with one agent mentioning “small yards” and “too high a proportion of office content”. James Clay of London Clancy focuses on the planning issue. “They are very high-spec buildings,” he says, “but the problem is that they can’t accommodate R&D or light industrial uses. We’d have let them all by now if that wasn’t the case.” Other possible factors mentioned by Clay include what he perceives as a desire among B8 occupiers to use “knockabout buildings” rather than pay out for brand-new property. And what about the other criticisms levelled at the scheme by rival agents? “The office content isn’t excessive and there’s nothing wrong with the yards,” says Clay. Proof that Southern Cross might have done better had it had consent for light industrial use can be seen across the road at Adanac Park, where lens manufacturer Ocular Sciences has taken a 350,000 sq ft (32,520m2) facility. “The difference in planning permissions between these two sites shows how important a full B1, B2 and B8 consent can be in making a scheme attractive to occupiers,” says Matthew Poplett of Chesterton. Other evidence of the strength of the local manufacturing sector includes the recent letting of a 50,000 sq ft (4,650m2) building at Ashfield Land’s Wellington Park, Hedge End, to fibre optics manufacturer Southampton Photonics. In Portsmouth, meanwhile, Formula One racing team Tag McLaren has taken 40,000 sq ft (3,720m2) at Canada Life’s Access Point. “All six units at Wellington Park were let within 12 months of completion because of the B1 and B2 consent that it had,” says Adrian Whitfield of joint letting agent Austin Adams. While the non-manufacturing part of the industrial sector has been quiet, some warehousing activity is nevertheless going on. Retailer Dixons’ Mastercare servicing operation has signed up for 124,000 sq ft (11,520m2) of warehousing space at Houndsdown business park in Totton. “It shows there are companies that are expanding into large regional distribution depots in Hampshire,” says Archibald of Humberts, letting agent for the scheme. “I think Southern Cross has tainted the view of success that distribution schemes can have, particularly with regard to Houndsdown,” adds Whitfield. While distribution dominates the industrial sector across much of the UK, on the south coast light manufacturing is on top – and schemes limited to warehouse use are tough to let. David Quinn reports Port development City’s future hangs on port inquiry The outcome of the public inquiry into Associated British Ports’ proposals for Dibden Bay is eagerly awaited among agents on the south coast. A green light for the proposals could signal an increase in activity among industrial occupiers nearby. ABP wants to create berths for up to six deep-water container ships, as well as a 500-acre (200ha) terminal, on the west side of Southampton Water. The company says that the scheme is vital to enable the UK to meet the demands of the industry. Local agents agree. Nik Cox of Chesterton proclaims: “If Dibden Bay doesn’t happen, Southampton as a port will collapse. If we can’t accommodate deep-water ships, then they will go elsewhere.” The inquiry is ongoing and it is far from clear which way it will go. English Nature has designated the proposed development area a site of special scientific interest, and there is opposition from nearby residents because of the predicted increase in freight traffic. However, some believe that the allocation of a 10-acre (4ha) former industrial site at nearby Millbrook to Ikea could tip the balance in favour of ABP at Dibden. “It’s a loss of a considerable amount of industrial, dock-related space,” says James Clay of London Clancy. “By taking that 10 acres out of the industrial supply, it is probably adding weight to the development of Dibden Bay and I wonder when people will wake up to that.” Should the inquiry find against ABP, Southampton risks further losing out to nearby rival Portsmouth, which has already recently grabbed business from shipbuilder Vosper Thorneycroft. Portsmouth agents are grateful for the lift, but warn of possible problems if Southampton declines further. “Vosper is a great boost for the dockyard and the city, but this migration of workers from Southampton will place an additional burden on the already laden M27,” warns Robin Dickens of Young & Butt. Southampton could also suffer a loss of business to Felixstowe and Rotterdam, should the ABP proposals be turned down. Industrial development £7m sale will test strength of boom Like other parts of the UK, the south coast is witnessing a boom in freehold sales of industrial property. “Low interest rates, the ready availability of finance and the increasing use of personal pension plans has fuelled the demand,” explains Simon Neilson of Neilson Holt. Prices are in the order of £75-£80 per sq ft and rising, according to Neilson. Examples of the trend include the sale of several units of up to 3,000 sq ft at Compass Point, Hamble, totalling around 80,000 sq ft. A specialist area of high demand has been workshops with yards, which have fetched a premium when placed on the market, thanks to their scarcity. Adrian Whitfield of Austin Adams says: “There are a lot of directors who want to put these buildings into pension funds and then lease them back, and they are selling well.” A major investment opportunity will come on to the market in the next few weeks and this could prove a test of the south coast’s strength. The 20-acre (8.1ha) Willments Shipyard on Hazel Road, Southampton, will be marketed by King Sturge and Humberts with a £7m price tag. It houses a number of existing tenants but has some development plots, according to Andrew Archibald of joint vendor’s agent Humberts. New industrial/warehouse land and building supply Sites with light industrial consents are predicted to fare better Location Developer Scheme details Access Point, Portsmouth Canada Life 1.3 acres. Two spec units totalling 58,770 and 40,475 sq ft let Adanac Park, Nursling Baker Mill Trust 62-acre strategic site adjacent to junction 3 of M27 Hamilton Business Park, Hedge End Hargreaves 10 acres. One speculative unit of 57,000 sq ft completed Houndsdown Park, Southampton Barker Mill Trust/Patrick Trant Approximately 15 acres remain Interchange Park, Portsmouth Sovereign Land Fully refurbished unit of 81,730 sq ft, plus land with permission for 25,565 sq ft Former Johnson & Johnson site, Portsmouth TBA (Vendor: SEEDA/ Portsmouth city council) 10-acre linear site for mixed-use office and industrial scheme Kites Croft, Fareham Easter Developments/ Morley/City Estates Up to 40,000 sq ft B1, B2, B8. Detailed planning in place. Construction imminent Marchwood Business Park, Southampton Oceanic Estates 75 acres to west of Southampton Water. Open storage plots with further development planned Midpoint 27, Fareham io Group 3.5-acre site with proposal for small unit scheme Milton Business Centre, New Milton A&R Developments 2,840-3,820 sq ft. Available now at £7 per sq ft Phase three, Mountbatten Business Park Store Properties 1.5 acres. Three terrace blocks totalling 50,000 sq ft Nelson Centre, Portsmouth Parlison/Highcross New scheme totalling 10,000 sq ft. 50% let Segensworth North, Fareham Davies Street Properties 8-acre site. Mainly sold to Brake Bros. Two units totalling 50,000 sq ft built on rest. One let Southampton International Park, Southampton airport Gazeley Phase one completed. Phase two of 47 acres subject to planning Southern Cross, Nursling Slough Estates Five warehouse units totalling 113,000 sq ft. One let Southmoor Park, Havant SEEDA 13-acre site with plans for new business park Sterling Business Park, Wimbourne Birchmere 14,000 sq ft letting at £6.95 per sq ft. Available spring Wellington Park, Hedge End Ashfield Land 93,000 sq ft speculative scheme. Lettings achieved Willments Shipyard site, Southampton n/a Freehold 20-acre site suitable for mixed-use development, priced at £7m Source: King Sturge/Goadsby & Harding/Neilson Holt Rental growth index values Eastleigh is the strongest regional market Source: IPDLocal Markets 2001 NB 1980 = 100 South coast industrial rents Southampton is the most expensive in Hampshire Prime rent (£ per sq ft) Prime rent (£ per sq ft) Andover 5.50 Petersfield 5.75 Bournemouth 6.50 Poole 6.00 Chichester 5.75 Portsmouth 6.50 Dorchester 5.00 Ringwood 5.00 Eastleigh 6.50 Salisbury 5.25 Fareham 6.50 Southampton 6.75 Havant 5.75 Weymouth 4.50 Newport 4.50 Winchester 6.50 Source: King Sturge