Stepping up: The shed market is being boosted by both the Olympics and regeneration plans for the Thames Gateway.
The north-east quadrant of the M25 is not short of high-profile economic drivers. The Olympic village will soon be under construction in Stratford, and to the east there are huge regeneration plans for the Thames Gateway.
Shed developers have not been immune to the excitement around these projects, and have been forging ahead with developments in the hope of capitalising on this.
The area also benefits from its proximity to central London, and fears of an oversupply seem to be far from the minds of developers and agents.
Jones Lang LaSalle director Richard Evans says: “There is a great story ahead for the area in the long term as demand increases from companies serving the market. The Olympics has taken out 200 acres of land, so there isn’t a huge supply going forward.”
Graftongate is among those to develop space, and two buildings of 177,000 sq ft and 141,000 sq ft were completed this year at Binary Park in Dagenham. Invista has a 193,000 sq ft building called Atlas available in Edmonton, while Henderson Global Investors has the 178,000 sq ft unit called Magnum 25 available in Waltham Cross.
Other big guns are bringing forward schemes. ProLogis, in conjunction with Standard Life, is developing a 315,000 sq ft building in Basildon called Imperium315, due for completion early next year.
In Enfield, Gazeley and Morley are due to start construction of a 366,000 sq ft unit called 360 at Link 25, which will be finished next June.
Many believe there is demand for such buildings, even though the retail market is more fragile than in recent years. Steve Williams, director of industrial and logistics at Atisreal, says that occupiers’ decisions on moving distribution centres tend to be strategic, rather than based on short-term market conditions.
“The occupier market seems fairly robust and, generally, things are fairly healthy in the area,” he says.
Colliers CRE associate director James Haestier adds: “Although there are quite a few buildings becoming available, there are also requirements coming through.”
Competition could, however, be increased by London Gateway Park at Shellhaven, near West Thurrock, where Shell and DP World gained planning permission for a 700-acre distribution and manufacturing park this year. Development of the site, which will sit alongside a new container port, is likely to start in 12-18 months.
Optimism about demand is being fuelled by a number of imminent deals. In Dagenham, Gazeley’s 232,000 sq ft Voltaic building, which incorporates several sustainable features, is under offer to local printing firm DSI. Comet is thought to be close to signing a 385,000 sq ft prelet at Arrow Park in Harlow, which is being developed by Canmoor and Kenmore.
Demand also exists for secondhand sheds and, in Enfield, a 124,000 sq ft refurbished building at Picketts Lock Lane, owned by Henderson, is under offer. Glenny partner Paul Fitch says: “There is a shortfall in secondhand stock with acceptable eaves height and yard area in the sub-200,000 sq ft market.”
Developers appear confident about the future. A strong level of interest is being reported for 26 acres being sold by RWE npower in Dagenham. A process of best bids is being carried out with the result likely to be decided by November.
“There hasn’t been any downturn in developer demand, despite a less active investment market,” says JLL’s Evans.
Parcels of land at the site were used by Gazeley for Voltaic and by Graftongate for Binary Park. In addition, PRUPIM has forward-bought a 58,000 sq ft plastic recycling plant, which is being developed for Closed Loop London by Cornwall Property Developments.
Despite the level of developer activity at the larger end of the market, agents report a shortage of medium-sized buildings of 30,000-100,000 sq ft – a common complaint around the M25.
However, some developers are starting to address this. At Thames Gateway Park in Dagenham, Ravenbourne and Standard Life are awaiting the final go-ahead from planners to construct eight units of 21,000-67,000 sq ft and hope to complete the buildings next summer.
Ravenbourne managing director Michel Henri says: “There is no supply at that size, which is precisely why we want to build these units.”
Developers continue to build at the smaller end of the market, too. For example, Chancerygate is developing a 32-unit, 105,000 sq ft scheme in Romford and 12 units totalling 33,000 sq ft in Brentwood. Both are due to be completed in the first half of next year.
Likewise, Kier is planning industrial units of 3,000-30,000 sq ft as part of its mixed-used redevelopment of Ponders End Industrial Park. Purchased with Invista in August, it will also include office units of around 4,000 sq ft.
According to Colliers CRE, although many agents are hoping for long-term rental growth, there has been little movement in the north-east M25 over the past few years. However, capital values have risen sharply in certain areas. In Enfield, for example, DTZ associate director Darren Cheeseman says they have risen 50% in the past three years to £180-£190 per sq ft.
