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DTZ

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Speculative development of industrial space above 50,000 sq ft expanded outside of the M1/M6/M25 corridors in Q1 for the first time since development recommenced in late 2013, according to DTZ.

Two units totalling 138,000 sq ft in Chandlers Ford, Hampshire, along with a plethora of buildings in the South East, Midlands and Yorkshire gave a much-needed injection of new grade A supply to the market. Grade A availability increased to 12.2m sq ft in Q1, confirming the end of a downward trend since 2009, where lack of development meant that this best quality available space fell by 77% over five years.

Occupiers continue to utilise the build-to-suit market, with this type of deal accounting for 4.5m sq ft, or 84% of grade A take-up in Q1 2015. Q1 build-to-suit take-up was already significantly higher than that of the entire second half of 2014. These kinds of deals are predominantly located in regions where there is low grade A availability and where speculative development has not yet begun in a meaningful way. Next plc took 703,000 sq ft of build-to-suit space in Doncaster in the largest deal of the quarter.

Ben Clarke, Head of UK Research at DTZ added: “This increase in developer activity has been very welcome at the supply-starved prime end of the industrial market. With occupiers actively seeking out the highest quality buildings, we expect industrial prime rents to rise by 2.2% on average per year over the next five years.”

Simon Lloyd, Head of Industrial Agency at DTZ, based in Birmingham said: “The shortage of grade A space has meant that occupiers have had to take a built-to-suit option with its longer lead-in time, or an older grade B building in order to satisfy their property requirement. The increased grade A supply generated by an accelerating speculative programme will mean that they are now more able to take a better building with its operational benefits.”

Robert Ladd, Head of Industrial Agency at DTZ Cardiff, said: “The shortage of grade A space has meant that in recent years occupiers have either had to take a built-to-suit option with its longer lead-in time as evidenced by Travis Perkins and Geopost in Cardiff, or an older grade B building in order to satisfy their property requirement. Wales is still unlikely to see a significant number of speculatively built properties over 50,000 sq ft in the near future although St Modwen has submitted planning for a speculative 50,000 sq ft building at Celtic Business Park. However there are several regional developers such as Formaction that have re-entered the smaller sized property market and who are again building speculatively. An increase in grade A supply that will be generated by an accelerating speculative programme will mean that occupiers will once again have the option to take a better building with its operational and sustainability benefits.”

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DTZ has completed the freehold sales of Avro House on Lancaster Close, Sherburn-in-Elmet and Unit 2 Focus Business Park, Yeadon to two Yorkshire-based businesses.

Avro House, comprising circa 13,200 sq ft, was purchased by PapaKata Limited for their own occupation. The tent and marquee hirer has seen strong trading performances which has resulted in the company relocating from Acaster Malbis to Sherburn-in-Elmet.

Renaissance, the window accessories manufacturer, has purchased circa 17,500 sq ft at the Focus Business Park in Yeadon. The established Yeadon-based company purchased the freehold of the modern detached building in March 2015.

Scott Morrison, Senior Surveyor in DTZ’s Industrial Logistics and Distribution team commented: “Both of these freehold transactions demonstrate the improvement in the regional freehold industrial market which has benefited from the increased availability of bank funding. We continue to see strong demand for well-presented freehold industrial premises as regional occupiers look to take advantage of the availability of debt finance and improving trading conditions.”

Increased investor interest in commercial property across Europe saw yields fall in many markets in Q1, with the best buying opportunities remaining in central and southern regions of the continent, according to research from DTZ.

The European Fair Value Index published by DTZ identifies Europe’s most attractive office, retail and industrial markets for prime commercial property investment now on a five year hold period. The report shows that peripheral Eurozone, Baltic and Central European markets are likely to outperform their traditional western European counterparts in terms of attractive investment opportunities.

DTZ’s latest Fair Value Index™ for Europe fell to 69 in Q1 2015 from 79 the previous quarter, meaning that although European commercial property markets are still attractively priced, their relative pricing compared to bonds is starting to diminish, reducing the ‘sweet spot’ of opportunity for investors.

The European Central Bank’s €1.1tn QE programme has resulted in bond yields and forward rates falling to unprecedentedly low levels, which has increased property’s attractiveness to investors searching for higher yields. The resulting increased investor demand for European property has seen prime yields fall in around half of the 117 markets in DTZ’s European Fair Value Index™ this quarter, causing the overall index score to fall.

Fergus Hicks, DTZ’s Global Head of Forecasting, said: “Our latest European Fair Value Index™ is showing that European property remains attractively priced. However, yield compression across much of Europe is seeing property become more fully priced and reducing investment opportunities.”

The industrial sector remains the most attractively priced sector in Europe, with 4 of the top 5 most underpriced markets in DTZ’s European Fair Value Index™ all in this sector. Higher income yields compared to the office and retail sectors make it particularly attractive to investors and results in a wider spread over government bond yields.

Central European, Baltic and Eurozone peripheral markets top the rankings as the most underpriced markets in Europe in the index this quarter, with the Riga industrial market ranked number 1. In contrast, many core European markets are now classified as fairly priced, while the Russian, Turkish and Swiss markets remain overpriced at the bottom of the rankings.

Magali Marton, DTZ’s Head of Research for EMEA, said: “While there are still plenty of attractive investment opportunities in core western European and Nordic markets, we believe that industrial markets in the Eurozone periphery, Baltics and Central Europe offer the best value over the medium term”.

The findings are based on the DTZ European Fair Value Index™, which provides a quarterly insight into the comparative attractiveness of current property pricing across 117 European markets. The classification for each market, based on a five year hold period, is determined by comparing the forecast return and the risk-adjusted fair/required return. A score of 100 indicates that all markets in the index are underpriced and zero that all markets are overpriced. A score of 50 indicates a balanced number of over- and underpriced markets. In Q1 59 markets were rated as ‘underpriced’, 44 ‘fairly priced’ and only 14 as ‘overpriced’.

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Speculative development of industrial space above 50,000 sq ft expanded outside of the M1/M6/M25 corridors in Q1 for the first time since development recommenced in late 2013, according to DTZ.

Two units totalling 138,000 sq ft in Chandlers Ford, Hampshire, along with a plethora of buildings in the South East, Midlands and Yorkshire gave a much-needed injection of new grade A supply to the market. Grade A availability increased to 12.2m sq ft in Q1, confirming the end of a downward trend since 2009, where lack of development meant that this best quality available space fell by 77% over five years.

Occupiers continue to utilise the build-to-suit market, with this type of deal accounting for 4.5m sq ft, or 84% of grade A take-up in Q1 2015. Q1 build-to-suit take-up was already significantly higher than that of the entire second half of 2014. These kinds of deals are predominantly located in regions where there is low grade A availability and where speculative development has not yet begun in a meaningful way. Next plc took 703,000 sq ft of build-to-suit space in Doncaster in the largest deal of the quarter.

Ben Clarke, Head of UK Research at DTZ added: “This increase in developer activity has been very welcome at the supply-starved prime end of the industrial market. With occupiers actively seeking out the highest quality buildings, we expect industrial prime rents to rise by 2.2% on average per year over the next five years.”

Simon Lloyd, Head of Industrial Agency at DTZ, based in Birmingham said: “The shortage of grade A space has meant that occupiers have had to take a built-to-suit option with its longer lead-in time, or an older grade B building in order to satisfy their property requirement. The increased grade A supply generated by an accelerating speculative programme will mean that they are now more able to take a better building with its operational benefits.”

Take-up in the North East totalled 446,000 sq ft.

Chris Donabie, Head of North East Industrial Agency at DTZ commented: “There is an acute shortage of grade A space in the North East and still strong occupier demand, as evidenced by the robust start to 2015 in terms of take-up. At present there are live enquiries from the manufacturing, third party logistics, parcel delivery and automotive sectors totalling in excess of 700,000 sq ft.  If you add in Vantec’s proposed new build distribution unit close to Nissan then the total figure exceeds of 1m sq ft.

“Despite sustained demand there is still no reported speculative development of buildings in excess of 50,000 sq ft.

He added: “We do expect build-to-suit activity this year, firstly the aforementioned Vantec building in excess of 350,000 sq ft, and active requirements from the manufacturing and third party logistics sectors. The latter requirements could exceed 200,000 sq ft in total. There is rental evidence from recent larger transactions exceeding £5.00 per sq ft, which is certainly giving developers more confidence when appraising developments.  Following the recession rents have gradually recovered whilst build costs rose far more sharply so any future further rental growth is welcome.”

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DTZ . Portrait Photography

Speculative development of industrial space above 50,000 sq ft expanded outside of the M1/M6/M25 corridors in Q1 for the first time since development recommenced in late 2013, according to DTZ.

Two units totalling 138,000 sq ft in Chandlers Ford, Hampshire, along with a plethora of buildings in the South East, Midlands and Yorkshire gave a much-needed injection of new grade A supply to the market. Grade A availability increased to 12.2m sq ft in Q1, confirming the end of a downward trend since 2009, where lack of development meant that this best quality available space fell by 77% over five years.

Occupiers continue to utilise the build-to-suit market, with this type of deal accounting for 4.5m sq ft, or 84% of grade A take-up in Q1 2015. Q1 build-to-suit take-up was already significantly higher than that of the entire second half of 2014. These kinds of deals are predominantly located in regions where there is low grade A availability and where speculative development has not yet begun in a meaningful way. Next plc took 703,000 sq ft of build-to-suit space in Doncaster in the largest deal of the quarter.

Ben Clarke, Head of UK Research at DTZ added: “This increase in developer activity has been very welcome at the supply-starved prime end of the industrial market. With occupiers actively seeking out the highest quality buildings, we expect industrial prime rents to rise by 2.2% on average per year over the next five years.”

Simon Lloyd, Head of Industrial Agency at DTZ, based in Birmingham said: “The shortage of grade A space has meant that occupiers have had to take a built-to-suit option with its longer lead-in time, or an older grade B building in order to satisfy their property requirement. The increased grade A supply generated by an accelerating speculative programme will mean that they are now more able to take a better building with its operational benefits.”

He added: ”The Midlands has been one of the main beneficiaries of the new building programme with a number of buildings of a range of sizes being built and taken up by occupiers.”

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A 35,000 sq ft industrial unit in South Wales has been let to global label manufacturer, Spear Europe Limited.

The company has taken space at Units 48-50 at Llantarnam Park in Cwmbran. DTZ and joint agent, Hutchings & Thomas acted on behalf of Columbia Threadneedle Investments whilst JLL represented Spear who already have a facility at the estate.

The premises comprise three refurbished terrace units and will be used to expand Spear’s growing operation in South Wales.

An established industrial location, Llantarnam Park is located two miles south of Cwmbran town centre and benefits from strong road links to the M4 motorway.

Rob Ladd, Director in DTZ’s Industrial agency team, commented: “We are delighted to have helped facilitate Spear’s expansion close to their existing Cwmbran base. Spear recognised the quality of the fit out and we now have only one unit remaining on the estate, offering 11,880 sq ft of fully refurbished warehouse and office space.”

Headquartered in the USA, Spear is the leading global supplier of pressure sensitive labels to the beer and beverage industry.

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Manchester United has secured a new tenant at the Manchester International Freight Terminal, Trafford Park.

McGill Transport has taken a lease on a unit of 28,528 sq ft.  Nolan Redshaw negotiated the transaction along with joint agents DTZ.

Paul Nolan of Nolan Redshaw commented: “There has been a flurry of activity at the freight terminal with its excellent road and rail connectivity and 24 hour security it is an attractive site.”

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Following a record quarter at the end of last year, 2015 got off to a strong start, with regional office take-up 11% above the five year average in Q1, according to DTZ. This was the sixth consecutive quarter of above-average take-up, indicating ongoing occupier confidence in the major UK office markets outside of central London.

For the first time since Q2 2012, overall office availability increased in the regions, most notably grade A availability, which increased by over a third. This was driven by various speculative developments nearing completion in a sign of confidence on the part of developers, with over 1.3 million sq ft of speculative space due to be delivered in Manchester and Glasgow alone over 2015-17. Interest in these developments is high, with around a quarter of the space already prelet and DTZ expects further lettings ahead of completion.

Notable schemes include One New Bailey and Two St Peters Square in Manchester; and St Vincent Plaza, 1 West Regent St and 110 Queen St in Glasgow.

The recent increase is off a low base and most cities are still suffering from a shortage of availability. This is particularly the case for grade A stock, which has led to landlords taking a harder stance on incentives. Rent free periods have fallen 28% in the past year and headline rents are forecast to rise 8% on average over the next three years.

Ben Clarke, Head of UK Research at DTZ, said: “The increased speculative pipeline in regional UK office markets is good news for various key occupiers reaching lease events, but the total pipeline is still more than a third lower than completions during the pre-recession 2004-08 period. This strength in prime occupier markets is helping support investment demand, which eroded prime UK regional office yields by a further 20 basis points in Q1.”

The Newcastle city centre and out-of-town office market made a strong start to 2015, posting a combined take-up figure of 299,000 sq ft in Q1, substantially above the four year annual average of 189,000 sq ft for the same period.

Take up-comprised 48,000 sq ft within the city centre and 251,000 sq ft in the out of town market, with notable deals including the 17,000 sq ft letting to Connect Physical Health Centres at Quorum Business Park, North Tyneside, and 20,000 sq ft to iParadgms at Wellbar Centre, Gallowgate. Of the 44 deals in Q1, the vast majority were in the out of town market, with only 14 deals in the city centre.

Chris Dent of DTZ’s Office agency team in Newcastle commented: “The supply of new grade A space to the market is still one of the biggest challenges facing the city. Just two new office developments are currently on site – The Rocket at Stephenson Quarter and Liveworks, Quayside, which are 35,000 sq ft and 14,000 sq ft respectively.

“If the current levels of take-up continue, there will be a significant shortage of supply in the latter half of 2015. We have already seen the hardening of incentives and the lack of supply is also putting upward pressure on rents. This can already been seen with the last remaining suite at Wellbar Central increasing the quoting rent to £24.00 per sq ft.”

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ADP, a leading global provider of Human Capital Management (HCM) solutions, has become the fourth new tenant at Templeback, Bristol in the past six months.

This follows lettings to Mott MacDonald, Momentum Financial and Colliers CRE at the building  which is asset managed by London-based Cube Real Estate on behalf of its owner, Benson Elliot. Templeback is being jointly marketed by DTZ and Alder King.

ADP will expand its Bristol business into Templeback and will develop its Research & Development arm within the building.

The company is taking 8,000 sq ft on the part first floor of the building on a five year lease. There is now just 41,000 sq ft left at the building, with 32,000 sq ft having been let in the past few months.

Phil White, head of EMEA Property at ADP commented: “Templeback gave us the flexibility to expand our Bristol operation into an attractive, contemporary building. The new facilities will allow us to further grow the business and attract the highest calibre of staff in the area”.

Jonathan Lawes, asset manager at Cube, continued: “By listening to the occupiers requirements and providing the flexibility of space they require, we have been able to continue our great run of success. We have introduced a concierge facility and will be undertaking further works to the common parts of the building shortly, further enhancing the appeal of Templeback to the growing level of demand in the market.

He added: “With the intended works to the arrival experience and the common parts, Templeback is further strengthening its place as the grade A building of choice in the city centre.”

Templeback is a 123,000 sq ft building and one of Bristol’s most prominent Grade A office developments. The waterfront building is one of the city’s greenest buildings and is available to new tenants on tailor-made attractive terms. It is the only grade A building that can provide in excess of 20,000 sq ft on a single floor.

NFU Mutual currently occupies two floors but substantial high quality space remains across three floors.

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Following a record quarter at the end of last year, 2015 got off to a strong start, with regional office take-up 11% above the five year average in Q1, according to DTZ. This was the sixth consecutive quarter of above-average take-up, indicating ongoing occupier confidence in the major UK office markets outside of central London.

For the first time since Q2 2012, overall office availability increased in the regions, most notably grade A availability, which increased by over a third. This was driven by various speculative developments nearing completion in a sign of confidence on the part of developers, with over 1.3 million sq ft of speculative space due to be delivered in Manchester and Glasgow alone over 2015-17. Interest in these developments is high, with around a quarter of the space already prelet and DTZ expects further lettings ahead of completion.

Notable schemes include One New Bailey and Two St Peters Square in Manchester; and St Vincent Plaza, 1 West Regent St and 110 Queen St in Glasgow.

The recent increase is off a low base and most cities are still suffering from a shortage of availability. This is particularly the case for grade A stock, which has led to landlords taking a harder stance on incentives. Rent free periods have fallen 28% in the past year and headline rents are forecast to rise 8% on average over the next three years.

Ben Clarke, Head of UK Research at DTZ, said: “The increased speculative pipeline in regional UK office markets is good news for various key occupiers reaching lease events, but the total pipeline is still more than a third lower than completions during the pre-recession 2004-08 period. This strength in prime occupier markets is helping support investment demand, which eroded prime UK regional office yields by a further 20 basis points in Q1.”

Chris Terry, Associate Director in DTZ’s Office agency team in Cardiff, commented: “Following the best take-up figures for three years, Cardiff’s office take-up for 2014 totalled an impressive 542,500 sq ft. 2015 got off to good start in terms of the number of office transactions (29 in total), however the vast majority of deals have been in the sub-3,500 sq ft size range, which resulted in Cardiff Q1 office take-up for the city centre and out of town markets registering only 75,000 sq ft.

“The largest office transaction in Q1 was the letting of part of the third and whole fourth floor of One Capital Quarter to Parsons Brinckerhoff which took 13,000 sq ft at a rent of £18.95 per sq ft. Market incentives for this transaction are believed to be been around two months for every year certain. Incentives are currently at 12 months’ rent free per five years of term certain on any new lease transaction, which assumes a regional covenant rather than a national PLC or public sector covenant.

He added: “There remains a genuine lack of grade A accommodation in the city centre available for immediate occupation, with only some 20,000 sq ft available at One Capital Quarter. Notable speculative schemes currently under construction in Cardiff city centre include One Central Square, a new 135,000 sq ft development project being undertaken by local developer Rightacres Property, available at a quoting rent of £23 per sq ft; and Two Capital Quarter – an 84,000 sq ft building available at a quoting rent.”