On paper, the North West region appears to have the most available volume of industrial space of anywhere in the UK, with 5.4 million sq ft (501,660 sq m) on the market at our last calculation, ready to be snapped up by third party logistics and e-tailers.
But the reality is that much of this space simply doesn’t meet the requirements of modern occupiers: 39 per cent of the available warehouse space is classified as Grade C, meaning it is either in need of refurbishment or is in a poor location, or occasionally both.
While in previous years there were some occupiers happy to grab a bargain and take such space, this particular demand tailed off by the end of last year, with not a single Grade C deal completing in the first three quarters of 2016.
Instead demand in the North West has been focused on superior Grade B space with almost 1 million sq ft (92,900 sq m) of this type of stock transacting in the same period. For landlords focusing on Grade B makes sense: since the start of 2013 average rents for Grade B space have been £4.12 per sq ft, 79 per cent higher than Grade C at £2.30 per sq ft.
Some landlords have responded to this trend and have consequently refurbished their Grade C space to Grade B in order to secure higher rents. Bury Point, north of Manchester, for example, used to be a dilapidated distribution facility. Owner Pin Property secured a 151,000 sq ft (14,028 sq m) letting to Wincanton Logistics/Morrisons on the basis of planning permission being achieved for its refurbishment and resulted in a 25 per cent increase in the rent.
Unsurprisingly, other landlords are now looking to replicate this kind of success. With occupiers showing willingness to pay more for better space, good quality refurbishment projects in the North West may find a ready supply of potential occupiers. Those who don’t may see that their Grade C space sits on the shelf for a while longer yet.