MARKETUPDATE NORTH WEST INDUSTRIAL & LOGISTICS

JULY2019Haydock Industrial Park

MARKETUPDATE NORTH WEST INDUSTRIAL & LOGISTICS

JULY2019

Venus 217, Knowsley

AT A GLANCE… INVESTMENT

£205M of NW industrial property investments transacted in H1 2019. Down 55% on H1 2018 (£453m)

Significant amount of deals under offer (£95m - 15 deals) and due to complete shortly.

Activity subdued, particularly in Q1, with supply hit harder than demand.

Pricing in certain sub-sectors appears to have softened slightly compared to the 2018 peak.

Continued appetite for speculative funding but confined to prime locations.

The fundamentals of the NW industrial investment market remain strong and we expect a slight rebound in H2, should BREXIT be resolved in an orderly manner.

F2G Multiply, Logistics North, Bolton

AT A GLANCE... OCCUPATIONAL

NW take up for units > 90,000 sq ft totalled 951,000 sq ft in H1 2019. Down 50% on H1 2018 take up level.

Brexit uncertainty lead to occupier caution in H1 although we anticipate a stronger H2 with close to 1.6m sq ft in solicitors’ hands and increased occupier activity.

Stronger occupier demand for good quality accommodation within the 90,000 – 170,000 sq t size range.

Continued speculative development for both big box and SME / multi-let schemes.

Consistent demand for new build/Grade A units within 15,000 – 50,000 sq ft size range.

Prime Big Box Rents established at £6.25 - £6.75 per sq ft.

Prime SME/Multi-let rents established at £7.50 - £7.75 per sq ft.

JULY2019

MARKETUPDATE NORTH WEST INDUSTRIAL & LOGISTICS

MARKETUPDATE NORTH WEST INDUSTRIAL & LOGISTICS

Parkway 4, Trafford Park

H1 2019 INVESTMENT MARKET SUMMARY

• The total value of NW industrial transactions during H1 2019 stood at £205M (26 deals), which is down by 55% compared to H1 2018 (£453M across 43 transactions). The five year averagefor H1 stands at £320M.

• The reduction in volume has been most significant for larger lot sizes, with only £116M of units >95,000 sq ft transacting, across four transactions. There has also been a significantreduction in the larger portfolio sales which were so prevalent in 2018.

• Key transactions in H1 2019 include Apollo Park, Crewe (£14.7M – 5.35%), Eddie Stobart,Warrington (£39.5M – 4.80%), The Cube, Runcorn (£10.6M – 8.65%) and TescoDistribution, Widnes (£58M).

• Activity has been subdued partly due to BREXIT. Whilst this has had somewhat of an effecton demand, it appears to have hit supply harder, with many investors not willing to bringassets to the market whilst the wider political and economic uncertainty remains.

• There is growing sentiment that the industrial investment market may have peaked in 2018(particular for logistics yields), which has further exacerbated the effects of BREXIT.

• Pricing at the prime end is difficult to gauge due to a lack of recent transactional evidence.We currently consider prime 15 year North West distribution/logistics yields to be in theregion of 4.50%, a discount of 25bps to last year.

• Overall pricing appears to have softened slightly in some sub-sectors, compared to the2018 peak, with a number of assets withdrawn from the market as bids have not matchedvendor’s aspirations. There appears to be a slight mismatch between buyers’ and sellers’aspirations for certain assets.

• There is a lot of investment stock currently under offer (circa £95M / 15 deals). A number ofthese have been under offer for some time, with transactions currently taking longer thanusual to complete. The £485m traded in H2 2018 will however be hard to beat!

• There is still some appetite for speculative development funding, but interest is confined to core locations. Some investors / developers are cautious following over supply in other regions,but this is misleading for the North West.

• The fundamentals of the North West industrial market remain strong and we expect thatthere could be a slight rebound in H2.

TABLE 1: NORTH WEST YIELD PROFILES

CLASS VALUE TREND

Prime Distribution (15 year assumed term) 4.50%+

Secondary Distribution 5.75%+

Older Secondary Distribution 7.25%+

Prime Industrial Estate 5.00%+

Secondary Industrial Estate 6.25%+

Multi-let Break Ups 9.00%+

TABLE 2: INVESTMENT TRANSACTIONS OF NOTE H1 2019

ADDRESS DATE AREA (SQ FT)(000S) TENANT APPROX. TERM

CERTAINPURCHASE

PRICE YIELD

SINGLE LET

Tesco, Runcorn Q2 2019 528 Tesco 15.00 £58.00m Conf.

Kerry Logistics,Trafford Park Q2 2019 62 Kerry Logistics 5.00 £4.45m 6.25%

Crown Records Management, Trafford Park Q2 2019 42 Crown Record

Management 2.00 £3.08 5.58%

Eddie Stobart, Runcorn Q1 2019 365 Eddie Stobart 17.00 £39.51m 4.80%

The Cube, Runcorn Q1 2019 152 Movianto 1.50 £10.68m 8.65%

Neovia Logistics,Irlam Q2 2019 195 Neovia

Logistics 2.75 £15.08m 5.25%

MULTI LET

Penketh Business Park, Warrington Q1 2019 148 Multi-let 2.50 £5.95m 8.81%

Etherow Industrial Estate, Glossop Q2 2019 201 Multi-let 3.00 £6.50m 9.84%

Apollo Park, Crewe Q1 2019 125 Multi-let 8.36 £14.70m 5.35%

Bromborough Point, Bromborough Q1 2019 131 Multi-let 3.35 £3.85m 10.52%

JULY2019

Stable Improving Declining

H1 2019

MARKETUPDATE NORTH WEST INDUSTRIAL & LOGISTICS

Parkway 4, Trafford Park

JULY2019

FIGURE 1: NORTH WEST INDUSTRIAL INVESTMENT TRANSACTIONS

H2 2013 H2 2014H1 2013 H1 2014 H2 2015

£ M

illi

on

s

300

200

100

0

400

H1 2015 H1 2016 H2 2016 H1 2017 H2 2017

500

H1 2018 H2 2018

M6 Epic 50, Wigan

FIGURE 2: PROPORTION OF NORTH WEST INDUSTRIAL SALES BY VALUE Big Boxes

Multi-let Estates

61%

20%

Smaller Warehouses

19%

MID-RANGE UNITS AND SMALL MULTI-LETS (BELOW 90,000 SQ FT.)

• The SME sector has seen consistent demand in H1 for both new build and good qualityrefurbished accommodation. There has been particularly strong demand for new-build/Grade A units in the 15,000 - 50,000 sq. ft size range highlighted by deals at Aurora,Stockport; Mere Grange, St Helens and Kiwi Park, Trafford Park (see Table 4).

• SME speculative development continued during H1 with a further 1.1m sq. ft under construction/committed (17 schemes) including Mersey Reach, Aintree by Chancerygate (33,500 sq ftover 2 units); Birchwood Park, Warrington by Patrizia (170,000 sq ft over 5 units) Haydock60 by Caisson/Patrizia (60,000 sq ft – single unit) and Carrington Gateway by Himor(108,000 sq ft over 5 units).

• The majority of new speculative development is for units over 15,000 sq. ft with demandfor the smaller size range (5,000 – 15,000 sq ft) continuing to be met by good quality,second-hand refurbished accommodation. This has led to continued rental growth and lowvoid rates for multi-let estates across the North West with second-hand rents in primelocations such as Trafford Park and Warrington now achieving in excess of £6.50 per sq ft,equivalent to new build rents in 2014.

• Prime new build rents are now established at £7.50 - £7.75 per sq. ft. Prime second-handrents are at £6.75 - £6.95 per sq. ft.

RENTS CURRENT QUOTING

Prime Distribution(10 year assumed term) £6.25 - £6.75 £6.25 - £6.95

Secondary Distribution £5.00 - £5.75 £5.50 - £6.00

New Build 10 – 15,000 sq. ft. £7.50 - £7.75 £7.75 - £8.00

Modern 10 – 15,000 sq. ft. £6.75 - £6.95 £7.00 - £7.25

Older 10 – 15,000 sq. ft. £5.75 - £6.00 £6.00 - £6.25

LAND VALUES LAND VALUES

Prime Site £600,000 - £650,00

Secondary Site £350,000 - £400,00

Tertiary Site £200,000 - £250,000

TABLE 3: NORTH WEST RENTAL LEVELS

H1 2019 OCCUPATIONAL MARKET SUMMARY

BIG SHEDS (OVER 90,000 SQ FT)

• H1 2019 take-up for units > 90,000 sq ft totalled 951,000 sq ft (7 transactions), down

50% on the 2.0m sq ft (11 transactions) recorded in H1 2018.

• Brexit uncertainty has undoubtably increased occupier caution, however, with almost

1.6M sq ft in solicitors’ hands, several unsatisfied high profile requirements in the market and

the continuing growth of e-commerce, we anticipate much stronger take-up levels in H2.

• Notable deals for H1 include the letting of a 102,500 sq ft speculative new build unit at Icon,

Manchester Airport to ALPHA LSG, the letting of 145,000 sq ft refurbished space to

Law Distribution at Millfield Lane, Haydock and the freehold sale of a 126,000 sq ft

modern unit to Alpla at Stone Cross, Golborne (see Table 4).

• 28% of take-up (270,000 sq ft) involved new build/design & build units with 56%

(535,000 sq ft) involving modern second-hand refurbished accommodation highlighting

clear occupier demand for good quality space.

• All H1 transactions comprised units within the 90,000 – 170,000 sq ft size bracket highlighting

continued occupier demand for this size. Transactions involving larger units were hindered by

a mixture of Brexit caution and a lack of supply.

• Online retailers and distribution occupiers again dominated take up, accounting for all big

box transactions in H1. That said, there are some larger B2 manufacturing requirements in the

market as occupiers prepare for Brexit related changes to the UK supply chain.

• H1 has seen continued speculative big box development in the North West with 7 new

speculative units > 90,000 sq ft completed (2.0M sq ft) and a further 5 schemes

(540,000 sq ft) committed/under construction compared to the 12 schemes (2.0m sq ft)

completed/under construction in the same period last year. Over 85% of the schemes

completed in H1 involved units above 200,000 sq ft as developers/funds look to address the

supply shortage and increased occupier demand in this size range.

• The third party logistics market was notably quiet in H1 despite reporting very little available

space within their portfolios and ongoing customer discussions. We expect this to result

in increased 3PL take up in H2.

MARKETUPDATE NORTH WEST INDUSTRIAL & LOGISTICS

JULY2019

MARKETUPDATE NORTH WEST INDUSTRIAL & LOGISTICS

JULY2019

Hurricane 47, Speke

SCHEME DATE SPECIFICATION AREA(SQ FT) TENANT ACHIEVED RENT

(PER SQ FT)

Q103, Unit 6 Broadgate, Oldham Broadway

Business Park, ManchesterQ1 2019 Refurbished

modern unit 103,781 ADI Gardiner £5.00

The Cube, Whitehouse Industrial Estate,

Preston Brook Q1 2019 Modern unit 151,769 Movianto £6.50

ICON,Manchester Airport Q2 2019 Speculative new build 102,500 ALPHA LSG £6.75

Millfield Lane,Haydock Industrial Estate,

St HelensQ2 2019 Refurbished

second-hand unit 145,060 Law Distribution £4.50B8 advised

P150 Winsford Q2 2019 Modern unit 153,917 Warehouse One £4.85

Stone Cross 126Golborne Q2 2019 Modern unit 126,016 Alpla £85.00

ICON,Manchester Airport Q2 2019 Design and Build 168,000 HTG Group FH sale -

Confidential

SMEs/MULTI-LET

203 Cavendish Place, Birchwood, Warrington Q1 2019 Grade A 15,000 Allied London £6.95

B8 advised

203 Mere Grange, St Helens Q1 2019 Speculative New Build 24,165 Kilwaughter

Minerals Ltd£6.50

B8 advised

Europa Point, Warrington Q1 2019 Grade B 46,000Bridgewater Community Healthcare

£7.00B8 advised

Unit 11 Premier Park, Trafford Park Q2 2019 Grade A 8,486 NRI Europe Ltd £8.10

B8 advised

Unit 2 1a Wilson Road, Huyton Q2 2019 Speculative New Build 15,000 Arcola Energy £6.50B8 advised

Unit G Aurora, Stockport Q2 2019 Speculative New Build 15,324 B & H

Engineering £7.50

Unit 1 Kiwi Park, Trafford Park Q2 2019 Grade A 37,302 SanzoomInternational Ltd

£6.95B8 advised

Pioneer Court, Blackburn Q2 2019 Speculative New Build 61,330 Tek-Dry £6.00B8 advised

Unit 1 Merlin Park, Trafford Park Q2 2019 Grade A 62,108 Green Group £6.50B8 advised

TABLE 4: OCCUPATIONAL TRANSACTIONS OF NOTE H1 2019

MARKETUPDATE NORTH WEST INDUSTRIAL & LOGISTICS

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FOR FURTHER INFORMATION PLEASE CONTACT:

Hurricane 47, Speke Academy Business Park, Knowsley

Boston Park, Haydock Kingfisher Business Park, Bootle

Unit 1 Merlin Park, Trafford Park Venus 217, Knowsley

6550 Daresbury Park

JULY2019