Industrial & LogisticsMidlands

Ian CornockLead Director – Midlands Region11th July 2012

Overview

2

Supply & Demand

• Supply of Grade A, high bay distribution space rapidly reducing

• Supply of good quality second hand space also reducing

• Demand – Robust demand particularly on new/good quality industrial space

• Sectors showing particular activity include:- Automotive (proposed JLR 1,000,000 sq ft engine plant)- Food- Internet retailing

• Underlying fragile economic circumstances

• Funding is generally still very difficult

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Example of Internet Parcel Hub

• APC Logistics – Kingswood Lakeside Cannock

New 130,000 sq ft cross dock facility currently under construction

4

Pre-Let Market

• Most of the activity at the moment is from occupiers looking at existing buildings which can be acquired on perhaps more favourable terms.

• With the diminishing stock of grade A space, we anticipate the pre-let/pre-sale market will improve later this year heading into 2013.

Speculative Development

• We are only seeing potential spec development in very prime core logistics areas and this is on a modest scale to start with.

Land Values/Rents

• These can vary dramatically on location and quality of land and whether it is owner occupier or developer led.

• As a range £200,000 per acre up to £400,000 per acre

• Rents appear to be fairly static at around £5.50 ft2 for new industrial buildings

• Modern second hand - £4.00 to £4.50 ft2

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Conclusions

• Stock Diminishing

• Speculative Development: Prime Locations?

• Funding?

• Preparation of sites for swift Design and Build

6

The Birmingham Office Market

Fit for purpose for the cities growth aspirations?

Charles Toogood - GVA

July 2012

gva.co.uk

Headline Statistics

• 18.64 m sq ft stock

• 930,000 sq ft grade A supply – new and second hand

• Of which 475,000 sq ft brand new

• 10 year average take-up 695,000 sq ft

• Grade A take-up typically 51% (32% in downturn)

• Current supply equivalent to 2.5 to 4 years grade A take-up

Historic Demand and Rents

Lease incentives – 50,000 sq ft letting, 10 year term - 36 months

Headline Rental

10 year average 695,000 sq ft

0

5

10

15

20

25

30

35

1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012

Year

Pri

me

Re

nt

0

200000

400000

600000

800000

1000000

1200000

1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011

Year

sq ft

Availability in Key Schemes

Eleven Brindleyplace ArgentSize: 75,000 sq ftGuide rent: £25.00 psf

45 Church Street Standard LifeSize: 43,000 sq ftGuide rent: £28.00 psf

Two Colmore SquareNurton DevelopmentsSize: 120,000 sq ftGuide rent £25.00 psf

Colmore Plaza Carlyle GroupSize: 174,000 sq ftGuide rent £28.00 psf

Availability in Key Schemes

1 Snowhill Commerz RealSize: 38,000 sq ft to letGuide rent: £28.50 psf

2 Snowhill Hines120,000 sq ft to letGuide rent: £28.50 psfCompletion Jan 2013.

Five BrindleyplaceHines and MoorfieldSize: 133,000 sq ftGuide rent: £27.00 psfCompletion Autumn 2012

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

450,000

500,000

2009 2010 2011 2012 2013 2014 2015 2016 2017

Proje

cte

d C

om

ple

tions

(sq

ft)

Year

Development Pipeline

150,000

107,000

37,000

118,000

Langley Point

1 Snow Hill

Calthorpe House

Two Colmore Square

11 Brindleyplace

The Cube

5 Brindleyplace 2 Snow

Hill

106,000

108,000118,000

44,000

? ? ?

Supply vs. Demand – The Tipping Point

0

200000

400000

600000

800000

1000000

1200000

2011 2012 2013 2014 2015 2016 2017

Gra

de

A A

vaila

bili

ty (s

q ft

)

Year

Average annual grade A take up

Tipping point?

Key Trends / Conclusions

• 2015 demand will outstrip supply

• Limited speculative development finance

• C 2m sq ft of major lease events by 2020

• Transport infrastructure completions

• The return of the pre-let

• More Grade A refurbishments

• Constrained ability to meet tenant demand

Colliers International

David Smeeton Investment Review

• Where have all the buyers gone?

15

16

Just where is the market?

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London’s another world

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Where are the banks?

• LBG £80 bn invested in property

• £30 bn in Business Support Unit

• £19 bn impaired

• You have to add up the top six funds to get to £80bn

• RBS is smaller but only just

• They are the market!

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So where is pricing?

• The market is in the hands of the following players

◦The Funds

◦Property Companies who’ve survived

◦High net worths

◦Overseas investors

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One Snowhill, Birmingham

• 263,415 sq ft office building constructed in 2009 located in Birmingham’s prime core

• Freehold

• Let to KPMG and Barclays Bank with an AWUXT of 13.05 years to expiries (9.8 years to breaks)

• 38,375 sq ft currently vacant (being sold with a 30 month rental guarantee)

• Total passing rent £8,200,000 per annum

• Three rent reviews in 2014

• Available June 2012, asking price £124 m, 6.25& NIY

Photoor

Illustration

21

Unit 5, Logix Park, Hinckley

• Situated in the “Golden Triangle” of the UK distribution industry, immediately adjacent to the A5 and close to J1 of the M69 and J10 of the M42, Logix Park provides excellent transport links to the rest of the UK

• The 362,000 sq ft distribution warehouse is let to logistics service provider Syncreon Technology (UK) Ltd, on a 6.5 year lease for an annual rent of around £2 m equating to £5.52 per sq ft

• In April 2012 Cabot Properties ltd purchased the freehold interest from Orchard Street Investment Management LLP on behalf of St James’ Place Property Funds for £23,225,000 reflecting 8.1% NIY

PhotoorIllustration

22

Kingfisher Centre, Redditch

• 920,000 sq ft covered centre comprising 160 units. 2,800 car spaces in a multi storey car park

• Freehold

• Retailers include Marks & Spencer, Debenhams, Bhs, Primark, Wilkinson, H&M, Next and T K Maxx

• MWUXT circa nine years to expiry

• Current income after landlords shortfalls equates to £10,985,288 per annum

• Market Rent approximately £13,782,115 per annum based on £30 ZA – £70 ZA

• Sold May 2012 for £130M reflecting 8.00%

Photoor

Illustration

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Stechford Retail Park, Birmingham

• Freehold

• 104,079 sq ft; 11 units

• Unrestricted open A1 planning consent (except for one A3 unit)

• Tenants include DSG, Argos, McDonalds, Poundworld, Cartpetright and Peacocks

• Aggregate current rent of £1,635,331 per annum

• Fully let; passing rents range between £9.96 and £18.80 per sq ft. Fixed increased on two units

• WAULT of 10.8 years

• Sold in March 2012 for £20.5M 7.53%

Photoor

Illustration

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Chase Point, Phoenix Way, Coventry

• The property is well located on the Gallagher Business Park adjoining the A444

• Coventry is the hub of the national motorway network. The M6, M1, M12, M69 and M40 are all within a few miles

• The property comprises two modern warehouses of steel portal frame construction, with fully fitted offices, service yards and separate car parking

• Point 1 let to Aston Martin Lagonda Ltd on a ten year lease commencing no later than 1 May 2012 at £411,070 per annum equating to £5.23 per sq ft

• Point 2 let to Schenker Ltd at £212,465 per annum with a WAULT of five years

• In March 2012 Legal & General Property Ltd purchased the freehold interest for £6,930,000 reflecting 8.5% NIY

Photoor

Illustration

25

The Cornerhouse, Nottingham

• Freehold interest

• Off market deal

• Circa 225,000 sq ft of space encompassing a 14 screen

cinema, 11 restaurants, two bars, a nightclub and a casino

• Purchased by Land Securities April 2012,

• £50M; 6.6% NIY

Photoor

Illustration

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Is this the bottom of the market?

• Only time will tell

• Things seem out of kilter

• London could be a bubble

• The secondary market may be over discounted