The booming logistics and distribution sector is driving land values sky high
The industrial and logistics market is evolving. Since 2016, the growth in online sales has driven a demand for prime development land for retailers, supermarkets and couriers.
With close to 50m sq ft of UK deals done in 2020, it’s safe to say that the Covid-19 pandemic has bolstered the warehouse and logistics market.
Accounting for close to 20% of all take-up last year, Amazon and their need for distribution space has grown faster than ever anticipated.
The need for more warehouses is national, but areas across the Oxford-Cambridge Arc and the Cambridge to Norwich Tech Corridor are home to significant demand. Many companies are looking to acquire assets in Europe’s key logistics corridors, so are pursuing new development avenues, such as build-to-suit developments on agricultural land, to guarantee they have sufficient distribution space.
One prime example of a logistics development within the OxCam Arc is Peterborough Gateway. The Peterborough Gateway development is on 240 acres of agricultural land along the A1. A local landowner and Newlands Developments entered a joint venture agreement to develop out the land. The developer secured outline planning consent for warehouse and industrial use in 2012. Now, 4.1m sq ft of buildings are completed and hold a gross value of over £300m. Amazon, distributor DPD, supermarket Lidl and retailer Urban Outfitters are occupy warehouses at the development.
The rise in this kind of development is driving land market values sky high. With planning permission, the value of land for such developments ranging from £400,000 to £2m an acre. The rise in demand for suitable land to build warehouses on is catching up with residential land value in some areas and is presenting significant opportunities for landowners.
Grade 3 land or poorer would be the most suitable for this kind of development, but if the site is good then there’s no restriction on land quality. Any site with the capability of delivering a large-scale warehouse space will be developed out very quickly.
A suitable site needs to:
have good infrastructure
have close proximity to motorways and major A-roads
be situated away from residential areas
Speak to both a planning expert and an agent if you believe your site is suitable enough to be converted into distribution space. Consulting both of us at the beginning of the process will ensure the development utilises your land effectively and caters to the market demand. For example, one of our planners might initially recommend you build a 500,000 sq ft warehouse unit, but as an agent, I might advise multiple 20,000 sq ft warehouses are built because that’s what the market needs. We’re always keen to work collaboratively to come up with the best solution for our clients.
Whether you’re seeking an option agreement, promotion agreement or even a joint venture. You need to consider how involved you’d like to be in the process. No matter what you decide, seek advice before making a decision. This will help you to promote your site properly, secure planning permission and attract occupiers to your new space.