For example, whereas once a printer might have needed to be located in or around central London so that they could be close to their clients and more easily and speedily ferry proofs around the capital for approval, thanks to enhancements to proofing software artwork can now be signed off remotely. As a result printing companies have over the last decade or so started to migrate out of inner London to the boundaries of the M25 corridor, and in some instances, beyond.
But what does this sort of relocation entail? What are the issues that printers considering relocation need to be aware of? And where are those printers looking for new warehousing space to house their business operations likely to find the best value for money?
When searching for a new factory there are two immediate things that printers need to consider: what rough geographic area do they want to move to and how much space are they looking for? For occupiers looking for a facility that more or less matches their existing site it’s relatively easy to establish exactly how much space is needed, but if a company is moving because they need to upsize their premises to accommodate a new finishing line or a new press then the equation becomes slightly more complicated.
As Bridget Outtrim, a director in the national industrial and logistics agency team at charted surveyor Savills, explains: “For uses where they are more uniform – for example an office use – we know that the general rule of thumb is you need roughly 120ft2 (11m2) per work station. But for printers what is just as important as the overall footprint of a building in square feet are the dimensions of the building because more often than not they have equipment that will dictate not just the size of its business, but its shape as well because some of the equipment that they use can be long and narrow.”
Right-sized
The obvious reason printers need to accurately calculate the amount of space and the dimensions of the space that they’re going to need is so that they can ultimately accommodate all of their equipment and storage space, but it’s also crucial to get this equation right because it will have a significant impact on the property search itself.
That’s because at the moment – particularly around London, but also elsewhere in the country to a lesser extent – there is a significant shortage of decent industrial stock, according to Steven Mitchell, a director in the industrial team at chartered surveyors Colliers International.
“I’ve just done a search for a client who is looking for 5,000 up to 20,000ft2 of space and we only came up with about seven or eight properties within the M25 ring that are currently on the market,” says Mitchell. “Availability is a major issue at the moment because there is a shortage of stock and a lot of what is available is of poor quality and it’s quite expensive.”
It’s a view supported by the latest research from chartered surveyors Lambert Smith Hampton (LSH). In its recently published Industrial & Logistics Market Report 2015 it found that total UK-wide availability of industrial space fell by 19% during 2014 and is now at its lowest level since 2007.
The situation surrounding availability of grade A, or prime industrial space, is even starker – it fell by 35% in 2014 thanks to the record 103m ft2 of take-up last year.
“Our analysis of occupier demand suggests that more grade A space needs to be delivered if activity is to reach its full potential,” says Steve Williams, national head of industrial and logistics at LSH. “The market is responding and we forecast that there is scope for almost 4.5m ft2 of speculative development to be brought forward in the next 12 months in the large and mid box sectors alone. So far speculative development has concentrated on prime markets, but we expect to see pockets of activity to ripple out to ‘just off prime’ as investors move up the risk curve and occupiers seek relief from prime rent rises.”
The option to move ‘just off prime’ and widen the search area for property is what an increasing number of companies looking for industrial space are already doing. Mitchell cites the example of a London-based printing company that was in a facility of around 15,000ft2, but wanted to relocate to bigger premises of around 30,000ft2.
“We moved them from south-east London out to the Dartford/Sidcup area to get them the size of building that they were looking for for the sort of money they wanted to pay,” says Mitchell. “The closer towards London you are the more likely rents are going to be £8 to £10 per square foot, but if you’re out by the M25 ring rents might only be £5 to £6 a square foot.”
Of course if you’re willing to look even further afield you can expect to pay less than that. According to recent data from LSH those marginally cheaper UK locations include parts of the North West where you might pay £4.50/ft2 (in Liverpool), the North East (£5/ft2 in Stockton-on-Tees) and the East Midlands (£5/ft2 in Derby). If you’re prepared to take ‘secondary’ – essentially secondhand – space you can expect to shave off a pound or a couple of pounds per square foot.
The most expensive industrial property locations in the UK are typically in the South East where at Park Royal you might be expected to pay £15.50/ft2, Yorkshire (£6.25/ft2 in Leeds) and the West Midlands (circa £6.25/ft2 in Coventry), which are all distribution hotbeds.
Savills’ Outtrim says that where possible printers should avoid these distribution heartlands at all costs. “Distribution and logistics businesses are the greatest competitors of manufacturers like printers for space and they also tend to pay higher rents for buildings so my advice would be if you’re going to relocate elsewhere avoid the key locations that the distribution and logistics companies like to be located,” she explains.
“For example, in the West Midlands there is an area known as the ‘golden triangle,’ which is dominated by huge big distribution boxes. The landlords who own land up there want to attract those companies and they’re probably not interested in talking to printers because they’re not going to get the best deal.”
That’s not to say that there aren’t still opportunities in these locations or in nearby locations that offer occupiers similar benefits such as excellent connectivity. For instance, Outtrim says that Corby is an overlooked location that has a strong economic future potentially. “It’s well connected and has got a massive programme of regeneration being led by housing. It offers good value and the housing stock is affordable so printers could find a ready supply of employees who can afford to live there.”
Chris Kershaw, director in the national industrial and distribution team at Bilfinger GVA, agrees with Outtrim’s assessment that although there isn’t a great deal of available stock at the moment, there are still a number of locations out there that are relatively untapped.
“The Black Country is less popular with the distribution companies and less well known and as a result there is more land availability and it’s slightly cheaper,” explains Kershaw, who says Wolverhampton and Walsall are locations that are worth looking at. He adds that Stoke-on-Trent also has more availability and is “available at a discount” to Birmingham. “Down the M5 that could also apply to Worcester and Gloucester, which haven’t been overrun by logistics operators so there is better availability,” says Kershaw.
Enterprising idea
One other option worth considering for companies looking to find even cheaper accommodation is relocating to one of the country’s 24 enterprise zones. There are a number of these zones dotted throughout the UK, in places like Yorkshire, Kent and Northamptonshire, with occupiers in the zones enjoying benefits such as an up to 100% business discount rate worth up to £275,000 over five years, a simplified and streamlined planning process and in eight zones that are located in ‘assisted areas,’ businesses making large investments in plant and machinery qualify for 100% enhanced capital allowances (tax relief).
After identifying a suitable location that has industrial stock available at the right price, you can also generate savings by negotiating the lease terms. For instance, you could offer to take a longer lease for a reduction in rent or you could agree a rent-free period of six months or so as an incentive for signing the lease. Accurately determining the length of the lease is vitally important for any business owner because it could become a headache further down the road if you get it wrong.
If you’re looking to grow the business five years might be too short, whereas if you take a lease of 10-15 years this might become a millstone around the company’s neck as your space requirements may change over time as the company either upsizes to accommodate new equipment, or downsizes if work becomes harder to come by, or even if technological advances allow smaller equipment to be installed. It’s all about striking the right balance, says Outtrim.
“You need to seek a lease that’s long enough to allow you to recover the capital expenditure you spent on the original move and fit out of the facility, but at the same time you need to negotiate some tenant-only breaks into a lease so that you would have the surety of a long lease and at the same time have the flexibility to break,” she advises. “However, be aware that with that flexibility can come extra costs as landlords tend to charge a bit more in rent to offer that sort of flexibility.”
Common pitfalls
Many of these aforementioned areas are pretty obvious and straight forward to deal with, but there are some issues that the untrained eye may fail to pick up on. For example, Outtrim says printers should watch out for industrial buildings with very high eaves, which they probably do not need.
“Printers have got heavy equipment that sits on the floor and they tend not to have lots of high storage requirements where they rack up to the eaves. However, a lot of modern industrial units have high eaves and with this height comes cost. That’s because developers who build these high units tend to expect a higher rent for them because they’re a bit more expensive to build, so printers who don’t need that height can find a much more economical building that better suits their businesses’ requirements.”
It’s also important to check the power supply to a facility, says Colliers’ Mitchell. “Having sufficient power was an important aspect for the printer we helped to relocate so we had to check out the ability to up the ante of the power on the industrial unit because of the machinery they had,” he explains.
GVA’s Kershaw had to carry out a similar exercise for a newspaper printer his company helped to relocate to a new site. “We had a physical issue in making sure that the floors were generously laden so that would be able to take the big heavy presses with the right level of power to supply it. If you haven’t got a high-power supply into the site it can be a massively costly issue to resolve.”
That’s why it’s vitally important that from the outset you establish with the landlord whether or not any alterations can be made to a building to accommodate things like extraction units and flues.
“If you’re only leasing the premises you have to get the landlord’s consent to make any alterations, and you may even need planning consent if you want to start making external alterations to buildings,” adds Outtrim.
If you breach the terms of your lease by making amendments that haven’t been pre-approved it can prove incredibly costly to put right, which is why any business owner thinking of relocating their company should seek professional advice from a chartered surveyor before they embark on this process (see ‘Surveyors’ services’ box).
As Outtrim concludes: “You might think that you can go out and acquire a new industrial unit like you’d acquire a two bedroom flat, but it’s a bit different to that. The process of acquiring a new industrial unit is a lot more involved and there are all sorts of rules and regulations you need to make sure you don’t fall foul of.”
SURVEYORS' SERVICES
Although business owners could oversee a relocation themselves, finding the right site and negotiating favourable lease terms can be an incredibly complex and time-consuming process, which is why it makes sense to call on the services of a chartered surveyor.
Savills’ Bridget Outtrim says the company’s own acquisition service entails four different stages. The ‘briefing,’ where the occupier outlines their objectives and lists the size, location and type of building they require. Lease requirements will also be discussed, covering lease lengths, rent-free periods and break clauses.
Armed with these requirements the surveyor will then undertake a search in the location(s) identified by the occupier and undertake tours of suitable sites.
Stage three entails drawing up a shortlist of sites so that the occupier can do site inspections. After the occupier makes a selection the surveyor will then enter into negotiations with the landlord about the lease terms. They will also offer advice on the layout and specification of the building. Stage four sees the lease being signed and the client taking occupancy.
“We play a full part in bringing the project to a successful conclusion,” says Outtrim. As for fees she says the structure “reflects our performance and our cost is usually more than paid for out of the savings we make for the occupier. We would structure a fee to suit the client’s preference, which could be a flat rate, a percentage of the rent, a percentage of the savings we could achieve off the landlord’s terms, or a mixture of these”.
