Opportunities rife for green developments
The waste and recycling sector is set to boost demand for distribution and logistics space as an area the size of 1,500 football pitches will be needed over the next five years.
According to research by BNP Paribas the changes by society in how it deals with its waste mean that there are now huge opportunities for investors and developers.
Paul Rixon, head of BNP Paribas Real Estate’s Birmingham office, said: “EU rules will see landfill cut 75 per cent by 2015 and potentially eliminated totally by 2020.
“We estimate that 300 landfill sites across the country will close and that 3,000 other locations will be needed in the UK to replace this capacity. This equates to at least 50 m sq ft of industrial space. The UK is a wasteful society that produces up to 434m tonnes of waste per year, enough to fill the Albert Hall 4,384 times over in the course of the year and it is widely acknowledged that this cannot continue.
“We believe that these legislative, fiscal and social factors have come together at the right time to offer a huge opportunity to commercial property investors and developers. Logistics properties are ideal sites as they boast essential storage space and transport links.
“With deals in the waste sector doubling and rising from 2 per cent of all industrial property deals in 2008 to 4 per cent in 2009, clearly demand is on the up, which is great news to an otherwise beleaguered sector.”
The research suggested that take-up in the waste sector will continue to increase in the years leading up to 2015 with at least 10m sq ft of space being required each year to accommodate the demand.
Based on last year’s take-up figures, this will equate to a third of total annual take-up in the distribution sector.
The UK is currently home to 139m sq ft of available industrial space according to BNP PRE and is currently experiencing decreased rental values and reduced lease lengths, as well as the burden of empty rates.
The Midlands still remains the most popular distribution location in the UK and 45 per cent of all industrial transactions in the first quarter of 2010 took place there. The region still has adequate amounts of supply and is home to 17 per cent of all total available stock in the UK equating to 23m sq ft of vacant space.
Mr Rixon added: “There has been no trend set as yet in the types of deals that are being done with waste operators in terms of size and price.
“We have witnessed transactions nationally on units ranging from 30,000 sq ft to 300,000 sq ft at rents varying from £2.80 per sq ft to £7.80 sq per ft. However we have noted that leases being taken on these units are increasingly longer than in other sectors of the distribution market with some deals being struck on 20-year plus leases.
“Requirements from the waste and recycling sector pose an excellent opportunity to absorb some of the current supply in the short term as many of the units available will be suitable for immediate occupation providing landlords with the potential for a long and secure income.
“In the long term opportunities exist for investors and developers with landbanks to create bespoke properties for these types of user which may see increasing demand for waste and recycling operators as anchor tenants at large distribution parks.
“The Midlands undoubtedly has the right criteria to cater for the waste sector. In addition to possessing sufficient amounts of space that waste operators will require it can also provide a range of solutions in terms of quality and size of stock.”