With a competitive exchange rate and growing global economy, the region’s exporters are having their best period for years. David Willmer from GVA explains why things are looking up for the aerospace and automotive supply chains
Firms such as Jaguar Land Rover (JLR), BMW, Mini and Rolls Royce have all achieved record sales over the past year, with JLR recording pre-tax profits of £1 billion – a far cry from the losses of £350 million it recorded in 2009.
At GVA, we are starting to see an increase in activity from manufacturers seeking to move into larger premises. This is great news for the commercial property sector as it starts to emerge from recession.
There are already possibilities in the offing – for example, JLR is rumoured to be choosing between three locations for a new engine plant that could create more than 2,000 jobs.
With Wolverhampton competing against South Wales and India for this lucrative new build, the West Midlands’ strong automotive sector could be enough to help swing the vote in its favour.
This is hopeful news for the region when considering a year ago Tata Motors, which owns JLR, said one of its two West Midlands plants - either Solihull or Castle Bromwich - would close.
However, even with the demand we are starting to see come through, we are doubtful that speculative development will make a return in this sector for a number of years.
The supply of new speculative buildings fell by 36 per cent in 2010 and no speculative warehouses of more than 100,000 sq ft have been completed since the first half of 2009.
The level of recent take-up has steadily eroded the amount of space available, which is helping to boost the region’s development industry. However, it is possible we could go back to the early days of the big shed market in the 1980s, when construction was very much demand-led on a pre-let basis and developers didn’t build much speculatively.
In fact, there are a lot more design and build requirements in the current climate, especially as occupiers are becoming far more discerning and specific about the design, layout and fit-out of their manufacturing premises.
We are already receiving a lot more enquiries about high-specification bespoke premises from component suppliers to the automotive industry. This is a sector that is growing in order to help make automotive manufacturers more competitive and prevent many from moving abroad.
In the last two years, the numbers of those employed in the components industry has fallen by over 25 per cent. Therefore, in order to become truly competitive, suppliers should ideally be located within easy reach of car plants. GM Motors has even identified a wish list of components it wants to source from within the UK and this includes items as diverse as air cleaners to wheel bearings.
With many expecting the manufacturing - as opposed to retail - industry to help navigate the country away from economic difficulty, there is great scope in the market for component suppliers to expand operations in the UK. In fact, it seems automotive manufacturers are actually beginning to demand it.
We are optimistic demand for high-tech design and build premises will start to rise and if they are to be located near to automotive plants then this is in turn will be good news for the West Midlands development industry.
