Multi-Storey Sheds – The Only Way is Up?
Goodman Group has announced that it has acquired a 9.5 acre site in Park Royal for around £70 million. This is an interesting acquisition as it represents the highest price per acre ever for an UK industrial land acquisition. However, Goodman’s plans for the site are perhaps even more intriguing.
Goodman’s plan is to develop a multi-storey industrial scheme. Multi-storey industrial schemes are common in global cities which are subject to a severe shortage of land (e.g. Hong Kong, Singapore and Tokyo). However, the only multi-storey shed currently in existence in the United Kingdom is SEGRO’s 234,000 sq ft two storey warehouse near Heathrow (which took eight years to become fully let).
Goodman (an Australian developer) has form in the multi-storey warehouse sector. Indeed, it developed the 13-storey, 6.5 million sq ft ATL Logistics centre in Hong Kong. Whether the Park Royal deal prompts UK developers to pursue multi-storey industrial schemes remains to be seen. The popularity of such schemes may rise in areas where land is scarce (e.g. inner-ring urban areas).
Any UK developer considering such a prospect would need to consider the following:
- Local market conditions – multi-storey industrial schemes currently go against the local UK market conditions. It may be difficult to entice tenants to engage with such a scheme (even if the tenant is an international operator which engages with multi-storey schemes in Asian markets).
- Comparables – with the multi-storey industrial sector in its infancy in the UK, it will be difficult to find comparables when valuing such schemes.
- Access to upper floors – developers will need to consider whether the scheme will include a ramp to access upper floors (which will enhance access to the upper floors but use up floor space) or alternatively incorporate a cargo lift (which would be cheaper to build but would result in all goods located on the upper floors having to be transported via elevators).
- Management – multi-storey industrial schemes are likely to be let to more than one tenant. This means that common multi-let issues (e.g. common areas and service charge) would need to be dealt with.
- Planning – local authorities are likely to take time to understand the concept of multi-storey industrial schemes. In urban areas, local authorities will be keen to ensure that the height of the scheme does not create an adverse visual impact. Noise creation will also be closely scrutinised.
Paul is a senior associate in our Commercial Real Estate team.