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News - 25/11/2014

Reshoring firms face fight for industrial space

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Manufacturers reshoring their overseas operations in the West Midlands face a fight for an ever-decreasing pool of available industrial and logistics accommodation, according to business and commercial property experts.

The Birmingham Real Estate Network put the spotlight on the UK manufacturing sector’s renaissance and the shift in businesses reshoring, bringing an increased demand for skills and suitable industrial, warehouse and distribution space.

The event was jointly hosted by Lambert Smith Hampton (LSH), accountancy and business advisory firm BDO LLP, and law firm Shoosmiths.

Speakers included manufacturing expert Professor David Bailey, of Aston Business School, Alex Carr, Industrial and Logistics Agency Director at LSH, and Richard Halstead, Regional Director of the manufacturers’ organisation EEF.

Companies rethinking property needs as manufacturing sees increased demand

The speakers focused on what the future holds for manufacturing and the real estate sector in the region. As the manufacturing sector experiences increased demand companies are rethinking their property needs. With investment in more technology and just-in-time processes, older buildings and large warehouses are becoming redundant.

Growing trend for reshoring manufacturing activities

Professor Bailey shared the findings from his recent report on ‘Manufacturing reshoring and its limits’. He said decades of offshoring is now being replaced with a growing trend for reshoring manufacturing activities.

The UK in recent years has become a “great place to make cars”, with over £7 billion invested in the automotive sector in the last three years with plants working 24 hours a day, seven days a week. It is now recognised as being genuinely world class, with a hugely skilled workforce, and there has been a shift to upmarket vehicles.

The success of the sector has presented companies in the automotive supply chain with opportunities to reshore their activities. However, companies are faced with challenges including high energy costs, access to finance, and the shortage of suitable property in the right locations.

Shortage of industrial supply across the region

Alex Carr told the audience of more than 60 business people that there is a massive shortage of supply of industrial and logistics property across Birmingham and the West Midlands.

“The existing supply has been completely exhausted and we are going to face a lot of problems next year. Occupiers have this year taken the opportunity to grab the last few available properties and now there is very little left on the market,” he said.

“It’s a good time to be a landlord, with rents rising to above £6.00 per square foot, but land supply is a major issue and the plans for HS2 have caused us real problems. While the Advanced Manufacturing Hub in Witton is great news for the region it can only accommodate two or three buildings for B1 and B2 uses.

“The region is losing out to the East Midlands which has a good supply of potential sites.”

Alex summarised the West Midlands market:

  • Occupiers have to consider design and build solutions but if site is not  “oven ready” it has an impact in terms of choice, cost and timing. A realistic  occupancy date is between 18-24 months into the future.
  • Should the likes of automotive component suppliers find a suitable location  they will be vying against the burgeoning e-commerce sector for both  existing buildings and design and build solutions.
  • There is undeveloped land available throughout the region that would be  suitable for development but it lacks planning consent, the allocation of  which can be a protracted process. 

Pictured: Alex Carr, Professor David Bailey, and Richard Halstead

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