Inside Knowledge: Client Briefing
Roll call: who you need to know n Maurice Dalton, senior vice president of Prologis Prologis works with retailers, manufacturers and third-party logistics operators globally. The firm owns and manages 20 million square feet of industrial space in prime locations across the country.
n Alex Verbeek, operations director UK of Gazeley Gazeley is operational in the UK, Europe, the Middle East and China. The company provides warehouse and distribution buildings for companies including Asda, Walmart, Tesco, John Lewis, Procter and Gamble and DHL.
n John Thompson, development director of Segro Prominent developer Segro works across 10 European countries. It has a customer base of over 1,900 companies, from small and medium-sized enterprises to global corporations. The firm owns some of the largest industrial estates in the UK, including Slough Trading Estate, Heywood Distribution Park in Manchester and Premier Park in Park Royal.
Industrial work shifts focus The nature of work in the sector is changing as the upturn emerges industrial michael lane
After enduring heavy declines in the volume of work in 2008 and 2009, the industrial sector now appears to be growing again but the nature of the work on offer has changed. Contractors should not expect to see developers building speculatively in high volumes as they did during the boom years before the onset of the global financial crisis. It is more likely that developers’ projects will be dictated by the requirements of future tenants and customers – such as supermarkets and other retailers – also known as built-to-suit. Standard Life Investments head of UK development James Stevens says that projects are now being driven by the bespoke needs of these occupiers, rather than trying to develop a mass-market product. “There will be speculative development on a smaller scale
“There is a lot more competition for all sizes of projects where previously some would rule themselves out” James stevens, standard life
with small units in core locations, but we won’t see speculative development of huge distribution centres. Some investment houses still have an overspill from the last cycling. Unless there is a change to the rating the costs of holding them vacant are astronomical. I don’t see that market coming back for a long time,” he says. Mr Stevens adds that there was no one region that appeared to be providing more development opportunities than others. He says that as a result of changes in the market, competition has increased among contractors, pricing has become more aggressive and the quality of their bids has improved. “There is a lot more competition for all sizes of projects where previously some
people would rule themselves out,” he says. “When the market was very hot people were looking for lowest price, looking to get it built as soon as possible.” Savills industrial agency and development director Toby Green says that speculative industrial development is not non-existent, citing the completion of the first phase at Amersham Commercial Park, which offers a range of units from 850 sq m to 7,500 sq m. “The reality is there’s more possibility of there being speculative development the smaller you go,” he says. Mr Green adds that multi-unit schemes, with units of around 3,000 sq m and under, are the kind of projects developers will build in the current market. However this, as always, depends on the level of demand and Mr Green says that London, the South-east and West Midlands have growth potential, particularly in confined urban areas such as Park Royal in West London. “In certain areas there is a very limited amount of stock, therefore there is a strong case for speculative development,” he says.
Prologis targets closer contractor involvement Interview: Maurice dalton
Collaborating with supply chains is often talked about by public sector clients but is something that is rarely mentioned in the private sector. In a market where developers are predominately working on built-to-suit projects for clients rather than speculative schemes, Prologis is working more closely with its contractors in a number of ways. “We’re looking at early contractor involvement, particularly on infrastructure projects where we are dealing with third parties like the Highways Agency,” explains Prologis senior vice-president of 48 | 28 July 2011
construction & procurement in the UK Maurice Dalton. While this means that the developer loses some elements of competition from its tender process, it allows Prologis to deliver industrial schemes with complex infrastructure more easily. Mr Dalton stresses that this system is still being developed and is not necessarily a permanent method. “If we think we’re not getting best value then we’ll go back (to the old system of tendering),” he says. Prologis, which builds industrial units of 10,000 sq m and above, has term agreements with several major contractors –
“We have stuck with our supply chain while market conditions have been tough. Those guys have not let us down” including VolkerFitzpatrick and Bowmer and Kirkland. “We have stuck with our supply chain while market conditions have been tough, and values and volumes are certainly
significantly down from the peak. “We’re getting very competitive tenders from these guys and we’re getting reliability. Those guys worked with us in the peak times and have not let us down,” says Mr Dalton. He adds that this fixed supply chain also allows Prologis to develop bespoke products tailored to clients’ needs as well as sustainable criteria. “It’s not a closed shop and there will be instances to go outside that group, but not in a hurry. “The tap was turned off in speculative building, but that’s not to say that there won’t be such opportunities once confidence returns,” he says. www.cnplus.co.uk