The Future of the Workplace – commercial property
How is the commercial property market changing?
Keith Taylor is the Managing Director of UK Land Estates, the largest owner of industrial estates, commercial property and commercial development land in the North East. As the pandemic has unfolded, they’ve seen a shift in needs from their clients on sites including the Team Valley Trading Estate, Teesside Estate and Tyne Tunnel Industrial Estate. In this article from our Future of the Workplace report, Keith explains how they think the commercial property market is changing.
More than a year has passed since the World Health Organization declared Covid-19 a pandemic. In that time, we have seen the North East commercial property landscape change dramatically.
From big name distributors and manufacturers, to SMEs and office occupiers, all have had to adapt, flex and change the way they work – and consequently, the space they need. The property landscape has been transformed over the last year, and there are significant opportunities for businesses in our region to ensure they have the workplaces they need to thrive.
E-commerce, logistics and distribution
With 87% of households making online purchases last year and online spending on the rise, it’s no surprise that big warehouses, logistics centres and distribution hubs are in hot demand.
With three major facilities in the region and employing more than 2,000 employees locally, internet giant Amazon’s business has boomed throughout the pandemic. And its expansion is showing no signs of slowing down – with the e-commerce company recently purchasing its first fleet of planes to increase its growing air freight network.
Similarly, online retailers and e-commerce businesses are doing better than ever and parcel distributors, such as DPD and Hermes, have reported volumes up between 40-50 per cent on pre-COVID levels.
With this sustained online demand, there’s an incredible opportunity here in the North East to attract investment, jobs and create supply opportunities.
The retail, e-commerce and logistics industries are looking for several key ingredients when it comes to new property: price-competitive land, excellent connectivity, a workforce and close proximity to centres of population. And on all fronts, the North East delivers.
Our region boasts a number of large brownfield sites and existing industrial parks with the space and utilities to make developments happen quickly. We have great connectivity with links to Yorkshire, the North West and Scotland, as well as a skilled local workforce.
The North East also has strengths in a complementary industry – electric vehicles. Retailers will be looking to make their delivery process as sustainable as possible, and electric vans and trucks will feature in fleets much more.
With all the above in mind, warehouse and distribution space is outperforming across the country and will continue to do well in the months and years to come – so we must continue to cater for this demand in our region.
“The coronavirus pandemic has triggered a surge in the number of business start-ups”
SMEs and start-ups
The coronavirus pandemic has triggered a surge in the number of business start-ups, as entrepreneurs are responding to the changing needs of individuals and companies, and laid-off or furloughed workers launch their own ventures.
In the UK business incorporations were up 30 per cent in the four weeks to mid-December compared with the same period last year, and the annual growth rate has been in double digits since June 2020.
Consequently, we have seen a sharp increase in the demand of smaller property spaces, with requirements for small scale production or warehouse storage.
Over the next few months, we will be looking at how we can make smaller serviceable units more readily available for this burgeoning sector.
Manufacturing and Engineering
Industrial property demand has never been so strong.
We have seen many of our tenants in the engineering and manufacturing industries go from strength to strength, including XL Precision Technologies – a Teesside based business specialising in the manufacture of components for the medical industry – who have doubled new business development activity in the past year and are making significant investments into their sites.
“Our business growth has justified major expansion of facility space for several years and we were almost ready to sign new leases when March 2020 happened,” explains Tom Graham, managing director at XL Precision Technologies. “Although those plans were put on hold, we actually had a very positive year. Many of our customers in the medical device sector maintained demand and our business development team had an extremely busy year.
“This means that, despite the continued economic uncertainty, we have committed to investment in manufacturing space and new systems for 2021, in both the UK and USA.
“Our processes are high technology, specialist systems and we needed a quick, flexible and practical expansion option. UK Land offered an adjacent building, with additional external space, within a short timeframe. The new building will be completely refurbished within 6 months of project start and this will be followed by similar enhancement of our existing facility.
We anticipate occupation of the new building in May 2021 and this will provide the platform for our ambitious growth over the next 3 years.”
“Companies are looking for space that is high quality, and available as soon as possible.”
Another company that we have seen thrive in the sector is Express Engineering who has recently invested in a state-of-the-art centre based in Gateshead and is now reaping the benefits of its smooth operation.
Like Express Engineering and XL Precision Technologies, other engineering companies will need to invest post-Brexit and post-COVID to remain competitive and finding the right space will be crucial for this.
Companies are looking for space that is high quality, and available as soon as possible.Not only that, but companies are looking for locations that provide excellent facilities for staff with good transport infrastructure. This gives the North East a huge opportunity to ensure we are attracting more STEM firms – which offer skilled, high-value jobs – through the provision of work space that meets their needs.
“Breakout spaces and modern facilities will be more desirable, while open plan offices will likely be re-worked so that there are areas for hosting private video meetings.”
Slack’s Future Forum research of 4,700 knowledge workers found that only 12% of workers want to return to full-time office work and 72% want a hybrid remote-office model moving forward.
Consequently, office occupiers will be looking to use space more effectively. Breakout spaces and modern facilities will be more desirable, while open plan offices will likely be re-worked so that there are areas for hosting private video meetings.
With more flexibility to work remotely, office occupiers will likely be looking for higher quality, smaller spaces. This coupled with Newcastle city centre congestion charges on the horizon, commuting into the city centre will be considerably less attractive to employees and we expect out-of-town locations to be increasingly more attractive – especially if they offer benefits like free parking.
Well connected, with a skilled workforce and with a number of development sites across the region, the North East is in a privileged position when it comes to property.
If we seize on the opportunity that the pandemic has created, embrace change and showcase what our area can offer, I firmly believe that we will bring new investment, jobs and growth to our region – and we will be stronger than ever before.