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What is the biggest barrier to letting big sheds in the Midlands at the moment?
Richard Smith In a word, tenants. Where we are now, I can tell we have had quite a lot of interest. If there is a large requirement they will look here. On average we are getting five or six live enquiries a month, all of whom could take this shed but none do for different reasons. The first one is fear for their future. Second, they don’t get any help. There is no government initiative to help get these sheds occupied. There is also a lack of understanding of what they need, in terms of fit-out. There is not enough expertise in our business to help them through that.
Lisa Fitch Until now people got excited about the idea of going far north and giddy about how cheap it could be. With the downturn and rising fuel prices, people are convinced prices will go up again and they are stepping back towards the core areas. I speak to them to try and get past ‘that’s not the way I do it’ to ‘this might be a better way to do it’.
John de Kanter If you look at a lot of the big sheds that have been let in previous years in Staffordshire, they would go to people who would have some link to the high street and retail. Some of the retailers are doing well, such as New look and Primark, but others aren’t and some retailers are going bust.
Stuart Williams The problems in that sector only add to the issue locally that supply has outstripped demand.
David Binks Anything growing at the moment seems to be in the discount sector. Our clients are telling us that holding on to cash at the moment is absolutely crucial and making a commitment to taking on a new warehouse is a big decision. And the amount of money it costs to fit out something like that is pretty astronomical. Often the discount retailers have different tenure requirements and want to own their own facilities.
Simon Lloyd We’ve got reduced retail expenditure. Retailers have been reducing stocks and many warehouses have been operating under capacity. We are now seeing shared facilities where before it was single user. That in itself has helped to reduce demand.
Robert Thacker We reside in a shared user facility. But at some stage I believe we will outgrow that and will need to find somewhere new. There is a lot of uncertainty. There are a lot of shared users, and with some products it’s in and straight out so there’s no need for storage and distribution.
Steve Holland A lot of our engagement is at an early stage when funding is being put together to build the shed. A lot of government assistance rules about where we can be involved with tenants are defined by Europe. In this area we can’t put anything into businesses. We could in North Staffordshire but not here as it’s a non-assisted area.
Smith It’s crazy.
Holland Part of the problem is that there’s a huge political debate about distribution being bad. We funded work with some of Richard’s competitors to prove that not the case. Staff are trained properly. But there’s still this political perception.
Nick Ford We’ve talked a lot about retail and driving efficiencies. In the past that has meant a move to bigger sheds and consolidation. At the moment a lot of spend is on management systems. Asda has taken on a new routing system. Rather than new buildings, it’s about making networks work better.

How did the equation between speculative development and occupier demand become so imbalanced?
De Kanter Quite clearly people didn’t see the recession coming and everything dried up very quickly. That also includes the appetite of financial institutions to snap up a building such as this in the hope that they would let it to a blue-chip company. The second point is that local authorities were too free and easy in giving blanket B8 outline planning approval ten or 15 years ago. I’m not saying B8 shouldn’t be here but a lot of the sites are just B8 with no room for anything else. I would just argue for a better balance in the use of sites.
Holland With our bigger schemes we have tried to go mixed use. But often the big B8 block has funded the other stuff.
Fitch Shared user was common in the US and Europe but when I arrived here seven years ago it was all ‘if I’m on a contract I want my own space’. Now it’s getting much more common to share a space. The 3PLs (third-party logistics businesses) have wanted ready made buildings and the developers responded to that.
Lloyd You also had a market that in terms of supply and demand was pretty well in balance. The more sheds you built, the more occupiers there were and it all seemed to work quite well. Nobody actually saw the recession coming and everything falling off a cliff the way it did. That’s why we’ve got this backlog of buildings. There’s nothing wrong with the products. And as buildings got bigger you needed the big open spaces you can get around here.
Kevin Nagle The developers were building in anticipation of tenant demand. It’s what tenants were telling them. It’s easy to think differently with hindsight but the reality is that there was pent up demand and the balance between supply and demand was pretty balanced.
Smith It’s also fair to say that it would not take a lot of occupiers to flip this around the other way. We haven’t got fields of unsold cars. We’ve only got a few buildings. It can be solved very quickly. It’s not a long-term problem. The government could solve it very quickly.
Binks We have said to a number of our clients that there is a window now. There is a definite first-mover advantage and that might not be the case in six or 18 months.
Smith It could be done so easily by a public pot of money coming in and doing something for six months.
Binks A tax break on fit-outs perhaps?

Can anything be done to counter the effect of void rates legislation?
Smith We’ve applied a lot of pressure. It’s been the British Property Federation and the chambers of commerce. Four or five major organisations. It’s a massive issue and nobody is listening to us. They must think we are stupid.
Holland We have lobbied very hard and we have been told very firmly where to go.
Lloyd I think it’s vindictive because actually it’s a tax on failure. And it’s a tax on the disenfranchised because businesses can’t vote.
Nagle It’s also the general view that property developers are not people we have to look after and they should start paying something back.
Fitch Retailers have said: ‘you did this and it’s supposed to be benefiting me by driving my potential rent down but you are actually creating a hardship for me because I needed X and now nobody is going to build X’.
Lloyd A lot of warehouses are occupied by manufacturing companies, just the sort of businesses the government is trying to encourage.
De Kanter One of our local MPs has suggested this legislation was primarily aimed at developers in the City. Perhaps we should argue that there should be exemptions in parts of the country because it’s part of getting the economy going.
Binks It’s a huge inertia on occupiers to think about relocating.
Fitch It becomes an employment issue, too. The void rates are a fixed cost. If employers can’t cut the cost there, they have to cut it somewhere. It’s also creating an unattractive environment with the second and third-tier warehouses. We are starting to see them being torn down.
Lloyd As at Longbridge.

Who are likely to be the occupiers of the future?
Lloyd At the moment it is the discount retailers. Going forward I think it will be more of the same as we’ve had over the past ten years, which includes manufacturing.
Ford In terms of sectors, there is a fair amount of activity from internet retail and waste management.
Holland We talk to a lot of people in the Jaguar supply chain and some of those are looking to move. The problem is that anything to do with automotive can’t get funding.

Is the hub and spoke approach to distribution a threat to the big sheds market?
Nagle There has been a big drive to hub and spoke; it’s driven by green issues. The other issue is a more practical one about where stuff is coming from. The 25,000 to 50,00 sq ft unit on the edge of big conurbations will become more popular.
Fitch The retailers will take advantage of hub and spoke but their size requirements are much bigger.
Smith A large retailer I’ve spoken to has a huge demand and what they offer creates jobs. If they could release the planning for these demands we could automatically release other requirements at the same time.
Holland Planning is becoming more flexible but there is an argument that retail should be city centre now and not out of town. We had a meeting with Tesco recently and its approach is to go to a deprived part of town and really get the local community to work in-store.