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Marc Ballard of property consultant Salloway investigates the lack of industrial and warehouse space opening up across the region.

Good quality industrial and warehouse space is drying up across Derbyshire and Nottinghamshire. The reducing supply means that opportunities for tenants and purchasers to negotiate ‘soft’ deals are becoming less common due to the lack of built stock now available.

The great news is that economic growth in manufacturing and distribution sectors has bucked the trend of the overall economy. This has resulted in good take up of industrial and warehouse stock over the past couple of years across Nottinghamshire and Derbyshire. With local businesses expanding, the bad news for occupiers is that the availability of new and good quality stock is now extremely low.

With good demand and stocks diminishing, there are likely to be two results; occupiers will increasingly face ‘harder’ commercial terms on available property with the effect being that landlords/developers stand to generate great returns on their investment.

It’s apparent that East Midlands companies with growth plans looking for warehousing or larger premises are now beginning to experience a very limited choice of build stock. My fear is these companies will start looking further afield for new industrial space. We don’t want to lose talented firms to the likes of the West Midlands or Yorkshire – just because we have a shortage of stock.

Basic economics says that demand will lead to supply, but with the banks continuing to make it all but impossible to fund speculative warehouse development, together with the spectre of lack of business rates relief, it is unlikely - in the short term at least - that Developers will have the inclination or indeed financial support from the banks be to build speculatively.

However, what I would say is that those developers with deep pockets - with the ability to fund a small level of speculative development - stand to make good returns in the medium term and could be firmly on the front foot in 12 to 18 months’ time. Indeed, Salloway have recently seen an upturn in interest in land buying as sensible values which could in-turn spark modest speculative development.

The reducing amount of good quality built stock has resulted in an increasing reliance on occupiers having to source design and build opportunities. Whilst on this basis, buildings or constructed to meet a company’s individual needs the disadvantage is the delay in being able to obtain occupation which can be up to 12 months due to the planning and construction process.

What I would say is that companies which have requirements now – or think they may have in the near future – should act quickly before commercial availability becomes critically low or indeed to allow adequate time to identify design and build opportunities.

Already this year, Salloway has carried out a number of transactions for companies seeking industrial space. One example, is Granger’s – the Alfreton-based manufacturer of waterproofing and cleaning products including Cherry Blossom shoe polish, which snapped up a 13,000 ft warehouse building in Alfreton.

The company wanted a warehouse close to its main site and Salloway were able to assist them with the perfect short time solution. Longer term we are developing a strategy to satisfy the feature needs of the business which would seem to indicate a Design and Build solution. We are seeing a lot more instances like this – particularly in distribution.

As supply tightens, I predict that developers will become more inclined to consider speculative development in the coming months, and on the back of improving values and continued growth in manufacturing and distribution we could even see a return to modest speculative development in early 2012.