Waste has become an increasingly important sector in the industrial property market and will soon be competing with retail in terms of the amount of space required.
That’s the view of BNP Paribas Real Estate which has conducted research into the future demands of waste operators and it finds that waste and recycling occupiers could provide a much needed source of demand for distribution and logistics space, requiring an estimated 50m sq ft of space by 2015, the equivalent of 1,500 football pitches.
Don Young, senior director of Edinburgh industrial agency at BNP Paribas Real Estate, said: “EU rules will see landfill cut 75% by 2015 and eliminated totally by 2020. We currently have 300 landfill sites throughout the UK but will require 3,000 other locations to meet recycling demand. This equates to at least 50 m sq ft of industrial space.
“Logistics properties are ideal sites as they boast essential storage space and transport links. With deals in the waste sector doubling rising from 2% of all industrial property deals in 2008 to 4% in 2009, clearly demand is on the up, which is great news to an otherwise beleaguered sector.”
BNP Paribas Real Estate’s research suggests that take-up in the waste sector will continue to increase up to 2015 with at least 10m sq ft of space being required each year to accommodate the demand. Based on last year’s take-up figures, this will equate to a third of total annual take-up in the distribution sector.
The UK is currently home to 138m sq ft of available industrial space according to BNP PRE and is currently experiencing decreased rental values and reduced lease lengths, as well as the burden of empty rates.
Don Young continues: “There has been no trend set as yet in the types of deals that are being done with these types of operators in terms of both size and price. We have witnessed transactions on units ranging from 30,000 sq ft to 300,000 sq ft at rents varying from £2.80 per sq ft to £7.80 sq ft. “However, we have noted that leases being taken on these units are increasingly longer than in other sectors of the distribution market with some deals being struck on 20-year plus leases.
“These types of occupiers are becoming increasingly popular to landlords, especially in light of their advancing technologies which mean that they are no longer viewed as being dirty and noisy neighbours.
“Requirements from the waste and recycling sector pose an excellent opportunity to absorb some of the current supply in the short term as many of the units available will be suitable for immediate occupation providing landlords with the potential for a long and secure income. In the long term opportunities exist for investors and developers with landbanks to create bespoke properties for these types of user which may see increasing demand for waste and recycling operators as anchor tenants at large distribution parks.”
He says that the nature of these operations means these sites will need to be evenly spread throughout the UK in order to collect and deposit waste ensuring that it will not just be the core distribution hubs such as the Midlands that will benefit from this demand.
Scotland has 6.5m sq ft of available space and is able to offer a range of units in terms of both size and quality to accommodate this new influx of occupiers.
