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1st May 2008, Page 44
1st May 2008
Page 44
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Page 44, 1st May 2008 — FLJJLLJJIJçJ r
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Which of the following most accurately describes the problem?

There's no logistics without land. But is there enough land in the UK suitable for rapidly expanding haulage companies?

Words: Louise Cole With the credit crunch closing its grip on finance markets and causing uncertainty in the business community, land values in the UK may start to stabilise or fall for the first time in six years. But there are other factors that will conspire to keep prices high.

Availability of land for commercial use is heavily dependent upon region — in England, the South-East has always seen demand outstrip supply while the North has been better served.

The availability of brownfield sites is fairly stable, despite constant redevelopment. Only 7% of the UK is urban and 'brownfield', at least by the government's definition — which is land that has been used before, including residential plots and gardens. The government wants 60% of new building to be on brownfield sites — a target the UK has surpassed — but such sites may not always suit logistics. "In logistics access is everything," says Lloyd Spencer, a director responsible for the industrial division at property consultant Lambert Smith Hampton (LSH). "Typically, brownfield sites are in conurbations, which can limit access, and 24/7 operations such as transport can be incompatible with other neighbourhood uses."

Any road transport operation that wishes to build on a greenfield site has to present a watertight business case. "Planning policy encourages local authorities and developers to focus on brownfield," says Merlin Hyman, director of the Environmental Industries Commission, a trade association for environmental companies. "Firms would have to show why they need to use greenfield." Unfortunately, the land adjacent to most motorways is greenfield and as the Ml and other key corridors become built up, pressure for available land is spreading out across the regional trunk roads and arterial network.

Brownfield sites are readily available, however, and more could become so if the government reviewed its legislative framework for land reclamation — or remediation. "If we are trying to regenerate urban land for environmental and social reasons then assessment and clean-up of contamination are important parts of that process." says Hyman. "The regulatory regime doesn't help. The high standards we have are fine, but the framework design causes delays and ambiguities."

Other factors that affect land prices include the restructuring of empty rates relief. In the past, developers were not obliged to pay rates on empty buildings; now the relief lasts for only six months to encourage full occupancy and drive rents down. While there are various canny ways to extend relief, the loopholes are being squeezed with the effect that building values will be pushed up.

Steve Lang, director at property consultant Savills, says the government's action may rebound and reduce the amount of available property. "We've already heard intimations that cheaper buildings may be demolished rather than face rates on empty sites," he says.

Legislative obligations The imposition of the Energy Performance of Buildings Directive for commercial property, which came into force in April, is another factor. Since 6 April, Energy Performance certificates have ben required for the sale, rental or construction of commercial buildings, starting with the largest premises and rolling out to all premises over 50m2 by October 2008.

According to an LSH national industrial report, this will push property prices up as more organisations will need to fulfil corporate social responsibility obligations and battle rising energy costs.

Lang says the capital gains increase in April pushed more property on to the market in the early part of the year. Presumably now that developers face higher charges, these will be passed on to purchasers.

While Lang says developers are increasingly pushing out from the Golden Triangle in the middle of England, replicating southern models doesn't work elsewhere because other regions cannot sustain the rent and property prices. Nonetheless, plenty of land is being made available.

Roger Williams, chief executive officer at the UK Warehousing Association, says: "There is no shortage of property around and there are still lots of developers doing speculative builds." Lang concurs. "There are many more key players in the market and something of a scramble to get the right land. Then developers will wait for a customer before doing any work because putting up 'sheds' is much quicker than residential building."

Larger players still tend to lease properties because such large capital outlay is high in risk as well as having implications for liquidity. But Lang says smaller industrial companies still prefer to buy because there are tax benefits, including the ability to tie the value of commercial property into an SIPP (self-invested pension),

The price of preparation

Developers are responsible for making sure sites are clean and habitable, but if your corporate rules go further the cost can be high.

Vehicle rental company TLS has recently started a policy of site-sharing to expand its rental proposition into areas already inhabited by its sister plant-hire company. After a chequered history, parent company GE now has exceptionally high standards of corporate governance and TLS chief executive officer Carl D'Ammassa is aware that ensuring environmental protection and health and safety puts a heavy cost on opening a new site.

"It would cost us 1150,000 to open a site with a portable office," he says ruefully. "That's just for the tests and searches, such as deep core soil samples, which GE demands. Its approach to health and safety is extremely laudable but a drag commercially" •


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