Is there any value in extra space for ‘Big Shed’ distribution centres?

Blog-5---Wales-Distribution

Following a bumper year in 2014, demand for property within the UK logistics sector remained strong in the first half of 2015 according to Savill’s latest report. Take up in the first six months was over 30% above the long-term average, and with demand still far outpacing supply, Savill’s suggest property investors can expect returns of around 15% by the end of the year. However, with ‘Big Shed’ distribution centres often achieving relatively low rental value per sq.m / sq.ft, is there any real financial benefit it using premium performance insulation to achieve additional space?

Sweetts Group looked at a new distribution centre on the outskirts of Cardiff, where research has shown demand for space remains high, driven in part by the local ports. Of the eight buildings studied within the report, the £18 million property has by far the lowest annual rental value at just £61.40 per sq.m (£5.70 per sq.ft). The unit itself comprises 90% distribution unit and 10% office space with an initial floor area of 35,800 sq.m (385,348 sq.ft).

The ventilated rainscreen wall constructions feature an internal layer of cement particle board and by specifying a layer of premium performance insulation, instead of rock mineral fibre, the overall construction depth was reduced by 80 mm across the 5,940 sq.m external wall area.

The premium performance insulation solution helped to recover an additional 79.20 sq.m (852.50 sq.ft) of floor space within the building. Despite the low rental value relative to other areas in Great Britain, and the additional capex uplift of £5.50 per sq.m for the premium insulation construction, this still allowed a 38% return on investment to be achieved on the price of the insulation. This equates to a capitalised value of £56,181.00 for the space,

For the final blog of the month, which will be posted on 25th August, we will take a look at a business centre in Scotland ahead of the introduction of Section 6 (Energy) in October.

If you can’t wait for the series to unfold and want to find out more, visit the real value of space website and download the whitepaper.

Read the whole of the Real Value of Space Blog series.

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Kingspan Insulation is a market leading manufacturer of optimum, premium and high performance rigid insulation products and insulated systems for building fabric and building services applications.

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