Danny Cramman is Director at Avison Young and joint agent on Integra 61 with Colliers International

Occupier demand for industrial and logistics space in the North East is being driven by a number of factors. Take up of larger units (50,000 sq ft plus) continues to be dominated by the manufacturing sector, accounting for 69% of take up in this size range during 2023. The largest transaction of the year happened in Q4 with Country Style Foods  purchasing the former 464,212 sq ft Nestle facility in Newcastle. Earlier in the year Encore Packaging purchased a former 102,940 sq ft Walkers facility in Peterlee. In the distribution sector, The Storage Place took a 100,340 sq ft unit in Peterlee, the warehouse only being vacant for six weeks.

There continues to be a steady delivery of large build-to-suit facilities. Envision AESC constructed the region’s first Gigafactory adjacent to Nissan’s car production site. The multi-storey battery production plant totals circa 1.7 million sq ft and will be operational later this year. An additional facility is planned to increase production, further feeding directly into Nissan. 30% of all cars built in the UK are manufactured at their plant in Sunderland and exported to global markets. The scale of these facilities has seen a whole supply chain emerge in the region to support them. This will continue to drive (pun intended) demand for space across the region.

Other sectors are also seeing significant growth in the North East, offshore industries being among them, benefitting from some of the area’s unique features. SeAH wind has built a 1.13 million sq ft monopile facility on Teesworks, the site of the former Steelworks in Teesside. The scale of the available land, infrastructure available and direct access to the North Sea made it the ideal location for their operation. JDR Cables is building a 742,000 sq ft cable manufacturing facility in Blyth, Northumberland, again because of the unique infrastructure the site can offer.

The region is not just attractive to the manufacturing sector however. From having very little presence in the region in 2019, Amazon has gone on to build four fulfilment centres in Darlington, Durham, Gateshead and most recently Stockton on Tees. The company now occupies more than 7.5 million sq ft of space, making it a major employer. Argos, Lidl, ASDA and Aldi all have large scale distribution facilities in the North East, demonstrating its strength as a storage and distribution location.

The region’s port facilities also continue to drive demand. The Freeport status of some offer significant occupational benefits for companies locating within them. These include enhanced capital allowances, stamp duty land tax exemptions, business rates relief for five years and relief on NI contributions.

The increase in occupational rents for industrial and warehouse facilities has been well documented. This rise has affected the whole of the UK, including the North East. However, on a comparative basis the region still provides good value. Both prime and secondary rents are lower here than our closest commercial neighbours in Yorkshire, significantly so when compared to the North West and Midlands. This, coupled with a lower cost skilled workforce, makes the area an attractive proposition for those companies with more footloose occupational requirements.

A lack of speculative development over recent years means there is a shortage of Grade A stock across pretty much all size ranges. The units delivered within the 640,000 sq ft Connect development at Citrus Group’s £400M Integra 61 mixed use scheme at J61 of the A1(M) near Durham represent the largest speculative scheme the region has seen in over a decade. It is important that further strategic sites continue to be brought forward to facilitate the delivery of units suitable for modern occupier demands.