M&S and Sainsbury’s sign up for 1m sq ft of distribution space across UK

Two of the UK’s biggest retailers, Marks & Spencer and Sainsbury’s, this week agreed a succession of key distribution deals as the big shed market holds its own in the property downturn.

The pair have signed up for more than 1m sq ft of distribution space – a sign that retail demand for big sheds has not disappeared.

Wincanton, a logistics company acting for M&S, has taken 560,000 sq ft at the CB Richard Ellis Investors-owned Marchington Industrial Estate in Staffordshire.

Wincanton, which has a contract to provide retail support for M&S, has taken six buildings on a five-year lease with a three-year break at £3.50/sq ft and £4.50/sq ft.

David Willmer, GVA Grimley’s industrial head in Birmingham, which acted for CBRE Investors with joint agent M3, said it was one of an expected wave of retail distribution deals to be done on flexible lease terms to allow tenants to assess how shoppers react to the credit crunch.

Wincanton was unrepresented.

In Yorkshire, Sainsbury’s has signed for a former Somerfield shed in Sherburn-in-Elmet. It will run its northern distribution operations from the 500,000 sq ft hub, and is thought to be paying around £4.50/sq ft.

The deals back up Colliers CRE’s industrial research, released this week, which says that demand remains strong and rents have continued to rise 1.8% year on year.

Cushman & Wakefield advised Sainsbury’s, which has also sealed a £191m sale and leaseback on four of its distribution depots, despite the difficult market conditions.

The deals, two of which were tipped in Property Week last November, have now completed.

The four sites are: 423,494 sq ft in Tamworth, sold to BAE Capital Pension Fund Trustees for £38.5m; 561,203 sq ft in Stoke, sold to Canada Life for £40m; 626,624 sq ft in Haydock, sold to clients of Mutual Finance for £42.7m and 783,344 sq ft in Hams Hall, sold to Christian Vision for £70.1m. All four deals have been secured on 25-year leases to Sainsbury’s and have an average yield of 5.74%.

Peter Baguley, Sainsbury’s property director, said the supermarket had more plans for its distribution property, including redevelopment.

Cushman & Wakefield acted for Sainsbury’s; Kitchen LaFrenais Morgan advised BAE; Atisreal represented Canada Life; Morgan Williams advised Mutual Finance and CGBA acted for Christian Vision.