Jon Sleeman, UK head of research at JLL, on the big shed market

1. The UK and North West Big Box
Distribution Market
Jon Sleeman, International Festival for Business, Liverpool 12 June 2014

2. Introduction
• Occupational market – demand, supply and new development
• Investment market – demand, yields, performance
• Conclusions and outlook

3. Occupier demand has been gathering momentum since last year
Supported by improving economic growth and logistics drivers
-
5
10
15
20
25
30
2007 2008 2009 2010 2011 2012 2013 Q1 2014
Millionssqft
New Secondhand 5 year annual average
Take-up of Grade A units of 100,000 sq ft and over

4. Retailers accounted for half the floorspace taken up in the year to end-
March 2014
50%
20%
13%
17%
Retail
Logistics
Manufacturer
Other
Grade A distribution take-up over the 12 months to Q1 2014

5. The Greater South East and Midlands accounted for 61% of space taken-
up in the year to end-March 2014
22%
21%
18%
15%
10%
10%
4%
Greater South East (South East, East
& London)
East Midlands
West Midlands
Yorkshire & Humberside
South West & Wales
North West
Scotland
Grade A logistics take-up over the 12 months to Q1 2014

6. Recent deals - new units of 100,000 sq ft +
taken up in Q1 2014
5
Rugby Gateway – 236,000 sq ft
Kingswood 127, Lakeside Business Park, Cannock
– 127,000 sq ft
LPP Sheffield– 412,519 sq ft
Magna Park Milton Keynes – 938,449 sq ft
The Bridge, Dartford – 122,500 sq ft
Titan, Heathrow – 115,000 sq ft
Central Park, Bristol – 175,000 sq ft
Prologis Park Ryton – 231,000 sq ft
Birch Coppice, Tamworth – 168,900 sq ft
Northfleet site, Kent – 450,000 sq ft

7. Selective North West distribution deals
Location Company Size (sq ft) Terms Comment
Maximus, Winsford Industrial Estate, Winsford Tiger Trailers 105,000 Leasehold Grade A unit.
Speke Boulevard Medlmmune 130,000 Leasehold Grade A unit.
Manor Park, Runcorn Rehau 132,796 15-year lease, £4.95 per sq ft Grade A unit.
The Cube, Preston Brook, Whitehouse
Industrial Estate, Runcorn
Clarcor 151,769 Freehold acquisition Grade A unit.
Liverpool International Business Park, Speke Johnson Controls 150,000 15-year lease, with break
option, £5.00 per sq ft
Brand new built to suit facility
developed by Marshall.
Cutacre/Logistics North, Bolton Aldi 441,000 Land purchase New built to suit facility.
One 175 Winsford Industrial Estate, Winsford Howard Tenens 175,000 5-year lease Speculatively developed unit.
Northern Gateway, Knowsley Toyota Tsusho
Assembly Systems
143,000 10-year lease Speculatively developed unit.
00 Month, 2014 6
2013-2014
Deals exclude Omega at Warrington

8. There is a pipeline of active requirements for large distribution facilities
• According to JLL market intelligence:
- There are currently 73 named requirements in the UK totalling between 22 and 27 million sq ft
(based on minimum and maximum size requirements).
- There are currently 14 named requirements totalling between 4.4 and 4.9 million sq ft which are
primarily focused on the North West region.
• But the market is quite patchy – good demand in well-established strong locations, weaker demand
elsewhere. Still quite slow moving.
00 Month, 2014 7
Current live requirements for distribution units of 100,000 sq ft and over

9. The availability of new and good quality distribution space continues on
a downward trend
0
5
10
15
20
25
30
H2 2007 H2 2008 H2 2009 H2 2010 H2 2011 H2 2012 H2 2013 Q1 2014
Millionssqft
New floorspace Good quality secondhand floorspace

10. The North West accounts for around a fifth of available space across GB
12%
14%
14%
12%
17%
21%
7%
3%
Greater South East (South East, East &
London)
East Midlands
West Midlands
Yorkshire & Humberside
South West/Wales
North West
Scotland
North East
End of Q1 2014

11. The market is now seeing some
speculative development
• 5 units completed speculatively since the recession.
• A further 9 are speculatively under construction at present.
• 12 of these 14 are between 100,000 sq ft and 200,000 sq ft.
• 1 is between 200,000 sq ft and 300,000 sq ft
• And 1 is over 300,000 sq ft.
00 Month, 2014 10

12. However, recent speculative development has been very modest
compared with the pre-recession boom
-
1
2
3
4
5
6
7
H1 2006 H2 2006 H1 2007 H2 2007 H1 2008 H2 2008 H1 2009 H2 2009 H1 2010 H2 2010 H1 2011 H2 2011 H1 2012 H2 2012 H1 2013 H2 2013 Q1 2014
Millionssqft
11

13. Investor demand for UK industrial and distribution stock is strong
0
500
1,000
1,500
2,000
2,500
Q1
2010
Q2
2010
Q3
2010
Q4
2010
Q1
2011
Q2
2011
Q3
2011
Q4
2011
Q1
2012
Q2
2012
Q3
2012
Q4
2012
Q1
2013
Q2
2013
Q3
2013
Q4
2013
Q1
2014
MillionsGBP

14. Regionally, the Greater South East and Midlands have attracted the
strongest investor interest
40%
14%
14%
10%
8%
7%
5%
1%
0.6% Greater South East (South East, East &
London)
West Midlands
East Midlands
Yorkshire & Humberside
North West
South West
Scotland
Wales
North East
12 months to Q1 2014

15. Strong investor demand, and limited supply,
have led to yield compression
3.50
4.50
5.50
6.50
7.50
8.50
9.50
Prime London Distribution Prime South East Distribution Prime Regional Distribution
Prime Distribution Yields: June 2014
London 5.00 - 5.25
South East 5.50
Regional 5.75

16. Distribution warehouse investment performance forecasts, 2014-2018
0.00
2.00
4.00
6.00
8.00
10.00
12.00
14.00
16.00
2013 2014 2015 2016 2017 2018 2014-2018
%perannum
Rental Growth Capital Growth Total Returns
15
JLL forecasts (May 2014) of IPD distribution warehouse segment
Distribution warehouses, 10.0% pa ,
compared with all property average of 8.9% pa

17. Conclusions and outlook
• The occupational market is supported by an improving economic outlook plus the positive impact of
logistics drivers. But occupier decision-making still quite protracted and market conditions are
patchy.
• The investment market is currently very ‘hot’ with strong demand and very little supply. Our forecasts
indicate that distribution warehouses will outperform the all property average total return over the five
years 2014-2018.
• The Greater South East and Midlands are attracting the largest shares of occupier and investor
demand.
• The North West is an important distribution market. Demand has traditionally focused along the M6
‘corridor’ but new transport infrastructure investment (Liverpool 2, the Mersey Gateway Project) will
boost the Liverpool City Region.

18. COPYRIGHT © JONES LANG LASALLE IP, INC. 2014
Jon Sleeman
Tel: + 44 (0)207 087 5515
e-mail: jon.sleeman@eu.jll.com
Thank you