The future for Premcor in 2024

By Simon Hawkins, Director, Premcor Estates

With the start of the year behind us, the UK economy remains challenging with uncertainty about interest rates continuing to dominate discussions amongst anyone who is involved in the property sector.

So, it is encouraging to read that some economists believe the economic backdrop should improve in the second half of the year, leading to a recovery in 2025.

If interest rates have now peaked after remaining unchanged since August 2023, will the Bank of England switch its focus to cutting rates in the latter half of 2024 to stimulate growth?

An early cut in interest rates should make an impact in the latter half of the year, which bodes well for property yields.  Yields are expected to stabilise and compress over the coming years, signalling a turning point for values across all sectors with industrial and retail benefiting from recovering consumer demand as real incomes grow.

However, global activities make the task of forecasting economic growth a daunting prospect, so let’s set these factors to one side and take a more positive view about how we see the year ahead at Premcor.

At Premcor, we are entering our fifth year as a commercial property development company although both Rob and I have many more years of experience in the sector to bring to the table.

Our approach

We have an entrepreneurial approach and a track record of successfully matching market demand with investor requirements, which has been a winning formula for us as we came out of the pandemic.

With the development and sale of an out of town retail park on the outskirts of Durham just over a year ago to an overseas investor – the North Durham Retail Park – this is exactly what we achieved. 

We created new jobs for local people, provided greater consumer choice with an improved range of local shopping facilities that included leading retailers such as Home Bargains, Aldi, Iceland’s ‘The food WAREHOUSE’ concept and a Starbucks drive-thru – and the sale proceeds of the site enabled its original owner, Elddis Transport, to reinvest in the growth and success of its business.

We believe this all round, win-win approach, which considers every aspect of day-to-day living as well as the investment cycle that we impact with each of our developments, is essential to success.  It means we focus on projects that the market will welcome – not property that will stand empty on completion or become an investment that is difficult to sell.

Industrial and Logistics – still opportunities to exploit

Throughout the pandemic there was an enormous shift in retail habits with more and more online shopping, so we have also been focused on the industrial and logistics sectors over the last few years which service this growing trend.

We will therefore continue to pursue these types of opportunities in the year ahead, building on the contacts and experience we have recently gained, specifically on two large prime sites we have completed in Sheffield and in Nottingham.

With location always a prime consideration, the Sheffield site is close to J33 of the M1 and provides 285,000 sqft of industrial space split across five units of 22,354 to 108,237 sqft. It fronts Sheffield Parkway and is in a great position to satisfy a wide range of occupiers, additionally affording the opportunity to tap into excellent labour resources in the region.

It forms part of what is collectively known as the Advanced Manufacturing Park which boasts world-class occupiers such as Airbus, Boeing, BAE Systems, McLaren Automotive, Rolls-Royce, UK Atomic Energy Authority and The University of Sheffield, among others.

We acquired the 18-acre site off-market in March 2021 by making a direct approach to its owners with support from agents BNP Paribas.  The site had the benefit of an outline planning consent for industrial development and was the last remaining plot on Sheffield Business Park.


Complimentary JV partners

We have been in the fortunate position of developing this site with a JV partner, Peveril Securities (Peveril).  We approached Peveril with the site at the outset.  It is the first time we have worked together, so I would hope we can do so again going forward as it has proved a highly successful relationship.

We have recently sold the Catalyst site to a UK investment fund, Mirastar, for an undisclosed sum after marketing the funding opportunity via our investment agents, Doherty Baines and Knight Frank.  It has all gone very smoothly and we are delighted with the result.

In Nottingham, we acquired a16-acre site on Firth Way, Bulwell, working with another JV partner, Barwood Capital’s Regional Property Growth Fund IV, in August 2021.

Nottingham 360 as it is called, was handed over in December 2023.  It is a high-bay logistics/production facility with a warehouse on the ground floor of 328,759 sq ft and additional office space of 32,874 sq ft which includes a hub office to the service yard.

ESG credentials form a key focus for the building design, which will deliver a BREEAM Excellent rating as well as Net Zero Carbon in construction and occupier readied, both of which look set to make it a highly sought after occupier location especially given its proximity to the heart of the UK road network and with nearby occupiers which include DHL, DPD, Bestway Wholesale and ASDA.

It is a best-in-class logistics scheme, which we are delighted to be bringing forward at a time when there is still robust demand for sustainable, well-located buildings.

In the North East, we sold our 24-acre industrial site in Darlington in December 2023 for which we had obtained planning consent earlier in the year for three industrial/distribution units with a combined floor area of 402,000 sq ft for office and industrial space.

Adjacent to the Amazon fulfilment and distribution centre, it was acquired by Greenbox, a UK logistics JV between Partners Group, a Swiss private global equity firm and York-based Citivale, a property development and asset management company.

We are retained as Development Managers for Greenbox Darlington and have recently appointed a contractor, Winvic, to build out the development in one phase..

Looking ahead

It is fair to say that the real estate industry will probably never return to  the way it was before Covid as work and commuting behaviour patterns remain difficult to change, even with corporate incentives to return to the office.  Office buildings have therefore lost their appeal to many investors.

In fact, one of the most common demands of the office worker today is not to be an office worker at all, but to work from home.  This trend has unsurprisingly led to hot desking with hybrid working, which requires less space than before Covid, the norm now.

Companies are seeking higher-quality spaces but potentially requiring less overall square footage. In time, this could see the office market being one of the most undersupplied portions of the real estate sector so this may be an area demanding our attention in the mid to longer term.

In addition to the commercial development sectors, we are also working in the Open Storage market and we are currently in the process of buying our first dedicated storage site on the outskirts of Newcastle, which is the first of several with legal work in progress that we aim to acquire during 2024. Our storage division will trade under the name of Yard, so look out for it.

Self-storage which we will also be directly operating used to be associated with hoarders but due to life events such as death, divorce, downsizing and the challenging economic times  we are experiencing today, self-storage is on the rise. 

As Forbes (September 5th, 2023) recently reported ‘Only one asset class has an average occupancy of 92% and outperformed other asset classes in 2021, self-storage. Self-storage can be a viable option for those looking for alternative investment opportunities. Self-storage can provide passive income, inflation protection (rates can change daily), and less tenant stress.’

So, will we ‘survive till ’25’?  We certainly intend to do so. On balance, we are looking to undertake more of the same kind of development and investment opportunities in the year ahead as in 2023. 

Key to our success has been selecting prime sites that tick all the boxes and working with some of the best JV partners.  We are always keen to discuss ideas and proposals with like-minded individuals, so please do get in contact.