A new dawn for the Port of Tyne

The Port of Tyne has a long, rich history. Founded by the Romans in the second century as a trading post for goods, in the 1600s the port truly began to thrive, thanks to steady growth in the export of coal.

As the region’s coal production started to wane in the latter half of the last century, the port’s focus shifted towards other commercial uses, such as bulk and conventional cargo, car terminals and logistics. Now it is about to undergo the next stage in its evolution.

The Port of Tyne is working on a series of significant green energy projects and is also on the lookout for joint venture partners to co-develop two enterprise zones on and around quayside locations at the port.

So what will the new phases of the Port of Tyne’s evolution entail and what is the port looking for from its development partners?

In terms of projects already under way, a new storage facility is currently under construction for nearby Lynemouth Power Station in Northumberland. The power station has moved from burning coal to wood pellets, which will be handled by the port.

As part of that project, the port has invested £38m in extending its quay capacity and in constructing new infrastructure to handle the work. Following the construction of a 125-metre quay extension at the port in 2016, it is building three major storage silos, with a total capacity of 75,000 tonnes, along with 1,364 metres of enclosed connecting conveyors and dedicated rail infrastructure.

The project builds on the Port of Tyne’s experience with biomass: it is the largest handler of wood pellets in Europe and is handling fuel for the Drax Power Station based in North Yorkshire.

The port is also seeking planning permission to build a renewable energy plant on Howdon Green Energy Park in North Tyneside. The facility would produce enough electricity to power 50,000 households using state-of-the-art technology to convert household waste into energy. The development would also regenerate a site that has lacked a permanent use for decades.

As far as the property industry in the North East is concerned, however, the proposed development on the enterprise zone sites is much more exciting. The first enterprise zone site, a former Esso facility, totals 30 ha and has been christened the Royal Quays Enterprise Park.

“We have masterplanned that and we are in the process of getting funding,” says the port’s head of estates Andy Kahn. “In 2019, we will have good stock available and we are already talking to people about pre-lets. It’s close to the A19, Newcastle and the Tyne Tunnel for access to both sides of the river, so it is a strategically good location.”

The former Esso site is near the A19, Newcastle and the Tyne Tunnel, so it is a strategically good location - Andy Kahn, Port of Tyne

The second zone, to be called Tyne Dock Enterprise Park, will occupy a 7 ha site next door to Tyne Dock Estate and will include 550 metres of quayside frontage. It is expected to formally receive enterprise zone status from the government in April. “We are also potentially infilling the remainder of Tyne Dock, which will create another six to seven acres of development land on the site,” says Kahn.

The sites will appeal to a range of businesses and sectors, thanks to its connectivity, he says. “It will also be available for design and build,” he says. “There is a lot of opportunity coming.”

Search for a partner

The port is looking for £60m to £70m of funding from a JV partner for the initial phase - more as the projects mature - and is flexible about how a deal might be structured.

“We have funding for infrastructure and remediation and we are looking for a development or investment partner to do a JV with,” says Kahn. “In terms of structure, the simplest option is that we put land in, they build and we share the profit, but we will be open to ideas in the tender and will pick the one with the best fit and synergies.”

The Port of Tyne developments will offer rare new-build space in a region that has seen precious little such development in recent years. “There is a lack of stock,” says Richard Scott, industrial and logistics partner at Cushman & Wakefield in Newcastle. “Good modern stock is diminishing year on year because speculative industrial development does not stack up in the North East at the moment. The only speculative development that is happening is reliant on grants.”

Demand is expected to keep up or increase, placing greater pressure on rents. “Rents and capital values are increasing in prime areas and the past two years have been pretty buoyant,” says Scott. “There is relatively healthy demand and diminishing supply, which is starting to drive rents and capital values forward.”

The distribution and manufacturing sectors have been holding up particularly well. “If you are looking for buildings of grade-A quality of 50,000 sq ft and above, there are only one or two available,” says Scott. “There are probably four to five requirements for 100,000 sq ft-plus and no stock at the moment.”

The lack of supply should make it easier for the Port of Tyne to attract occupiers, but according to Kahn many companies simply do not think of the port as an option.

Port of Tyne by numbers

“People tend to go to the conventional industrial estates. They don’t think of us. But we’ve been trying to change that perception over the past 18 months,” he says. “We have all the logistics and connectivity; we can do warehousing and distribution and you can get raw materials shipped in rather than by road. We are a one-stop shop.”

Several existing sheds at the port will soon become available, including a 133,000 sq ft unit and an 85,000 sq ft space. “All have been occupied but for various reasons are becoming available,” says Kahn.

According to Keith Stewart, industrial agency director at Naylors, the 133,000 sq ft facility is one of the best logistics buildings currently available in the North East because of its size, height and yard space. “It has a cross-dock facility,” he adds. “There is possibly only one other facility that can offer that in the North East and no others of that size. It is also on the port so it has the added benefit for importing or exporting.”

Competitive rents

Rents at the site are also competitive compared with traditional industrial areas such as Team Valley in Gateshead. “Taking space with our existing stock is cheaper than being in Team Valley,” says Kahn. “In Team Valley, you’re looking at £7/sq ft to £8/sq ft and we’re finding big sheds are still in the £4/sq ft to £4.50/sq ft range.”

It is difficult to make exact comparisons, he adds, because deals at the port are often bundled up into a mix of shipping, logistics, containers and warehousing. “We can package good deals because of the other port services.”

The new-build facilities coming in 2019 are expected to command a premium, however. “We have not yet tested the market in terms of what we can achieve with new-build,” says Kahn. “[But] given the interest we have had in Royal Quays we are confident of achieving the headline rents being achieved in prime areas around the North East and are able to package flexible deals.”

The proposed industrial developments at the Port of Tyne could bring welcome relief to a constrained market. However, success will only be guaranteed if occupiers can be persuaded to broaden their horizons and consider making the trip to the seaside.

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