Industrial

Industrial

Is building underneath green belt land the way forward in the quest to develop industrial space? Amber Rolt looks at plans in the works for a shed under a west London pasture

Amber Rolt

Fly-tipping, anti-social behaviour, illegally grazing horses – these unwelcome activities are routine at the 110-acre Rectory Farm site in Hounslow, west London. Once viable farmland, it is now an eyesore. But it is undevelopable because of its green belt classification – or is it?

Plans drawn up by Cheltenham-based Formal Investments could transform the site into much-needed warehousing – and a welcome piece of green space. Unable to build above ground, Formal Investments plans to develop a shed underground, while the ground above will be landscaped as a park.

With such high demand for distribution space, particularly in urban areas, could building underground be a viable solution? According to Savills, the industrial sector had its best year on record last year, boosted by the surge in online retail.

The supply of existing warehouse space has fallen by 71% since 2009 and developable land is running out.

Formal Investments has submitted plans to Hounslow Council for a 2m sq ft underground warehouse at the Rectory Farm site that would sit beneath a park in a similar style to the car park beneath Hyde Park, SW1. The completed 9m-high shed could be split into multiple units of at least 80,000 sq ft.

There are few examples of existing projects, and nothing of this scale has ever been built in the UK before.

The spoil of the project would be enough to fill 700 Olympic-sized pools – a substantial cost in itself. But the developer has plans to deal with that too. There is a large deposit of gravel underneath the site that could be used for other building projects and help offset the cost, although Formal remains tight-lipped about the overall development cost.

The scheme would be completed in phases using sealed top-down construction, a technique normally used for city centre buildings – the Shard is an example. Excavation takes place using concrete slabs that are laid beforehand, then landscaped on top.

“We want to attract a large occupier that might not otherwise expect to locate in such a prime location and we will get lots of interest because of the scale,” says Bridget Outtrim, director at Savills, which is advising on the development.

Rent would likely be less than the £15 per sq ft prime in the nearby area, given the unusual nature of the scheme.

“This is a pioneering project that is almost certainly unprecedented in its size,” says Tunde Adegbemile, partner at Cushman & Wakefield. “It’s ambitious but this should be applauded because London and other major cities – particularly those facing limited scope to expand outwards – are going to have to find alternative ways of finding space if they’re to grow. Those options are upwards, densification or underground.”

It is not the first time underground space has been put to commercial use. In Cheshire, former mines have been used as a storage unit called DeepStore where documents and archives are kept. In Kansas City, Missouri, former mines have also been converted for commercial storage space in a vast 55m sq ft network dubbed SubTropolis. The difference is that these examples make use of existing natural infrastructure, which is cheaper than developing underground.

The extra cost of removing spoil could limit the areas in which this kind of development could happen. Overall construction costs are likely to be higher than traditional construction costs, which could negate any saving on the price paid for the land.

Nicholas King, managing director of Formal Investments, says: “The locations that will come first are in areas where the land can be excavated. If you are going to be excavating an old quarry, then the costs are going to be even higher, so it really does depend on what you’re excavating.”

If the project proves a success, it could act as a template for similar developments and their associated costs. Adegbemile adds: “Lessons learned from this pioneering project will help reduce the costs of future schemes.”

Investors will need convincing that such projects are viable. Occupiers will also need convincing that underground is a viable business location (see box). Formal is funding the Rectory Farm scheme itself, which means there are no investors to convince.

Jonathan Powling, partner at Addleshaw Goddard, says: “There are a lot of challenges with building subterranean projects, which is why investors will want to see examples of previous projects. I think that investors would be interested, but someone needs to show them how it would be modelled and how it would be brought forward.”

As long as demand for warehousing continues – and e-commerce shows no signs of losing favour with shoppers – the market will have to recognise that it needs to come up with alternative solutions. “Five years ago they would have laughed us out the room,” says Outtrim. “We have to look at different ways of providing space and we have to be more innovative.”

Adegbemile says: “As expertise grows and costs come down, viability will increase. It might well be the case in future that underground development becomes a great way of overcoming nimbyism, overcoming constraints on green belt development or even becomes a planning gain requirement.

“For now, however, it’s likely to appeal to areas where land supply is tight and therefore be expensive enough to make such schemes viable.

“As for the future, it might not so much be a matter of the sky being the limit but quite the opposite.”


DeepStore, Cheshire

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Who wants to be based underground?

Natural light, ventilation and access are all going to be considerations when considering underground space.

Formal Investments has already had early discussions with occupiers including data centres and postal companies that serve Heathrow, but no deal has been agreed.

Will Waterhouse at Rapleys says: “Self-storage, for example, may be one of those sub-sectors that can successfully migrate underground. When operations require higher frequency of movement and access then the logistical challenges of underground facilities are going to be much harder to overcome.”

As with the development risk and sourcing funding, more occupiers will likely feel confident in signing up to underground space once they have seen what has been done elsewhere.

Tunde Adegbemile, a partner at Cushman & Wakefield, adds: “It is a bit of a leap of faith as occupiers generally want to stick to what they know works. They will need to be convinced that their ability to operate from the accommodation is not severely compromised compared with more conventional buildings.”

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Amazon’s shed in the sky

While Formal Investment is going underground to solve the industrial supply problem, Amazon has its eye on the sky. The internet giant has patented plans for an airborne warehouse that would sit 45,000 feet above ground. It would be suspended by cables from airships and would deliver items by drone. But how serious is it?

“You have to welcome ideas of innovation and so fair play to them,” says Bridget Outtrim, director at Savills. “Amazon is fantastic in the way that it has challenged the way we shop and has challenged the logistics business too, so we need people to come up with ideas like this.”

Cathy Fearnhead, partner, Addleshaw Goddard, adds: “I don’t know anything about the regulation of air space and so don’t know what you would need to facilitate that. I am less convinced about this than I am on the underground shed but Amazon is leading the market in many ways and if Amazon has a patent then there might be something here.”