Newly formed industrial developer Panattoni has unveiled plans for an aggressive programme of spec development in the UK.

The firm, created this week through the merger of Panattoni Europe and First Industrial, intends to bring 3m sq ft of spec development a year to the supply-starved market and has an initial £300m war chest to deploy in the sector.

The 3m sq ft target is more than the total amount of spec development expected to be delivered in the second half of this year by all the other developers combined. According to GVA, just 2.3m sq ft is likely to be built.

Panattoni Europe chief executive Robert Dobrzycki told Property Week the firm planned to build mega-sheds of up to 1m sq ft without having a tenant in tow and that it expected to become “a substantial player” in the UK market in as little as two years.

“We want to show the market that we are starting something special,” he said. “Nobody is spec developing to any great size. It is a gap in the market that we can grab. There aren’t too many global players building big in the UK market. We can cover the gap between the local developers and the global players.

“We have big ambitions. We want to be volume orientated and customer focused.”

Substantial player in two years

In order to scale up quickly, the firm would bid aggressively to acquire sites as well as buying or partnering with smaller developers, said Dobrzycki, adding that he hoped to replicate Panattoni’s success on the continent where it was the largest developer by volume between 2014 and 2016 – building 29m sq ft of new stock. In Germany the firm established itself as market leader in just two-and-a-half years.

“I don’t know if it is going to be the case in the UK but we want to be at least a substantial player in two to three years,” he said. “If it takes five years that’s OK, there’s no time target, but that is what we are pushing for – to become a substantial player in the UK.”

Dobrzycki shrugged off suggestions that spec building on such a large scale was a gamble in the current market, especially with the wounds still yet to heal from the over-development of spec facilities before the financial crisis.

“It can be viewed as a bit more of a risky strategy, but looking at the demand side we view it as less risky than smaller shed development,” he said. “Ecommerce occupiers are taking bigger spec buildings and larger spec on the continent is doing better than smaller stock. There are similar fundamentals between the two markets.”

Panattoni’s managing director Matthew Byrom said the firm was looking at developing units in the 350,000 sq ft and 750,000 sq ft range as well as having investor backing to build a single 1m sq ft spec shed. “There is a lack of product available nationally yet demand is very strong in the 350,000 sq ft and 750,000 sq ft size band,” he said.

“We want to be ready with available product when the next upsurge of demand comes. We see that we are at the bottom of the curve of the speculative building cycle.”

He added that the business would be recruiting to double or treble the size of its team over the next few months.

Property Week, 22nd September 2017