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Electric Cars Could Drive West Midlands Property (But Not Very Far)

How quickly things change. Only a few weeks ago the UK car industry appeared to be on its knees, with Ford announcing plans to close their Bridgend plant, Honda pulling out of Swindon and JLR cutting 4,500 jobs worldwide, most in the UK.

Suddenly everything has changed as JLR announces plans to invest heavily in electric car production at Castle Bromwich. BMW are also investing in electric vehicles, backing the new electric Mini to be built in Oxford.

Does this mean the good times continue to roll for the West Midlands’ auto-related property sector?

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It has been an awful few months for the UK auto sector, and it came after an even more awful 2018.

The Ford and Honda closures came as investment in the UK car sector plunged by 46.5% to £588.6M from £1.1B in 2017.

Data from the Society of Motor Manufacturers and Traders showed production fell 9.1% to 1.52 million vehicles, with output for the UK down 16.3%, and export production down 7.3%.

Against this background, the announcement that troubled JLR had not abandoned its Midlands base, but instead intended to invest in electric car production at Castle Bromwich, felt like doubly good news.

JLR said the decision will secure the jobs of 2,700 workers at the plant.

Exactly what it will do and when is not clear. JLR hasn't revealed when it will launch the battery version of the Jaguar XJ. This week's announcement of a £500M government loan to help develop technology adds to the sense that, despite the lack of detail, something serious is underway.

For the region’s industrial and logistics market this is good news, pure and simple, even if the transition from internal combustion to electric engines may be bumpy.

"There are a significant number of tier one, two and three suppliers to JLR in the region, so its business supports many others,” Cushman & Wakefield partner Simon Lloyd said. “There is great importance to JLR investing further in the region. It has already invested significant sums, which is reflected in the number of suppliers and the investments that they have made. It had been clear for some time that JLR needed to invest in this technology to remain competitive, and having a solution to that issue is very helpful for confidence.”

Lloyd is convinced new contracts from JLR means new buildings for developers to provide, but warns that the overall growth in the electric vehicle market must be supported by a significant improvement in the infrastructure, such as sufficient charging points, and power generation.

Lloyd's upbeat tone is widely shared, along with an undoubted sense of relief.

JLR’s investment decision is a major vote of confidence in the region and the UK as a whole, as well as a commitment which will secure several thousands of jobs,” BNP Paribas Real Estate Head of Midlands Simon Robinson said.

“It indicates at least a medium-term future for JLR in the area, which will support the manufacturing sector and the wider economy and positively impact the commercial real estate market."

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Developers are already eyeing-up the potential. St Modwen worked with first tier automotive supplier Grupo Antolin to deliver a 113K SF unit to support their work providing interior trim systems and components to clients including JLR. St Modwen has established a dedicated team to work with the auto sector on more deals.

Jaguar Land Rover’s commitment to delivering electric vehicles in the West Midlands is promising, especially for the industrial and logistics sector,” St Modwen Senior Director Ian Romano said.

“Whilst it may take some time for the benefits to be felt by the property industry, there will be a positive knock-on effect with the car giant’s suppliers needing to be able to upscale in order to manufacture and deliver parts, carry out research and development, store and transport vehicles.

“We recently established a dedicated industrial and logistics business unit in recognition of the opportunity UK-wide, but the Midlands is a brilliant example of how a particular sector can drive forward growth.”

“We are fielding some demand from the electric vehicle sector, some component makers, but it's mostly manufacturers like JLR who took a 400K SF Prologis unit earlier this year for battery assembly,” Avison Young principal David Wilmer said.

“We’ve not yet seen much activity from suppliers, although there are a couple of requirements and some more floating around of about 100K SF each. So substantial enquiries, just not many of them.

“JLR’s moves, combined with BWM’s investment in electric Minis at Oxford, will be significant, but we need to watch how much is manufactured overseas. We also need to be careful not to assume this means a massive long-term increase in demand. I guess many component makers will just reconfigure their floorspace to suit electrical vehicles, and there may be no net increase in floorspace overall.”

Electric car production will not begin in earnest until (perhaps) the middle of the next decade. But with car makers now tooling up, the pace of change is sure to quicken. And with it a new, more sustainable, if not necessarily much larger, auto-sector property market.