Shillaw said the strategy of scaling the group was going well but real estate shares remained at a discount. Credit: via FTI

Microsoft agrees £106m land deal with Harworth for ‘hyperscale datacentre’

Harworth’s recycling of its land bank to focus on logistics sites and build its investment portfolio has seen the sale of 48 acres to the US tech giant at Skelton Grange in Leeds.

Lynda Shillaw, chief executive of Harworth Group, outlined the significance of the deal: “Since re-listing in 2015 Harworth has successfully completed a number of significant transactions that create value for our shareholders but this sale at Skelton Grange is the group’s largest to date and is yet another exemplary case study that demonstrates the successful regeneration of brownfield land.”

Microsoft and Harworth exchanged contracts for the sale of two adjacent plots, with the first phase development to be completed in the second half of this year and then the second in the first half of 2026.

Harworth said in a statement to the stockmarket that proceeds will be reinvested into logistics development and “to retain more directly developed prime Grade A properties”.

The group’s development pipeline now totals 38m sq ft, with 5.5m sq ft under construction or in advanced planning. The pipeline has the potential to achieve a gross value of £800m within the next five years, Harworth said.

The strategy for funding the logistics pipeline includes “selectively acquiring and accelerating the delivery of residential sites to provide a steady funding platform for growth”.

Harworth paid £3m in December 2014 for the former Skelton Grange power station site to the south-east of Leeds. Since buying the site, the developer has won planning approval for 1.1m sq ft of industrial and logistics space.

Before this deal with Microsoft, Harworth has already yielded results at Skelton Grange. In 2020 a 19.5-acre plot was sold to Enfinium for a 49MW energy-from-waste electricity generation facility for its own operation. In 2021 a lease was agreed to facilitate the development of a 100MW Battery Energy Storage System facility on 5.7 acres. Harworth bought 21 acres of land next door in 2023 to enhance the development potential of the overall scheme.

After the Microsoft datacentre is delivered, Harworth will have invested around £37m in the site and generated £136m of sales. The group will retain 16 acres on which to promote 250,000 sq ft of employment space. This is in addition to the 77 acres owned in a joint venture with the Aire Valley Land LLP at a neighbouring development, Gateway 45.

The group is on track to take the weighting of industrial in its portfolio from the current 60% to more than 85% by 2029.

Shillaw added: “Over the last three years and, despite volatile market conditions, we have been successful in implementing our strategy, scaling the business and continuing to deliver market-leading returns. We remain confident that we will reach our goal of growing our business to £1bn of [net development value] by 2027 and in our ability to continue to scale the business beyond this.

“Despite this operational resilience, elevated share price discounts persist across the listed real estate sector, and so with the aim of maximising both total accounting returns and total shareholder returns for our investors, we have undertaken a detailed evaluation of our strategy to determine where our focus should be in the second half of our strategic plan period.”

Shares in Harworth Group were unchanged in early trading on Thursday at 146p. The share price has climbed steadily since the start of the year when they were changing hands at 123p valuing the business at £474m.

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