Bringing opportunities

As usually happens, building new transport networks opens up development opportunities. In this case it is the Crossrail with its creation of new stations. Derwent, in collaboration with Crossrail, has put in a planning application for a mixed use scheme of 25,548 sq.metres to be built above the new Tottenham Court Road Station, to be called 1 Oxford Street.

The main part is offices of 16,443 sq.metres on eight floors, complemented by further offices and a new 350 seat theatre.
There will also be retail space. Derwent’s John Burns commented: “The planning application is an important first step in the much needed revitalisation of the eastern end of Oxford Street and is essential for the long term growth of Fitzrovia and Soho, where we have holdings of over 139,350 sq.metres.”

Derwent now has planning permission for a mixed use scheme of 31,214 sq.metres at 80 Charlotte Street, Fitzrovia, W1 plus more residential space at nearby 65 Whitfield Street and Whitfield Place. It will be part new build and part refurbishment to a design by Make Architects on an island site in the middle of Fitzrovia. It will have a capital value of £125 million. Public realm improvements bring the creation of a new park.

Derwent has also linked with Grosvenor for a mixed use scheme at 1-5 Grosvenor Place, next to Hyde Park Corner, that will feature a hotel, commercial and residential space. Just to add to the big list of Derwent projects, it has planning permission for another mixed use scheme of 27,034 sq.metres at the City Road Estate, EC1. This will be mainly offices with some retail and residential accommodation.

How long will the fun last?

The intriguing question in London is how long the inward flow of money into prime assets will continue, although the recent increase from Greece and Spain indicates demand is undiminished.

Apparently there are no limits to what can be sold with the German CLI Group Fund putting he iconic 28,910 sq.m. Lloyds Building on the market for £290 million for a yield of 5.5%.

A similar price is being asked for the 30,110 sq.m Tower 42, another landmark property in the Square Mile.

Knight Frank’s Stephen Clifton said: “Investors with global perspective can find best in class assets and tenant covenants in the city.” Adding to the attraction is that sterling is down 30% since 2007 and there is also the consideration of the euro being under pressure. The high prices available and the prospect of rental increases make this a perfect period for selling, particularly as some of the German funds show large gains.

One of the largest portfolios on offer is from KanAm which is using Knight Frank for the 34,373 sq.m. headquarters of the European Bank for Reconstruction and Development at One Exchange Square, EC2. Also in the portfolio, which could raise £1 billion, are Deutsche Bank’s Winchester House, Thomson Reuters’ 30 South Colonnade and Olswing’s HQ at 90 High Holborn.

Some of the selling is coming from the Irish, such as Shieldpoint, which is putting the 8,361 sq.m. Royal London House at 22-25 Finsbury Square on the market through Savills. This is the third time Shieldpoint has sought to sell city properties in the past two years. What is impressive in London is the wide range of investors. For example, the Canadian group Brookfield is prepared to pay over £300 million for the 42,734 sq.m. Broadgate West, EC2, from Gemini Commercial for a yield of 6%.

Big numbers for west end residential

Developers’ ambitions to build ultra luxury apartments in the West End are increasing as the flow of foreign buyers continues to grow, the latest being Greek and Spanish investors seeking safe havens for their cash.

Among the luxury projects is a proposed plan by Brockton Capital for a £400 million residential scheme on a corner site at 56 Curzon Street where it has been piecing together the land since 2007.

At the moment, the block has 35 flats and the new scheme would have a restaurant, garden, spa and underground parking. Initial estimates are that selling prices would be £48,420 a sq.metre (£4,500 a sq.ft.).

Another major residential scheme is for the Clarges Estate at 82-84 Piccadilly, a former office of the MI6 spy agency, which is expected to go to Chelsfield Partners for £170 million. The 1 acre scheme could mean similar prices to those
expected for Brockton’s project and comes at a time when there is a shortage of major sites for offices in the West End.

John Caudwell, who made a fortune marketing mobile telephones, has joined in the quest for luxury residential schemes in the heart of Mayfair. He has purchased Audley Square House for £143 million and plans a large residential scheme.

Caudwell said: “The intention is not just to re establish Audley Square as one of the most desirable residential areas in London, but as one of the most desirable in the world, with super prime properties appealing to the most discerning buyers and I believe traditional Mayfair architecture is the key to success.”

Summer high

Far from slowing down, office demand in central London rose strongly again in August with a 13% rise in the City pushing requirements up to 706,040 sq.metres (7.6 million sq.ft.). There was a contrast with the West End, said CBRE, where demand was steady at 445,920 sq.metres (4.8 million sq.ft.). Digby Flower of CBRE said:

“However, a fourth consecutive month that space under offer has remained at or above the ten year average reaffirms our belief that the second half of the year will witness an improved picture on the first six months.”

Further research by CBRE has shown that secondary property has taken over from prime in leading capital growth. Yields on prime central London offices have stabilised but have tightened on secondary property. “Yield compression on prime property looks to have run its course,“ said Peter Damesick, EMEA (Europe, Middle East & Africa) Chief Economist at CBRE.

London commercial property remains the best performing part of the UK with Midtown outpacing the other London areas throughout the summer. Iain Malcolm of Farebrother said “Total investment transactions and occupier take up in Midtown could match, or even exceed, pre recession levels by the end of the year. Demand from a wide variety of business sectors, low supply (6% availability rate) and a modest development pipeline has driven investor interest.”

The most notable recent lettings have been at UK & European’s recently completed 1 Kingsway, where the creators of the iconic Wolseley restaurant will be opening a new 13,500 sq.ft. sister restaurant at the end of this year. Tate & Lyle has taken the top floors (24,780 sq.ft.) for its new corporate headquarters at a headline rent of £67.50 per sq.ft. a benchmark for new space in WC2 in the current cycle and John Laing has just signed up on the 1st & 2nd floors.

One part of Midtown has been transformed with the first stage of the Chancery Lane Enhancement Project completed. It has brought a host of improvements from footpath widening and repaving as well as better street lighting. There has also been tree planting and new seating.

City of London Planning Chief, Peter Rees, said: ”This long term strategy has been carefully coordinated to preserve the unique character of one of the most historic and unusual streets in the City while also making it fit for purpose as part of a 21st century business centre.”

In fine fettle

What is clear is that the City office market continues in fine fettle, despite the woes of the national economy, with new developments and a flood of investment deals. The City of London has given planning permission for four new schemes, including greater height for Great Portland Estates’ and Brookfield Office Properties’ 950,000 sq.ft.100 Bishopsgate scheme. A similarly sized scheme is planned by Hines for 100 Cheapside, where Canary Wharf Group was originally the front runner, while Rockspring and Chesterfield Asset

Management have planning for a slightly smaller scheme at Centurion House, EC3. Rockspring’s Richard Bains said: “Since acquiring the project last year, we have drawn up ambitious plans to create an entirely new ground up development which will appeal to a wide range of city occupiers.” The largest development getting planning permission was City Site Estates’ 11 storey scheme of 12,077 sq.metres (130,000 sq.ft.) at 51 Eastcheap, EC3. One scheme that already has planning permission is Hammerson’s £485 million Principal Place, E1 project. Now Hammerson is seeking a partner for the 50 storey residential element of the 73,856 sq.metres (795,000 sq.ft.) development which will have 243 private and 56 affordable units.

Getting the best return

One West End site that will be developed mainly for offices is 8-10 Hanover Street which has been sold by LaSalle Investment Management to Morgan Capital Partners for over £25 million.

The property has planning permission for a mixed use scheme for offices of 2,321 sq.metres (24,984 sq.ft.), together with retailing and six apartments.

“The sale of this asset is the culmination of a process of site acquisition, planning, design and construction development which has resulted in superior returns for our pension fund client,” said LaSalle’s Richard Maple.

Backing technology

The days when the City was a jealous guardian of its role as the top global financial centre has shifted to a more subtle position.

That earlier hostility was mainly directed at Canary Wharf, which is now a fact of life and has added to the global appeal of London. The new role is to foster the creation of an East London Tech City stretching from a roundabout in Shoreditch to the Olympic site in Stratford. Young entrepreneurs and new start ups are flocking to the area around Silicon Roundabout. Simon McGinn of the City of London said: “The City Corporation has facilitated the start up of an Innovation Centre in Smithfield which provides advice and guidance to SMEs (small and medium enterprises).

In fact, we have already actively supported the SME community for some years through the provision of affordable accommodation in City fringe areas.” He noted that the government was pushing the initiative hard with its vehicle, the Technology Strategy Board, having a £200 million war chest to help the high tech industry. In fact the government has taken its role to promote the Tech City aggressively as witnessed by its support for Eric van der Kleij as UK’s Trade and Industry’s“entrepreneur in residence.”

Also, Intel has thrown its weight behind Tech City, earmarking a supercomputer, capable of handling 2.25 trillion calculations per second, for startup companies in the area to use free of charge. The City of London has sponsored a scheme known as “Angels in the City” to recruit 125 investors prepared to put seed money into new companies. The scheme is in cooperation with the London Business Angels and aims to generate £10 million in new investment annually.

What attracts the young businesses to the area is that costs, notably rent, are relatively low and they are physically close to sources of funding in the Square Mile.

Access to these young companies is one of the reasons why Google and Cisco have moved into the area. McGinn points out that “it is hard to plan a cluster of like minded companies and entrepreneurs but in the case of Shoreditch there was already the framework for high tech operations because the creative industries had already moved in.”

The competition from other parts of Europe, notably Berlin and Dublin, is fierce. The advantage in London is the adjacent pool of wealth through individuals and financial institutions plus the experience of the City of London.

Rebuilding Bromley

Bromley has joined nearby Croydon in ambitious plans for town centre regeneration.

The Bromley master plan names 12 opportunity areas for offices, hotels, housing and, in particular, shops, in a £1 billion plan that will need private developer involvement. Among the sites is one west of the High Street that could have 19,974 sq.metres (215,000 sq.ft.) of shopping and 1,180 residential units. Included in the proposals is a major extension of the Glades Shopping Centre.

Two sites have already gone to developers; Land Group will turn the town hall into a 150 bedroom hotel and Cathedral Group will embark on a £300 million scheme in Westmoreland Road.

In the case of Croydon, the master plan for the key site between George Street to the north and the High Street to the west, in the heart of the metropolitan centre, has been up for public consultation in September and October.

The area has some impressive buildings, such as the art deco Gas Board property and also the headquarters of Nestle UK, but it suffers from a poor quality public realm and the legacy of the 1960s St George’s Walk Shopping Precinct.

Bromley based Jeff East of Acorn has already put together a deal for a Travelodge in the town, one of four in the immediate area, the others being in Sidcup, Bexleyheath, and East Grinstead (which will have a Wilkinson store as part of the scheme).

"Generally speaking the lettings we have transacted have been small. The investment activity has been from private buyers, such as the portfolio of 11 freeholds we sold, three of them let to Swintons," East said. He noted that business had become harder in the past two months "but we have had a good year and double that of 2010."

Gateway Starts

With funding agreed, preliminary work is starting on the Mersey Gateway project that will bring a six lane toll bridge between Runcorn and Widnes. Steve Nicholson of Mersey Gateway said: “The agreement represents the best possible deal for the public purse and means that we can focus on delivering a project that will bring benefits to local people, commuters and businesses across the region.” It comes at a time of increased development activity in the area, epitomised by Peel getting the green light for the £175 million Trade Centre in the Wirral Waters scheme at Birkenhead Docks. Also in Merseyside, Barnfield Centric, a joint venture of Capital & Centric and Barnfield Construction, has started building the 7,618 sq.m. at the Estuary Banks Business Park, Speke, South Liverpool. The scheme has been helped with £2.54 million from the European Regional Development Fund.

The twenty hybrid units can be used for offices, research & development, light industrial and warehouse accommodation and come in a variety of sizes.

Cauldwell joins Prince

The role of local entrepreneurs in regenerating their areas has been a key factor in many parts of the UK, not least in the North West through John Whittaker of Peel.

Now we have John Caudwell, who created a successful mobile phone business employing thousands in Stoke-on-Trent, with his involvement in the conservation and regeneration of the Middleport Pottery in his home town.

This has also become another project for the Prince of Wales’ charity, Tthe Prince’s Regeneration Trust. The objective is to create local jobs, attract new business to the area and ensure that production of the Middleport blue and white Burleighware remains in Stoke.

“In an era of invisible and largely electronic economy, it is sometimes forgotten that everything we know today was built on an industrial and manufacturing revolution, which bred incredible craftsmen and products and made Britain a manufacturing powerhouse.

Coming from an engineering background myself, I really appreciate the skills required in making and producing quality products,” Caudwell said.

He added that “nowhere on earth are the skills and craftsmanship of working with clay, water, heat and colour so deeply imbedded in the DNA of the population and it is crucial that this is preserved in Stoke.”

Stoke already benefits from the skilled development by St Modwen, which has now submitted a planning application for the latest phase of the Etruria Valley development, an area which is at the heart of the city’s pottery history.

This will see an increase of 16 acres in the Etruria Valley Business Park, which is part of the wider Festival Park area, once the home of the Shotton Iron and Steel Works. The joint venture of St Modwen and the city’s regeneration company aims to build a mixture of offices, manufacturing and storage space.

Since the regeneration plan for the area was launched in 1988, there has been development of 125,415 sq.metres (1.35 million sq.ft.) which has included a large contact centre for Vodafone and a new factory for Wade Ceramics.

Backing Birchwood

Cantt Pak has added to its holdings in Birchwood Park, Warrington by buying Washington House and Allday House advised by Pin Property Consultancy, whose MD, Nasira Majid, won Woman in Property and Outstanding Business Woman of the Year awards at the first North West & Isle of Man Women in Business Awards.

The two buildings total 9,755 sq.metres (105,000 sq.ft.) with Washington House occupied by URS, an engineering consultancy, while Allday House is empty. Imran Younus of Pin said: “We will soon announce details of the refurbishment programme that will totally transform Allday House. We have already had interest from potential occupiers.” DTZ acted on the acquisition. Also in Warrington, Allen & Appleyard has taken the 1,505 sq.metres (16,196 sq.ft.) Unit 3, Taurus Park, Europa Boulevard.

Pannone in the market

Yet another major Manchester based law firm is seeking a large new headquarters in the city. Pannone wants to move out of its Deansgate building by the spring of 2014 and is using p3 to find a site of 8,826 sq.metres (95,000 sq.ft.). It has 620 staff in Deansgate, Hale, Alderley Edge and London. Pannone Managing Partner, Emma Holt, said: “We have spent a great deal of time this year finalising our strategic growth plans to position the firm to capitalise on opportunities in the evolving legal market.” She indicated that Pannone might go for two properties in the city centre to cope with its needs.

Catering for the media

In the competition to attract new investment, Manchester has stolen a march on many cities in the UK and Europe by having a major new media complex in Salford Quays.

The scheme by Peel that has brought in the BBC and ITV is of such a size that it has impacted on the whole UK media industry o the point where a wide range of companies catering for media want to be located in the region. This potential has prompted Canning O’Neill to start a new company focusing on the needs of the media, a sector of the economy that was already thriving in the region with a considerable history, including being the most important newspaper centre in the north of England for many years Mark Canning said: “We have seen a dramatic increase in enquiries from media companies and realised there was the potential for a company focused on the industry. In my view, this is the most important trend I have seen in my 22 years in Manchester.”

Among the initiatives from Canning O’Neill is a website devoted to the media industry This is not something that has come out of the blue, because they already had considerable experience of dealing with media requirements.

“We have been involved in filming, notably at the Soapworks,and are familiar with the needs of media companies,“ said Canning. The creation of a new company at a time of tough economic conditions speaks for a degree of optimism. Another new company is Capital & Centric which brings together two North West developers, Tim Heatley and Adam Higgins. Both have considerable experience, with Heatley having been a director of Modus while Higgins has been with Peel, Ask and Manchester Property Alliance Group.

The company’s strategy is to build a portfolio organically without exposure to excessive debt. Heatley said: “The current market provides an opening for companies run by individuals with extensive experience but without the legacy of servicing debt with their portfolio.”

Axa build

Axa Real Estate Investment Managers are likely to be one of the gainers from the current market having received planning permission for the £50 million office scheme at St Peter’s Square. It manages this property on Dickinson Street, fronting St Peter’s Square, for the Co-operative Insurance Society and will now develop a property with a 12 storey structure of 10,033 sq.m. more than double the existing building. WHR and CBRE are lettings agents for a project that apparently depends on a pre let to trigger construction.

The property will meet the top BREEAM standards on sustainability. Axa’s Dorrien Thomas said: “In recent years, Manchester has firmly established itself as England’s premier business location outside London and we are confident that the new development’s prime city location, together with the quality of the space, will make it an ideal destination for local, national or international businesses.”

Going bust

Judging from the latest figures for business failures, the economy is having a hard time picking up speed in the region. According to Equifax, the failure rate of businesses in the North West increased by 9.1% in the third quarter compared with the same period of 2010. In fact, that is half the national rate.

To some extent the figures should not surprise since retailing has had a bad period with a 41.8% rise in failures. Mark Nuttall of Equifax commented: “The North West has seen failures creep up by 10%, which highlights the overall UK picture and suggests that businesses everywhere need to remain cautious. The reality is that businesses are continuing to find it much harder to keep their heads above water as the economy fails to pick up.”

Attracting investors

F&C Reit Asset Management has bought the 7,060 sq.metres Boulton House, Chorlton Road, Manchester. F&C’s Daniel Plummer said: “We recognise Manchester attracts top inward investors and is a continuing base for existing businesses resulting in a strongly performing occupational market.” Greg Ball of Jones Lang LaSalle, letting agents on the property, added that F&C “take a competitive approach to quoting rentals and offer flexibility, as we intend to subdivide one floor into small suites.”

Holding up

It may surprise the more pessimistic forecaster in the UK, but the regional commercial property market is holding up well and is set to at least match last year’s outcome.

Among the major cities, Manchester has the best balanced market, helped by the scale of its economy and strong entrepreneurial spirit as exemplified by Media City and Spinningfields.

What is happening is that the downturn in the UK economy is providing a test for all regional economies and markets and those with the greatest resilience are emerging as stronger entities. To some extent the fierce competition between Manchester’s two football teams illustrate that spirit.

Analysing the first nine months’ figures for regional office markets, Jones Lang LaSalle (JLL) expects aggregate take up by the year end to equal 2010. JLL notes that in the third quarter rents in Manchester increased by 5.3% on the
previous three months and the Grade A vacancy rate is only 2.1%. Given the tough market, those are impressive figures. Even so, Peter Skelton of Lambert Smith Hampton said: “The market is extremely quiet and it appears that a short term approach has returned bringing a lack of decision making.

That contrasts with the start of the year when there was expectation that we were overcoming the financial problems in the UK.” In his view, the office market lacks direction and there is no confidence that it has reached the bottom. One of the future problems could be the amount of property that will be released by the banks holding it because of bad loans.

So far, financial institutions have been unusually careful in the release of this property but some is being filtered out, notably from Irish sources. In fact, the overall picture of the market can be painted in brighter colours because of planned new development and demand from large companies. An indication of the demand is that there are requirements for at least 27,870 sq.metres (300,000 sq.ft.) of Grade A offices, led by BUPA with a need for 13,006 sq.metres (140,000 sq.ft.).

The impetus is that a majority of its leasing contracts end in 2015. Another major requirement is from Jacobs Engineering for a regional headquarters of 9,290 sq.metres (100,000 sq.ft.). In this case there is the question of whether the company takes existing space or goes for the option of design and build. Also in the market for a large office is the insurance company Aviva.

Yorkshire grit payout

Perhaps it is a reflection of the region’s determined spirit, but the commercial property market is apparently ignoring the dire economic warnings and having something of a revival.

That has opened the way for higher office rents and a return of new development in central Leeds. Jeff Pearey of Jones Lang LaSalle takes an optimistic view of the situation.

“We have seen a significant improvement in occupier activity in the second quarter (which has continued since) with a 331% increase in lettings compared with the first three months and shows
that stronger sentiment is finally returning to the market,” he said. According to the Leeds Agents’ Forum there are promising signs that take up this year could top 37,160 sq.metres, well ahead of 2010. The Forum said: “While occupiers remain cautious, the figures show a healthy level of interest, at what is traditionally the quietest three months of the year.”

Some of these requirements are of impressive size. The law firm Squire Sanders & Dempsey is seeking 5,574 sq.metres. This illustrates Leeds’ role as a legal and financial centre. The natural reaction in a city where the amount of Grade A space is declining is new development.

And so to the action. Planning permission was granted in October 2011 for the redevelopment of a 120,000 sq.ft. landmark building above Leeds City Station. City House will provide Grade A, BREEAM Excellent offices suites of all sizes, meeting/conference facilities and serviced offices. The main contractor is due to be selected and various approvals with Network Rail are progressing to enable a start on site early next year with completion scheduled for mid 2013.

Gregory Projects and Marshall have also submitted a planning application for a £30 million office and hotel scheme at Whitehall Plaza, next to the railway station. It will have a 130 bedroom hotel and 4,645 sq.m. of offices. Richard Dunn of letting agent Sanderson Weatherall commented: “There is a shortage of Grade A offices in prime city centre locations and even ahead of the planning application, occupier interest in the scheme has been encouraging.” Adam Cockcroft of joint agent DTZ added that “Leeds remains one of Europe’s top business destinations and still enjoys a healthy demand for high quality offices, despite the economic downturn.”

Taking a shine to Leeds

The improved climate for development is likely to lead to the Lumiere scheme on Wellington Street, which was originally slated to be a residential tower, being developed commercially.

Ripley Capital and Axa Real Estate Managers have teamed up to acquire the site from Lloyds Banking Group. The property was designated to be Europe’s tallest residential tower but is now in the hands of the Receiver, Deloitte.

The new plans calls for a 1,1148 sq.metres scheme of offices and shops on the ground floor. Meanwhile, Legal & General, advised by Jones Lang LaSalle, has paid Danmerc £14.38 million for the 4,755 sq.metres office property at 1 Whitehall Quay, an initial yield of 7.88%. The largest investment deal, however, was RREEF buying the 9,011 sq.metres Lateral office building on City Walk, Leeds for £24 million from DTZ acting as the LPA Receiver.

The property is let to the Department of Communities & Local Government. In another major deal, a prime Leeds shopping arcade that boasts some of the UK’s top retailers has been put on the market by the Bank of Ireland Private Banking. The 20,903 sq.metres Grade II listed Victoria Quarter has been given a price tag of £135 million for a yield of 5%, reflecting the quality of the high end occupiers such as Harvey Nichols, Wolford and L’Occitane. The bank paid £126 million for the arcade in 2006 and there have been off market efforts to sell it for some time.

A Warning of Shortages

While the industrial property market in the region has displayed admirable stability, the lack of new development means that shortages are already occurring.

That is the message from Mike Baugh of DTZ who said: ”As the market improves and take up of vacant stock continues, we move closer to the situation where there is a shortage of some sizes of units. This is intensified by a shortage of land and a limited number of developers holding back speculative development.”

He suggested that the problem in Leeds was for companies seeking units of below 1,394 sq.metres (15,000 sq.ft.) bringing a ”hardening of rents and a reduction in incentives.” Even so, Yorkshire offers a higher proportion of Grade A industrial space than most of the UK.

Baugh said: “The window of opportunity for occupiers to secure an attractive deal is closing and they will have to be more organised and forward thinking in their search for new premises.”

Nationally, reports Jones Lang LaSalle, occupier demand in the first half for big sheds weakened and this continued in the three months to 30 September. But “investor demand is strong, concentrating on prime stock let to strong covenants on long leases.”

Two examples of recent industrial deals come from Knight Frank. It acted for Havells Sylvania who sold a 12,727 sq.metres (137,000 sq.ft.) warehouse in Shipley to Card Factory. At Harley Business Park, Bradford it has let 1,858 sq.metres (20,000 sq.ft.) to Barrett Steel.

Another significant industrial transaction in Yorkshire is provided by the bus manufacturer Optare which is amalgamating its three factories in Leeds, Blackburn and Rotherham into one 13,006 sq.metres (140,000 sq.ft.) unit at Sherburn Distribution Park, Sherburn in Elmet. This will be the first new bus assembly plant in the UK for 40 years.

Paul Mack of DTZ said: “The latest addition demonstrates the capabilities of the area as a hot spot for manufacturing and distribution in the Yorkshire region. The Sherburn Industrial Estate benefits from a huge power supply which is the key to the manufacturing sector.”

Inland Port for Doncaster

The pace is also quickening at Doncaster where there are ambitious plans for new transport links and regeneration. Top of the list is a new £400 million plan to build Britain’s largest inland port and logistics park. This is the result of a deal between Helios Europe, SEGRO and Shepherd Developments for a site at Rossington, near Doncaster.

It is designated as an inland port because it will have customs clearance and bonded warehouses in a total scheme of 534,175 sq.metres (5.75 million sq.ft.), all linked by rail and direct motorway access. The key target is for goods from Felixstowe to be shipped inland to the port, which is on Junction 3 of the M18. Mike Hughes of Helios Europe said: “Doncaster is acknowledged as a premier location for logistics in the UK.” Meanwhile, construction by Vinci has started on the joint venture (council/Muse Developments) at Doncaster’s new performance venue with completion due in 2013. The new link road to Junction 3 of the M18, a key part of the inland port, is also taking shape. Muse Developments’ Michael Broadhead said: “The civic and cultural centre is really taking shape.”

Ripley in Halifax

Two transactions in Halifax add to the growing evidence of a more widespread recovery in the property market. Ripley Asset Management has paid a private investor £1.78 million for retail property at 26-30 Southgate let to Sports Direct and Banana Beach Tanning. Michael Hardman of Ripley said: “Halifax town centre is a popular retail destination with a high footfall.

There are now signs that both the residential and commercial property markets are beginning to recover, albeit slowly, and we are ready to seize attractive investment opportunities.” Also in Halifax St James Securities has completed the refurbishment of the Grade II listed 372 sq.metres (4,000 sq.ft.) Shaw Lodge House into 10 office suites. Oliver Quarmby of St James said: “We have restored the splendid Shaw Lodge House to its former glory. The refurbishment is the first major piece of work on the path to restoring the mill complex.”

York looks good too

What is impressive about the regional market is that there is a healthier situation in other towns and cities.

The improvement is not confined to Leeds because there has been plenty of activity in York, such as a 124 bedroom hotel at Layerthorpe for Tiger Developments and four deals at the Stirling Park Industrial Estate, Clifton Moor.

The four deals total 3,066 sq.m. (33,000 sq.ft.). DTZ’s Paul Mack said: “Clifton Moor continues to be the location of choice for many businesses and trade counter operators in York and the wider North Yorkshire area.” At York Business Park, Evans of Leeds has sold three office and hybrid business units at Opus Avenue and Novus Avenue for £1.54 million.

Richard Flanagan of Lawrence Hannah said: “These deals are another chapter in the success story of York Business Park, which is well located two miles from the city centre.” In the centre, Mott MacDonald has taken space at St Saviour
House through DTZ whose Eamon Fox said: “The city’s reputation as the centre for the UK rail industry makes it an attractive destination for professional firms such as Mott MacDonald.” The consultants made the decision after cycling
to work was the preferred mode of transport for its staff. At nearby Knaresborough the tea and coffee merchants, Taylor of Harrogate, has leased a 6,968 sq.metres (75,000 sq.ft.) distribution centre on the 22 acre St James Business Park. Roger Quarmby of St James said: “It is one of the final pieces in the jigsaw of our successful business park, which we have been developing for the past 15 years.” He believes that the success of the business park “will help to drive the economic growth of the historic town of Knaresborough.”

Backed by investment

Underpinning the positive view of the office market in the region is the steady flow of investment transactions.

In the largest deal for years, a fund managed by the investment manager Orion Capital Managers has bought a 50% stake in 43,663 sq.metres (470,000 sq.ft.) White Rose Office Park for around £130 million from Munroe K.

The transaction comes at a time when Munroe K is planning to expand the 27 acre park, which is three miles from Leeds city centre, with a 2,787 sq.metres (30,000 sq.ft.) office building and extended conference facilities.

David Aspin of Munroe K said: “The acquisition by Orion underscores my belief in the future of the park and gives us one of the truly forward thinking fund managers to partner, further manage and develop the business park.” There is one small office suite to let at the park, which has a number of blue chip tenants such as HSBC, O2 and the WSP Group.

Occupiers are optimistic

The improved outlook from the property sector is reflected in positive views by business in Yorkshire and Humberside for future growth.

A survey by Santander, the Spanish bank that owns a number of British banks, showed that directors of businesses in the region with a turnover of up to £20 million are expecting, on average, to double their annual turnover (109% growth) in the
next five years.

In the shorter term, businesses are concentrating on survival rather than actively pursuing growth. On the plus side, 40% of the businesses in the region are investing in research and development, which Santander said is the highest of any region in the UK.

Santander’s Steve Pateman said: “The country is reliant on these businesses to drive economic recovery and it bodes well that they are confident in their growth potential.”

Looking at enterprise

Viability of the Bristol Temple Quarter Enterprise Zone has been improved by the inclusion of residential development.

That is the view of Gordon Isgrove of GVA, saying that the Enterprise Zone should look to Bristol’s Harbourside for inspiration on how to achieve a 24 hour city. Isgrove said: “The new Enterprise Zone has laid out a vision of being a hub for creative and digital industries. I should urge those planning the zone not to overlook the benefits of including an element of residential use to create truly mixed use and creative development.” In his view the success of the zone will not only be the number of jobs it creates but also the establishment of a sustainable city quarter where people want to live and work and prove an attraction to property investors over the long term.

The zone will play an important part in the growth of the city because it aims to create 17,000 jobs over a 25 year period, although some doubt has been cast on whether this can be achieved solely with creative and digital industries. That said, the letting of space in Bush House, one of the most prominent buildings in Bristol, to Yucca, a digital marketing agency, indicates a demand from that sector even if it has taken a small amount of space. Ben Martin of Yucca commented: “Bristol has been establishing itself in the past few years as a creative hub for the digital media.”

Cashing in at Cabot

The Crown Estate is cashing in on the successful Cabot Park, Avonmouth by selling a third share to Axa Real Estate acting for a client.

The 33 acre site will be developed by the Co-operative group as a regional distribution centre. The Crown Estate will retain the other 64 acres on the park, which is used by Honda for storing its vehicles. The park wasdeveloped by a joint venture of Gallan and Stoford with DJ Deloitte acting for the Crown Estate.

The Crown’s regional portfolio includes shopping centres, retail parks, industrial estates and business parks across the UK. Its portfolio is valued at over £7 billion.

Avonmouth is at the heart of an active industrial market that benefits from good transport links. This brings a steady stream of deals, such as Flights Hallmark taking 3,467 sq.metres (37,317 sq.ft.), through Lambert Smith Hampton (LSH), in Silverton Investments’ Port Edward Centre. The building will be used by a fleet of buses serving the region. LSH’s Tim Beare commented: “The Port Edward Centre is now a fully occupied estate, further demonstrating that Avonmouth
continues to be a target destination for a broad range of high quality occupiers.”

The strength of the Avonmouth market makes refurbishments such as the Croudace Properties’ unit at Third Way Corner (which is being marketed by DTZ and Jones Lang LaSalle), profitable. Research by DTZ shows that the south west has the smallest amount of industrial space available in the UK, now below 10% of total availability.

The firm’s Philip Cranstone said: “The refurbishment of the unit is a good example of the emerging Grade B battleground in the south west and results in some of the best quality refurbished space in Avonmouth.”

A foretaste of how the market is going is provided by Central Park, Bristol getting its first pre let with the pallet distributor CHEP taking 4,645 sq.metres (50,000 sq.ft.) for a 15 year lease. It will be operational in the second quarter of 2012.

£50 million Exeter project

Exeter is in line for a major development with Network Rail seeking a partner for a £50 million project adjacent to Exeter St David’s.

The 6 acre site could support more than 13,935 sq.metres (150,000 sq.ft.) of mixed use space together with a better transport interchange to mate in with Network Rail’s work on the station. There will also be a new public park.

The likelihood is that the scheme would have student accommodation, offices and a hotel. Network Rail’s plan is to fund the scheme by passing the freehold, or a long leasehold, onto the developer once two parts of the project are completed: the multi storey car park and the train crew accommodation.

Creative in Bath

Bath is also due for a substantial new development through St James’s Investments and Tesco. The £50 million mixed use scheme on the site of the former Bath Press site has been modified to increase the amount of commercial space.

The new proposal is for a Tesco store, 4,554 sq.metres (49,000 sq.ft.) of creative work units, 2,834 sq.metres (30,500 sq.ft.) of offices and 10 residential units. This would make the joint venture the largest provider of workspace for artists in Bath.

Reaping the benefits

One developer that clearly believes in the prospects for growth in Bristol and the positive outlook for new schemes is Salmon Harvester.

Together with NFU Mutual, it as now bought the 0.3 acre Three Glass Wharf site on the waterside at Temple Quay from PWC, the Administrators, which is within the upcoming Enterprise Zone. There is an existing planning permission for a mixed use scheme of 12,077 sq.metres (130,000 sq.ft.), including offices, retail and residential.

Rorie Henderson of Salmon Harvester said: “The purchase is a further endorsement of our confidence in the city centre market in Bristol and follows our purchase of Two Glass Wharf last November.”

This adjacent site, which has been close to a pre let deal, can accommodate a similarly sized scheme to Three Glass Wharf (which, if built, alone would have an investment value of £40 million) and could be combined with the new acquisition for a larger project.

Axa was negotiating for a pre let on Two Glass Wharf which, had it been completed, would have been the largest in the south west at 6,503 sq.metres (70,000 sq.ft.). The insurance company wanted to bring its staff into one building, but has now decided to review its space requirements. Salmon Harvester had been one of the investors in the original Castlemore scheme for Glass Wharf and paid £5 million for the Two Glass Wharf site.

Another strategic site which will provide one of the largest development opportunities in the south west is coming onto the market in the shape of the University Hospital Bristol NHS Trust’s General Hospital. The city centre 3 acre site has 17,465 sq.metres (188,000 sq.ft.) and will be vacant next year.

Bristol is the fourth cheapest city in the UK at £4,410 per workstation, above Leeds in fifth spot. DTZ’s Philip Morton said: “Once again Bristol features as a good value for money location in terms of overall business cost. Occupiers continue to look at the cashflow over the length of their lease which will become critical when the International Accounting Standard 37 affecting lease accounting comes into operation in April 2012.”

Swindon more active

Eduserve is to use Jones Lang LaSalle (JLL) to promote its 3,437 sq.metres (37,000 sq.ft.) data centre in Swindon. This means promoting the dedicated customer data vaults to a wider business audience. JLL’s Charlie Carden said: “The centre has the ability to deliver bespoke customer solutions within an established facility from a proven provider of IT services.”

It comes at a time when the Swindon office market is struggling to break out of the recession. Jeremy Sutton of Keningtons said: “The office market has become a bit more active and there has been an increase in viewings in the current quarter.” He noted that there has been an increasing workload on lease renewals, which will become increasingly important in the future as the 25 year leases of the 1980s run out.

Efficiency beckons

Savills estimates that a staggering 6.5 million sq.metres (700 million sq.ft.) of commercial floor space may need to undergo an energy efficiency overhaul by 2018. Of this total, 538,220sq.metres (5.8 million sq.ft.) is in Bristol. The analysis is based on the impact of the Private Rented Sector Regulations which form part of the 2011 Energy Bill. Michael Pillow of Savills said: “If the legislation goes through, leasing of a sub Grade E standard property will become unlawful from April 2018”. The advice is to go beyond basic levels of refurbishment to make properties easier to let because companies are increasingly attracted to greener buildings.

The chances are that this will lead to higher rents as well as making it easier to let. Even so, Savills’ warning is a real scare at a time when letting markets are in deep trouble.

Cubex buys in Glastonbury

Cubex has bought the 30 acre Morlands Enterprise Park, Glastonbury from the South West RDA funded by Palmer Capital and the Beckley Island Regeneration Trust (BIRT). Situated on the edge of Glastonbury and close to Street, the former tannery site has a number of blue chip clients such as Screwfix, Avalon Plastics and Thompson Group.

Cubex has also bought the residual land for further development. Peter Walford of Cubex commented: “We already have a number of enquiries from people interested in taking space and expect to announce new deals in the near future. The purchase has been funded through our principal funding partner, Palmer apital, and follows on from the successful model established at our Bath Business Park.”

Backing Bristol

There are signs that Bristol is heading for an improved office market that will put it back in the spotlight as one of the top regional cities.

The growing shortage of Grade A space indicates that speculative schemes could be once again on the agenda and that rents will respond. At the moment, said Simon Price of Alder King, “the city centre is polarised around a considerable amount of empty second hand space that is unlikely to be let in the near future.”

The likelihood is that space will be refurbished for a variety of uses and in some cases demolished for new schemes. “We now have five or six active enquiries for sizeable amounts of space of between 2,323 and 6,503 sq.metres (25,000 and 70,000 sq.ft.) and believe the growth prospects are good for the next 12-18 months,” Price said. He has two clients examining plans for new development, a sensible policy given that supply of Grade A is only sufficient for just over a year. As far as rents are concerned, the top rate is £296 a sq.metre (£27.50 a sq.ft.) which will now apply to new schemes. The expectation must be for incentives to narrow.

Although take up declined by 47% to 8,0822 sq.metres (87,000 sq.ft.) in the second quarter, there was, said DTZ, “greater interest in highly specified Grade B which offers more options and flexibility for mid sized professional firms.” The consensus is that take up will be around the same level as 2010 although this could be beaten if Axa take the sizeable amount of space they have indicated they need in the future. Indeed the financial sector was more active with some firms seeking space that they can grow into. The investment market reflects the improving situation “with a tentative equilibrium at the prime end and a contrast with the secondary properties which will be re priced.”

Crowing King's Norton

SEGRO’s King’s Norton Business Centre has proved that a well managed business park will pull in the tenants.

This year has seen a steady stream of new occupiers. Recent growth in business has prompted Sterling Technical Engineering to consolidate its three existing locations into one unit. Similarly, a growth of business has sent Mechatronic Solutions, a civil and structural engineering practice, into a larger unit at the park.

SEGRO’s Jane Leedham said: “We have invested in making the centre a pleasant and secure place to work and we’re confident that we provide the premium business space in south Birmingham.”

Barberry in Coventry

Another Royal Mail sorting office, this time in Coventry, is also to be redeveloped in a £50 million scheme by Barberry Developments.

The mixed use Bishop Gate scheme is being funded by the Co-operative Bank in Birmingham and has already been granted planning permission. It will have a supermarket of up to 12,077 sq.metres (130,000 sq.ft.), a gym/leisure facility including a swimming pool and 585 car parking places. Steve Pamely of the Co-operative Bank said: “Our lending to Barberry proves the benefits of the Bank’s strategy of developing long term relationships with customers that have clear and proven corporate strategies.”

Professionals like space

Although the regional office market was boosted by a number of large deals in the second quarter, such as the Ministry of Justice and Deutsche Bank in Birmingham, the lower end of the market is still the most active. That is the view of DTZ in a report that also highlighted the strengthening demand from smaller professional firms.

Apparently some of these were on flexible terms during the economic downturn, but are now seeking to take advantage of the current market to upgrade to better accommodation.

It could indicate an improved market for new developments in the Midlands in the main cities. Matthew Long of DTZ said: “Take up in Birmingham in the second half is forecast to reach 18,580 sq.metres (200,000 sq.ft.).” He reiterates the problem that Grade A stock will continue to fall so that rents will edge up in early 2012.

In fact the new lettings are an important indicator of the market situation with the Law Society likely to move its Midlands headquarters to the 5,110 sq.metres (55,000 sq.ft.) 2 Colmore Square developed by Nurton; accountants Grant Thornton expected to take half that amount in Colmore Plaza and another accountant, Boomer Heaven, moving to Rutland House. Note that they are all professional service organisations. International players such as Hines have experience of when to move into markets.

In the case of Birmingham its Pan-European Core Fund has bought the 3,998 sq.metres (43,040 sq.ft.) One Eleven Edmund Street from IVG for an undisclosed sum. It also owns Brindleyplace and Two Snowhill through other vehicles.
Derby has also improved with a number of new developments. Tesco plans a large store at Allanton while at Sandiacre it will go for a mixed use scheme including a store. But the largest development is on a 15 acre site of the Derby Royal Infirmary for a Morrisons supermarket, hotel, offices and 400 homes.

Lively Telford

i2r Packaging, through Bulleys, has bought the 5,479 sq.metres (58,977 sq.ft.) former UK Greetings facility at Hortonwood 30. i2r manufactures a range of wrinkle wall and smooth wall semi rigid aluminium foil containers used throughout the food industry and have relocated to Hortonwood from Stafford Park.

This is the second deal by Bulleys recently and follows the letting of the 6,712 sq.metres (72,245 sq.ft.) Premier House, Hortonwood 7 to the logistics company AMCO Services. Barry Lumsden of AMCO said: “Our partnership agreement with Force Protection Europe Limited has enabled us to finally put down firm roots in the Telford area, bringing new employment and establishing another AMCO 3rd party logistics facility.”

Bulleys also acted for Prospect Estates in the first sale at its Epic Park, Halesfield Industrial Estate, where Western Power Distribution has taken 1,950 sq.metres (20,990 sq.ft.). Prospect bought the former Plastic Omnium premises and divided it into a separate industrial estate. Bradbury Commercial are joint agents. Matthew Tilt of Bulleys said: “We are discussing with a number of enquirers seeking large properties in Telford and we are optimistic that we will be in a position to report further good news in the near future.”

All gone

At a time when many cities, including Birmingham, are seeing a decline in Grade A offices, the last speculatively built big shed in the UK has been let to Amazon.

This is Gazeley/Met Life’s 65,030 sq.metres (700,000 sq.ft.) shed at G-Park, Rugeley, Staffordshire which was taken by the on line retailer on a 15 year lease. Known as Flair, it has been available since 2008.

Such has been the pace of Amazon’s expansion that it has leased a number of large sheds in the UK at Doncaster and Peterborough as well as a massive warehouse in Dunfermline, Fife.

It comes at a time when, said Colliers International, average prime and secondary rents in the Midlands have been static for 12 months. Colliers’ Simon Norton said: “I have a distinct feeling of dejavu reading the statistics. They are no different from 2010.”

But he believes they are likely to increase now that the take up of prime space has eaten into supply. “The lack of speculative development due to the scarcity of funding and the general lack of confidence due to the recession have exacerbated the situation.

For the first time in years, landlords are beginning to feel that they may have the upper hand and are holding out for better rental terms.” At the heart of the decline was the fall in land prices. For example, in the West Midlands lot sizes of 10 acres or more averaged £484 an acre this year compared with £221 in 2006.

Where land is available for expansion, developers are increasing the size of existing estates, such as Hortons at Hollymoor Point, Rubery where it will build a new unit for NVC (Manufacturing) China’s largest lighting manufacturer, who already occupy a unit there, making a total occupied of 8,454 sq.metres (91,000 sq.ft.) at Rubery.

Typical of many estates, Target Park, Redditch only has two units available after the sale of a 1,134 sq.metres (12,209 sq.ft.) warehouse to Heartbeat Manufacturing.

Highcross Invests

One development that has started is the second phase of Highcross’ 3,406 sq.metres (36,665 sq.ft.) refurbishment of Livery Place. It is the largest refurbishment, costing £1 million, in Birmingham in 2011 and will bring the property up to Grade A status. This follows the first phase which cost £3 million on the 5th and 7th floors and common parts.

Highcross is having real success with the property. The company’s Joe Curlett said: “Randstad, the human resources firm, has taken a floor of 836 sq.metres (9,000 sq.ft.), soon after Packt Publishing has taken further space. We will be offering a boutique suite soon.” CB Richard Ellis’ Theo Holmes said: “Tenants are turning their attention to good quality refurbished Grade A space, which generally can be acquired for up to £10 a sq.ft. cheaper than new space in the city centre.” CB Richard Ellis has been chosen as the sole letting agent by Ballymore and Hines for the 29,170 sq.metres (314,000 sq.ft.) in the second phase of Two Snowhill.

The law firm Wragge & Co, will occupy virtually half of the scheme. CBRE is now also marketing 4,180 sq.metres (45,000 sq.ft.) in the Mailbox, recently bought by Brockton Capital. Brockton’s David Zimmerman said: “We have a significant capital budget allocated to maximise the potential of the Mailbox as a key destination in Birmingham. We are continuing our strategic review of the asset, the results of which will be the basis fordeveloping our overall vision for its future.”

Still buying

CB Richard Ellis (CBRE) makes the point that 77% of the take up in the first six months of the year was in second hand space. At the same time, the imbalance in supply worsened as second hand space took a larger proportion of the 259,293 sq.metres. CBRE’s Will Ventham said: “It is unlikely that, apart from Two Snowhill, any new speculative space will come to the market in the foreseeable future, albeit Goodman may be reviewing options at Eastside.” On the other hand, the appetite for investments is undiminished.

CBRE’s Justin Marshall commented: “The appetite for larger, prime assets in the central business district from the UK and overseas funds should continue, while the stabilisation of rents and incentives should see the return of a number of funds and property companies to the market for more asset intensive buildings.”

Timing

Mike Slade of Helical Bar is renowned for the timing of his deals that catch the market on the move in either direction, up or down. So Helical Retail’s purchase of a 53,000 sq.metres site at Reddings Lane, Birmingham from Eaton Electric is a positive point for the city. This company is a joint venture of Helical Bar and Oswin Developments of Solihull. Helical Retail plans a 6,976 sq.metres (75,092 sq.ft.) Asda supermarket and a similarly sized retail park.

This is part of a large (£50 million) regeneration plan which includes an industrial scheme being developed by Mucklow.

Look ahead

Now is the time to move away from the stifling worry about the economy and look ahead to a healthier situation of growth, That would seem to be the message from Birmingham where the council is going for a Big City Plan for future development in 2,000 acres of the city centre with one of the government’s new enterprise zones.

Of course, the city has been pursuing an enlightened urban renewal programme for years, including using funds from the European Union for some projects. It is now applying for £20 million from the European Development Funds (ERDF) to help the development of business accommodation, office and industrial projects.

There are a host of private sector developments in the pipeline, many of them stalled by the fragile economy. A new scheme is from Sahlia Investments of Kuwait for a mixed use scheme costing £150 million in the Beorma Quarter and is adjacent to the Selfridges store and the Bullring Shopping Centre. Sahlia is seeking funding for the scheme from Barclays Corporate for the 60,199 sq.metres (648,000 sq.ft.) which will have a 200 bedroom aparthotel and a 27 storey 31,603 sq.metres (340,183 sq.ft.) office block together with a refurbished cold store.

The improvement in the urban areas are also a priority, hence the work on Church Street public realm in Colmore Business District (CBD). This high quality designed area will bring wider and new pavements, landscaping, trees and other associated works.

CBD which is one of four business improvement districts in the city centre is contributing £250,000 towards the total cost of £750,000 for the project. Gary Cardin, Chair of CBD said: “The new square will add to the public realm improvements promoted by us across the commercial heart of Birmingham and be a showcase for high quality, pedestrian friendly open spaces.”

These improvement plans come at a time when the city centre office market is only in moderate health, although the second quarter take up was 14,678 sq.metres (158,000 sq.ft.) mainly due to several large lettings, such as the Ministry of Justice for 3,530 sq.metres (38,000 sq.ft.) at Axis, But the Grade A stock has now fallen again, continuing the three year long process. Craig Satchwell of Colliers International said: “Grade A stock is now at its lowest level for three years.

Worryingly, there is just one scheme with a speculative element currently on site, Hines and Ballymore’s Two Snowhill, which will not be completed until 2013.” He predicts that there will be an increase in refurbishment of existing properties together with pre lets for speculative schemes.

Milton sells in Redhill

In the largest deal in Redhill this year, Surrey County Council has bought the 3,833 sq.m. Consort House from the Milton Group. William Gelder of Hurst Warne, who acted for Milton Group, said the council will be relocating staff from existing premises in Reigate.

While the office market in Redhill and the surrounding towns has been quiet this year, it can look forward to the major mixed use plan for 9,290 sq.m. scheme (including a Sainsbury store) in the future when the existing lease runs out in 2014.Gelder said: "There is the prospect of lettings in the town when the current sub leases at 3 Princess Way expire in 2014, with occupiers such as Santander and Lombard being forced to relocate. There are a number of historic leases in the town that were agreed in the late 1980s and 1990s that are coming to an end in the next few years and occupiers are faced with the choice of either negotiating new deals with their existing landlords on tiring buildings or taking the opportunity to relocate to new or refurbished accommodation whilst the market is still in the tenants’ favour. This is likely to be the case in other similar office markets throughout the UK."

Showing the way

As politicians struggle with the closure of the massive Pfizer research base at Sandwich, now renamed Discovery Park, they will surely take a long look at the examples of Kent Science Park (KSP) and Kings Hill.

Each of these is a model of intensive and focused management together with the benefits of long term investors, La Salle Investment Management at KSP and Liberty Property Trust at Kings Hill. The problem at Sandwich is the sheer scale of the site with 278,700 sq.m. of laboratory, storage and office space. Enterprise Zone status will help but CBRE still faces a mammoth task.

In the case of KSP, the former Shell facility has been turned into a science park with a range of high technology companies in 55 acres of landscaped grounds serviced by a range of amenities such as a café and shop, gym and swimming pool together with meeting rooms and a lecture theatre. There is planning permission to expand on an adjoining site which will allow for future growth. That is the focus of Site Director, James Speck, and his experienced staff. "The expansion of Sheerness and the location of the Vestas wind turbine factory there will put pressure on the infrastructure, as will the regeneration of Sittingbourne town centre."

That will lead to upgrading of the transport and power supplies, he says, including the vital link to the M2 motorway which will become more important as Sheerness and KSP grow. That link could come from the northern relief road for Sittingbourne. Speck says simply: "The future is bright. Never forget that we have some big businesses in this area and we are a jumping off point for continental Europe."

Another important pointer to the future is that Speck has fostered relationships with universities, including Greenwich, Imperial, University College London (UCL) and Kent. Another peg for the future plans is closer ties with France to foster cross channel business activity.

Given the nature of the occupiers, such as the recently arrived Toximet, a product of the University of Greenwich, it is not surprising that KSP has an advanced broadband network. "We are looking at the idea of clustering that would link small operators and we have the facilities to foster that, including speculatively built laboratories to suit individual needs," said Speck. His success shows with the steady rise of the occupancy rate which is 77% now and will reach 82% by the year’s end.

Fundable deal

Another Sainsbury supermarket, this time in Woolwich, has also been sold recently. Woolwich Properties, advised by Lawson & Partners, sold the 3,809 sq.m. property to a private investor for £9.7 million, a yield of 5.5%.

Darryl Stevenson of Lawson said: "This is a very fundable deal that allowed the investor to acquire a long dated secure income from a sought after tenant within Greater London. The price is at a discount because the building has a long
leasehold with a longer rent review pattern than is normal."

New JV Buys in Tonbridge

One financial organisation that has been taking advantage of the decline of the property market is Palmer Capital.

It continues to follow its route into joint ventures in different parts of the UK, mainly through funding successful developers who understand their local market. The new £25 million joint venture is, however, with a financial organisation.

Fleming Financial Services is a UK financial adviser with a high net worth international client base, with a particular focus on Africa and the Far East. The fund has completed its first deal in acquiring a Sainsbury store in Tonbridge, Kent where the deal was struck at a yield of 5.25%. The JV will concentrate on properties in the price range of £1 million to £10 million.

Green Light in Brighton

Most towns in the south east are struggling to keep regeneration moving ahead but in Brighton plans for a mixed use scheme at the railway station have progressed.

The city council’s planning committee has given the green light to the scheme of Square Bay Properties for a hotel, offices and homes on a site known as ‘Block J.’ This is part of a programme to make access to the station easier and will, for example, bring an extension of the ‘Greenway’ route of a traffic free cycle and pedestrian link between the station and New England Road.

The scheme for a 94 bedroom hotel, 147 homes and offices is described as low carbon which includes rooftop allotments. There will also be a new public square. This development is the last of the so called New England Quarter to receive planning permission. The former railway goods yard has been developed in stages since a master plan was accepted in 2003.

Astellas buys in Chertsey

Astellas Pharma Europe, which is currently based in Staines, has bought the 9,303 sq.metres building in Hillswood Business Park, Chertsey, from Electronic Arts. Advised by Knight Frank, (DTZ for Electronic Arts), Astellas paid £16 million for the Sir Norman Foster designed building, which is set in landscaped grounds of 7.54 acres and with an adjacent development site of 6.13 acres. Hillswood consists of three headquarter buildings, the other two let to Samsung and Regus. At the moment Astellas occupies three properties in Staines so it will refurbish Building 2000 at Hillswood before moving in mid 2012.

Industrial dominates

Judging from the Locate in Kent (LIK) figures, the market is holding up reasonably well, being on target for inward investment in the first half when it pulled in 40 occupiers. What was noticeable is that demand for industrial property
increased to 60% in 2010-2011 from 39% in the previous year.

Peter Symons of LIK said that a planning application for the Vestas wind turbine factory at Sheerness was going in before the end of the year and "the consultation process has been positive." But he suggested more government support was needed for the industry.

Tough going

Normally the commercial property market in the counties close to London reap the benefit of the performance of the capital city, which has been enjoying a strong run in the past two years or so. But this is not happening at the moment and in the three counties agents agree that the market is tough going.

This view is echoed in the market survey by the Royal Institution of Chartered Surveyors that said: "Improvements in the market seen in the first half year faltered during the third quarter as occupier demand fell back for the first time in 12 months."

Even London was less buoyant which may be one of the factors that is making it harder work in the three counties. The main barrier is a lack of confidence as agents and developers digest the flow of gloomy predictions.

As far as the industrial market is concerned, Charles Binks of Knight Frank said: "Market activity was subdued in the first half year in London and the south east. We anticipate a general weakening over the next 6 to 12 months as deteriorating consumer confidence and public sector austerity measures ultimately impact upon logistics demand."

That is not preventing deals and continued development, such as at Kings Hill in Kent where the steady process of improvement continues as Liberty Property Trust takes the long view. A similar view applies to Kent Science Park, Sittingbourne.

While the Kent Property Report paints a reasonably optimistic picture with the stronger performance of 2010 continuing into 2011, it does say that "take up in (business parks) has been subdued in the first half year." The report noted the high occupation rate at Kings Hill and that in north Kent "Crossways continues to draw in major occupiers."

That applies to offices and industrial, where Schooner Park, Crossways has attracted a steady stream of new tenants, such as Milton Keynes Paint & Equipment. Broadly speaking, yields have fallen for office properties.

Hayes' gem solid

A further indicator of the improving Thames Valley market is that Jones Lang LaSalle has sold the ten acre Hyde Park Hayes Business Park for £30.1 million to Melford Special Situations for a yield of 8.2%.

The deal follows an extensive refurbishment of the Art Deco gem, which is strategically located close to the motorway network and Heathrow. LaSalle’s Gary Player commented: “We bought the property to the market in March 2011 and it attracted strong interest from a wide range of institutional and value added funds, showing that there remains a significant demand for the right type of office properties in the south east.”

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Milton Park's purple patch

MEPC’s Milton Park, one of the UK’s largest science and business estates, is having a purple patch with a host of new companies and its new status as an enterprise zone. In a one month period in the summer the innovation centre on the estate attracted eight new companies while three organisations relocated within the centre and a further three graduated to other premises. James Dipple of MEPC said: “Start up businesses are given support to succeed and expand to other offices on the estate.” The estate has become part of the Science Vale Gateway Enterprise Zone which is now within the Oxfordshire Local Enterprise Zone. Ansys, an engineering software company, is one of the growing companies at Milton Park and it has now expanded its facility to 1,134 sq.m. (12,203 sq.ft.).

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Manufacturing sets the pace

The message from many parts of the region is that manufacturing is leading the way in the improvement in the industrial market.

That is what the government wants to hear, but it has come naturally without the help of the public sector. It is hard to know how far this trend can advance but it is certainly highlighted by DTZ in its research on the UK market with the comment that “manufacturing has been at the heart of much of the positive news during the quarter.” While that applies to the wider UK, other comments from the Thames Valley bear that out.

Tunde Adegbemile of DTZ said: “The Heathrow and West London markets tend to provide a good indicator for Greater London and the south east, and there are some signs of confidence becoming more established with some speculative developments likely to commence in the second half of the year.” Adegbemile added that “from a logistics perspective, demand continues to be dominated by the food retailers, although there are signs of improving activity from the health and pharmaceutical sector.” One of the largest deals for manufacturing capacity is by Albion Land, advised by Jones Lang LaSalle and White Commercial, for Goodrich CTG, a leading carbon fibre technology firm, to take 12,774 sq.m. (137,500 sq.ft.) at Network M40, Banbury.

The £9 million facility will allow Goodrich, part of the US Goodrich Corporation, to expand extensively and develop new products. This follows Albion Land pre letting the slightly smaller nearby property to First Line and forward selling it to a pension fund client of Whitmarsh Holt Young for £8.65 million. Simon Parsons of Albion Land commented: “We identified the site as one of the few locations between London and Birmingham able to accommodate these large units. On the strength of demand we are keen to consider other opportunities along the M40.”

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Sun Park available

Sun Park, close to Junction 4a of the M3 motorway, is one of the largest office complexes to come onto the market for years, The 264,217 sq.m. former Oracle Office Park, which is in a 38 acre landscaped site, is now owned by a joint venture of Delancey and Landid and has the space for 3,000 people in three buildings as well as room for 1,351 cars. Trevor Silver of Landid said: “We anticipate that sectors such as pharmaceutical, IT, energy and research & development may be interested.”

There is also planning consent for a further two buildings totalling 14,186 sq.m. At Basingstoke’s Kingsland Business Park, SEGRO has let a refurbished office building of 1,234 sq.m. to ECI Telecom, a supplier of networking infrastructures.

SEGRO’s Chris Davies said:“This is the second building to let at Kingsland Business Park since the beginning of the year and achieved in just over four weeks.”

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Head of steam

The industrial sector has picked up steam which has been highlighted by the pre let of a large shed on the Suttons Business Park, Reading to Brakes Group, a food supplier, the largest of its type ever in the town.

The deal, through Haslams and Lambert Smith Hampton (LSH), means Standard Life Investments will develop the 19,230 sq.m.distribution and storage unit as a chilled warehouse. Philip Hunter of LSH commented: “This deal alone equates to more than 60% of the total industrial space transacted in Reading last year. For large industrial occupiers, the shortage of big sheds poses a very real challenge when it comes to acquiring new premises.”

Haslams’Neil Seager said: “Brakes’ acquisition of this new facility is an important transaction, both for Reading and the wider Thames Valley industrial market. Not only does it mark the largest deal of its type, but it sees the arrival of a major new occupier to the town.”

Another major scheme in Reading sees Royal Mail seeking a developer to buy a 69,675 sq.m. mixed use scheme on the 6 acre site of a former sorting hub. Royal Mail has planning permission for a scheme which would have 370 homes, offices, shops, restaurants and a hotel. Martin Gafsen of Royal Mail commented: “We have a strong track record in using theproceeds from the disposal of surplus property to invest in the mail operation.” Meanwhile, the office take up in Reading recorded a 116% increase to 17,191 sq.m. in the first half year compared with the same period of 2010, reports Stephen Head of Hicks Baker. He added that: “There are concerns that continuing economic uncertainty and fragile business confidence is slowing the rate of deals in the pipeline and this means the market may struggle to match the total take up of 2010.”

Head notes that the outcome will depend on the major enquiries in the market, such as Reading Borough Council and ING. He added that: “The market is relying on at least one of these ‘trophy deals’ coming to fruition in the next few months. We have to consider this (the take up in 2011) in context and remind ourselves that 2010 was already a considerable improvement on and 150% up on 2009.” The council’s decision should come in October. ING is looking for around 8,361 sq.m, more than it occupies in Reading at the moment where the lease ends in 2014.

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