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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Optimism to the fore

Colliers International has looked ahead to what the figures for take up in the third quarter could achieve and has put it above 46,450 sq.m.etres (500,000 sq.ft.) That reverses the poor showing in June-September. Guy Grantham of Colliers said: “Above all it remains the technology, media and telecoms (TMT) sectors that are leading the recovery in both take up and demand.”

“The main driver has been demand from software companies who have accounted for 31% of TMT transactions. Networking and data storage providers have been one of the most active subsections,” Grantham added.

In his view there is “much to be optimistic about.” That is true of Ealing where Redwire DC Ltd has signed a deal with the council for an innovative scheme in the West London borough that will have a 1,617 sq.m. (17,400 sq.ft.) data centre alongside a Premier Inn 165 bedroom hotel. The £45 million development will be on the site of the council’s former regulations office. The original plan was to incorporate an office but the economic stagnation since 2007 has ended that part of the scheme.

What is noticeable about the West London market is that most office centres are experiencing increasing rents. That applies to Chiswick, which has the highestat £403.50 a sq.m. (£37.50 a sq.ft.), to Uxbridge and Hammersmith.

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More space at Chiswick

Chiswick Park, which Blackstone bought for £480 million from the Chiwich Park unit trust in March, has shown how demand for space is healthy enough. It is currently talking to SOS, the security company, about a letting of 4,645 sq.m, giving it the incentive to embark on a new phase of development at the park. Blackstone proposes to invest £70 million to increase the size of the park to 130,060 sq.m.

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Companies are cash rich

While politicians bemoan the slowing of the economy, companies have been prudently piling up the cash in their balance sheets. What is preventing them from spending the money on mergers, better properties or machinery, is a lack of confidence throughout the global system. That will change in due course and they will go for growth. That particularly applies to the technology sector, the lifeblood of the Thames Valley. So it is encouraging that a number of major companies are now seeking space, such as Huawei, Nokia, ING, BP and Hasbro.

Their total requirements could be 35,302 sq.m. (380,000 sq.ft.) to which should be added substantial requirements from Centrica and an electronics manufacturer. That should be compared with the latest analysis from Jones Lang LaSalle with a poor second quarter take up of less than half that of January-March, giving a six months’ total of 52,210 sq.m. (562,000 sq.ft.). But there has been a surge in requirements to 297,280 sq.m. (3.2 million sq.ft.), which is 17% up on the same period of 2010; a healthy pointer to the future.

JLL’s James Finnis commented: “Grade A supply is being erodedand the development pipeline, which remains at a record low, is failing to replenish it. We are forecasting a point in 2012 where, assuming current levels of demand, rents will increase markedly for the best areas.” Another indicator of a healthier market is that Finnis reports 1.8 million of office inspections in the second quarter, well up on January-March.

Experience varies from town to town with Simon Fryer of Fryer Commercial reporting that “July and August were quieter than usual. Fortunately, we have been much busier in September.”

He notes the fierce competition between landlords to keep tenants and do new lettings. Fryer points to the start of Bracknell Regeneration which will bring in retail facilities, notably a new Waitrose supermarket. As far as the office market is concerned, a letting of one of the large buildings available (there are four totalling 46,450 sq.m. would be a real boost to confidence.

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Still building ships

As the long term transformation of the River Clyde proceeds, there is still a reminder of its great history as the world’s shipbuilding centre with three Type 45 destroyers being fitted out and a section of the new Queen Elizabeth aircraft carrier sitting on a barge.

In contrast, the new Clyde riverside is being built around the shipyard with the Riverside Museum, BBC centre, hotels, shops, houses and offices. Eleanor McAllister of Clydebank Re-built said: “It is important to have a long term plan for the Clyde corridor of at least 20-25 years. There are problems to overcome such as contamination from the shipbuilding but we are stitching the Clyde into the city centre.”

Although cuts in government spending are on the cards, McAllister wants “everybody to hold their nerve and continue with regeneration.” That particularly applies to Clydebank which has the “benefit of a good board and local partners,” she added. Mark Barton of Clyde Waterfront points out that the regeneration of the Clyde is one “of the largest in the UK with 68 projects under construction, including the massive NHS Southern General Campus costing £842 million as well as two other hospitals.”

The breadth of the plans is considerable and includes the Scottish Hydro Arena concert venue which will open in 2013. The expectation is that this will have a similar impact to the O2 in London. David Rooney of Glasgow Regeneration Agency said: “We have introduced residential accommodation to the banks of the Clyde and built two new bridges which have opened up the southern side of the city. This means the area has been linked to the International Financial Services District, opening up areas for further development and providing access to jobs.”

Rob Pryce, also of Glasgow Regeneration Agency, added that “it is important to bring the local population and businesses into the process of regeneration so that they stay in the area and grow their activities.” This is also helping the expansion of tourism “where the Glasgow brand has changed in the past few years to that of a business centre.”

It is worth remembering that Glasgow has a number of world class museums and art galleries, including the new Riverside Museum on the Clyde designed by Zaha Hadid. This houses Glasgow’s transport collection.

Selling regeneration The extensive waterfront regeneration in Glasgow and other Scottish cities is the main reason why it will host the 8th WaterfrontExpo in November.“This shows our commitment to regeneration in the cities,” said Derek McCrindle of Scottish Enterprise,” and we have a suitable location for it at the Crown Plaza Hotel, SECC Glasgow.” It will be held on the 2nd and 3rd of November. The event will break new ground by concentrating on the actual experience and progress of seven major cities in turning their waterfront regeneration plans into reality - and the new investment opportunities this has created. McCrindle said: “The conference will address the shortcomings of how master plans and economic aspirations have turned out in practice by offering a combination of speakers and guided tours of the Glasgow and Edinburgh waterfronts as well as city workshops.”

New business park Regeneration, together with the extension of the M74, has brought immediate rewards with two UK development companies planning to invest £14 million in the Clyde Gateway East Business Park. Scot Sheridan will develop industrial space of 5,340 sq.metres while MEPC, in its first major scheme in Scotland outside Hillington, will build 13,006 sq.metres. The site has been undeveloped for 40 years and the two schemes will support 700 jobs. Clyde Gateway East is a new business park of 12 hectares with a capacity for industrial space of 37,160 sq.metres.

MEPC’s Rick de Blaby commented: “It is an important strategic acquisition for us, where we hope to replicate and deliver a modern Hillington Park. The infrastructure that Clyde Gateway has committed to this area of Glasgow is enormous and we are happy to invest alongside that.” Another new scheme in the Clyde Gateway area is the £38 million headquarters for the Strathclyde Police, less than one mile from the site of the Commonwealth Games.

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Lightening up

The mood has lightened in Edinburgh as the office market experiences a stronger performance. As a result there is a growing appetite for new developments, as shown by Gladedale seeking a funding partner for the next stage of its £450 million Quartermile project at the 19acres of the former Edinburgh Royal Infirmary site.

When completed, it will have 900 homes, two hotels, retailing, leisure, 7 acres of landscaped gardens and 35,515 sq.metres (350,000 sq.ft.) of offices. Another major site has come onto the market with Lloyds Bank putting the 13 acres of the former Scottish & Newcastle Brewery next to Edinburgh’s Exchange District on the market. It has planning permission for a mixed use scheme of residential, leisure, student accommodation and retailing.

Jasper Masters of CBRE, who is reviewing funding options, said: “A lot of investors will want a trophy site within the UK.” The difficulty of finding suitable investments in London means “it makes sense to look further to places that are still internationally recognised and doing well, such as Edinburgh.” Stewart Taylor, also of CBRE, said of the Edinburgh office market that “despite the largely unchanged levels of new build stock, the indicators are encouraging following a good first quarter in terms of take up and an increasingly tangible schedule of demand.”

“The availability of mid market large floor plates, good quality accommodation on flexible terms has proved attractive to occupiers such as Amazon.”

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Salmon Flys

A joint venture between Salmon Harvester & Frogmore Developments is planning a major new HQ building and hotel on a prime 10 acre site next to Edinburgh Airport. The

JV behind the £300m proposal has claimed it could generate £4.4bn for the Scottish economy and create 3,600 jobs within 20 years. Salmon Harvester is also planning a mixed use scheme with NF Mutual at 50 Argyle Street in conjunction with the adjoining Punch Taverns. The scheme will have a new retail unit and a pub to replace the Cairns Public House together with a hotel on the upper parts. The end investment value is estimated at £12m.

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Good credentials

Credential Holdings is one of a number of solid privately owned property companies in the UK which has quietly and steadily built up a diverse portfolio. Its latest deal is to lease 1,858 sq.metres (20,000 sq.ft.) in Tay House, Bath Street, Glasgow to Barclays Bank. Earlier, RBS and a government department had quit the building near Charing Cross leaving 3,716 sq.metres (40,000 sq.ft. vacant). That allowed Credential to upgrade the facilities at the popular office block.

The other major office property in Glasgow owned by Credential is Doges, Templeton on the Green, a fascinating former carpet factory which has been subject to a mixed use

refurbishment. This has the advantage of being close to the new M74 extension, main bus routes and railway station. It is also important for the future Commonwealth Games in 2014 as it houses Sportscotland (the administrative body) and is close to the site of the games. Within the complex there are modern tech offices, studio suites, a gym, nursery, micro brewery and restaurant and a hot food takeaway.

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Selling shops

One of the odd things about the commercial property market this year has been the buoyancy of the investment market for shopping centres and retail parks. The oddity is because the retail sector has been having a hard time. At the front of the queue to buy has been LaSalle Investment Management which has now paid £4.85 million for the 11,148 sq.metres (120,000 sq.ft.) Artizan Shopping Centre, Dumbarton, on behalf of pension clients, from Ireland’s National Asset Management Agency. This gives a yield of 13.6%, but the centre is 54% vacant by leasing area.

LaSalle said it would invest substantially to reinvigorate the centre to raise the standard for consumers. This is the seventh shopping centre purchased by LaSalle since 2009. LaSalle’s Andrew Bull commented: “This purchase demonstrates that value within the secondary market is beginning to come through and we have put together a solid business model to take the asset forward.”

In another retail transaction, Morgarth Group, through Colliers International and Morton Fraser, has paid £12 million for St Catherine’s Retail Park (South), Perth on behalf of an overseas investor. The yield of 6.82% reflects that it has strong medium term growth potential and a good range of retailers including Wickes, Pets at Home and JJB Sports.

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Soar away Aberdeen

As long as the oil price remains high, so the office market in Aberdeen is designed to set the pace in Scotland.

That is the message from the first half when take up soared to 38,535 sq.metres (414,804 sq.ft.), substantially exceeding the total for each of the previous two years. Added to this, rents sit at £333.68 a sq.metre (£31 a sq.ft.), which is above that for all UK regional cities.

As an indicator of future growth, only 8% of the 77,315 sq.metres (832,242 sq.ft.) of available stock is newly completed Grade A. The clear message is that if you want new space, then go for a pre let.

Mark McQueen of CBRE said: “The office market is in extremely good shape at the moment due to some significant transactions in the first quarter. It is very encouraging (that 2010 figures were exceeded in the first half) in the light of the challenges of recent years.

The market will remain buoyant for the remainder of the year.” The industrial market is also buoyant. Allied International, a distributor and stock manager of fittings, has leased a 1,342 sq.metres (14,446 sq.ft.) unit with head tenant Iron Mountain on the Altens Industrial Estate, Minto Avenue, Dyce.

Craig Watson of Jones Lang LaSalle, who acted for Iron Mountain together with FG Burnett commented: “It is clear that supply is tight in Aberdeen and occupiers have limited choice. This sub letting was achieved early on in the marketing process at the passing rent, helping Iron Mountain to significantly reduce their ongoing liabilities as part of their relocation to the north of the city.”

Also in Aberdeen, MWB Group Holdings, has done a sale and leaseback deal on its Malmaison hotel development for £16.1 million. The property has been sold and will be leased back from CIP Property on behalf of Citibank International as trustees for Aviva Investors Property Trust. Malmaison will run the hotel on a 35 year lease.

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Inverness performs

Inverness, and the area around it, has been an active market in the past year. The latest office deal, the largest in Inverness this year is the 465 sq.m. let in Oykel House, Cradlehall Business Park to the telecommunications company Highnet. Sandy Rennie of agent J&E Shepherd said: “As the largest office transaction in Inverness so far this year, the deal confirms the buoyancy of demand in the competitive market.” J&E Shepherd also acted for Mapeley in the sale of the 427 sq.m. Phoenix House, an office building at Wards Road, Elgin. It is 75% let to government agencies.

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Anchoring Maxim

The financial restructuring of Maxim Office Park, Lanarkshire has brought a swift success with the anchor letting to the Scottish Environment Protection Agency (SEPA). It has leased 5,574 sq.metres (60,000 sq.ft.) in the Maxim 6 building, which allows the agency to bring staff under one roof and provide a laboratory to complement the one it has in Aberdeen.

David Gebbie of Arisaig Property Partners who are the new asset managers of Maxim said the financial changes allowed “both parties to achieve a leasing deal that previously couldn’t have been achieved.”

The importance of the new facility was emphasised by Scotland’s Environment Secretary, Richard Lochhead, who said: “The move will help develop closer working between partners within Scotland’s public sector. The new facility will house another first class laboratory and achieve excellent standards of energy efficiency and environmental performance.”

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Mixing Business and nature

Hillington Park has become the first estate of its kind to be awarded a Biodiversity Benchmark by the Wildlife Trusts. This is an accolade for MEPC, the majority landlord at the 75 year old estate on the Glasgow and Renfrewshire boundary, because it has pursued a policy of environmental improvements which recognised the potential for encouraging wildlife to thrive in the park. Peter Dorans of the Wildlife Trust said: “Only a handful of organisations have achieved the standard of site management which meets the requirements of the Biodiversity Benchmark.”

There are small green sites dotted throughout the park, which have been used to support various wildlife activities, including a wetland and protective nesting boxes for small birds. MEPC’s Grant Edmondson said: “This is a tremendous endorsement of the work which has been led by our marketing and customer manager, Alison Clark.“ Clark added that, “we have been working on this project since 2008.”

At the Pegasus Business Park, Hillington, St Modwen has let 2,044 sq.metres (22,000 sq.ft.), most of which was to the furniture retailer Morale Furnishings. St Modwen’s Michael Hosie said: “There is great potential for further development here and the opening of the M74 extension has increased the site’s appeal.”

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Swinging Edinburgh's way

The swing of the pendulum between the Scottish cities appears to have moved favourably for Edinburgh but less so for Glasgow while Aberdeen powers ahead on the crest of an oil wave. Even so, the level of activity remains weakened by the recession that started in 2007 and has hit confidence hard throughout the UK.

That is only part of the picture. The other is of a more resilient industrial sector and the impact of such improvements as the regeneration of the Clyde and the new M74 link.

According to the Registers of Scotland, commercial property transactions are down to the level of 2007 with a total of £890 million in the first half, which is £200 million below January-June 2010. David Melhuish of the Scottish Property Federation said: “Generally the market is bumping along the bottom.” As far as investment is concerned, in the first half it totalled £165 million, down from £180 million in the preceding six months. Half of this was accounted for by Glasgow and Edinburgh.

Campbell Docherty of CB Richard Ellis said: “There is still good demand from UK institutions and significant interest from overseas investors, specifically German open ended funds, in the prime regional office market although a severe lack of investment products and a shortage of development pipeline is hampering deal volume.” The CBRE report on the market highlights the stronger performance of industrial property compared with offices so far this year. Ryden’s Alan Gilkison said: ”The mid sized market, up to 3,716 sq.metres (40,000 sq.ft.), has been quiet while the smaller sector as well as larger sheds has improved.”

He noted that there had been a shift in demand for space from distribution to manufacturing. “The level of requirements is encouraging and we expect deals in the larger space to improve in the next few months.” What is clear from Gilkison and other property professionals in Glasgow is that the new M74 extension, which completes the ring road, is having a significant impact on business including opening up brownfield sites for development.

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Tennis tournament property aces

More than 30 property professionals in Hampshire have battled it out in the 9th annual Solent Property Tennis Tournament.

The fiercely-contested event, held on 22nd September at the Hampshire Tennis & Health Club, by the Rose Bowl stadium near Southampton, was organised by Russell Mogridge of Hughes Ellard.

Sponsorship was provided by developers City Estates, chartered accountants CW Fellowes, solicitors Paris Smith and office fit-out specialists DMW, with backing from Southampton Property Association.

Taking part were commercial property agents, developers, lawyers, financiers and accountants. Russell Mogridge from Hughes Ellard, said: “Once again the tournament proved a big draw to property professionals in and around Southampton and Portsmouth. It was also a chance to share market intelligence in an informal, fun environment.”

Winners of the men’s doubles were Tim Clark, the retail specialist with Hughes Ellard, and James Daniels, a property taxation analyst with property tax consultants E3. Andy Goodridge, of property development and investment company City Estates, and Lucy Horne, a commercial property solicitor at legal firm Paris Smith, took the honours for mixed doubles.

The wooden racquet - the tournament’s equivalent of the wooden spoon - was presented to David McGougan of commercial property agency Lambert Smith Hampton for a comically haphazard smash.

Winchester wins

Old established market towns and old established cities in the UK have often avoided the worst of the economic downturn. That appears to be true of Winchester which, said Goadsby’s Annelies Culley, “is still proving to be fairly resilient.”

She notes the “steady demand for city centre offices.” In particular she mentions the refurbished Athenia House, Trafalgar House and St Swithuns as being in demand. “There has been a lot of excitement regarding the proposed Silver Hill development in the city centre. The mixed use scheme will include high quality offices, retail and residential accommodation. The industrial market is still seeing a good level of enquiries for premium space.” Goadsby has also recently analysed the market in another market town, Romsey where it has seen “a positive start to 2011 with a number of office lettings.” Goadsby’s Ben Welch said: “The market town of Romsey offers an attractive working environment and good access to Winchester and Southampton.”

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SEGRO success

The steady letting of property on SEGRO’s developments in Portsmouth and the M27 corridor is a good indicator of the performance of the region’s industrial market. At the Railway Triangle earlier this year Fraser Freight took a 10,460 sq ft warehouse/ production unit to add to its existing head office and warehouse space elsewhere in the city.

In May, SEGRO let a 50,000 sq.ft. production/warehouse unit at its Unit 1 Trilogy scheme, Segensworth, to Contego Packaging on a fifteen year lease. The Trilogy scheme is now fully let. SEGRO has also let a 10,667 sq.ft. industrial unit to Snows Group, a motor dealership, on a twelve year lease, at Mitchell Way, Portsmouth.

On Voyager Park, SEGRO has let an 8,775 sq.ft. unit to Transas for a new training facility. The company is a developer of software, integrated solutions and hardware technologies to the marine and aviation industries.

It has also let a slightly smaller unit to existing occupier, Stone Bridge Global. SEGRO has now sold or let 75% of the Explorer and Discovery phases at Voyager Park, which total 1,487 sq.metres (160,000 sq.ft.). Lambert Smith Hampton’s Adrian Whitfield highlights the strength of the south coast industrial market. He said: “With a general lack of available property, this year has seen landlords in a stronger position and in some instances it has led to the reduction in the level of incentives.” But rents remain static and while the market is tough due to the economy it is mainly a result of a lack of stock. “There are a number of requirements which could be the catalyst for a developer to build a speculative scheme. However, pre let, design and build occupier led deals are more likely,” Whitfield added.

Ross Moyler from Vail Williams commented “that we have seen steady levels of industrial take up over the last 6 - 12 months which is encouraging bearing in mind the backdrop of the current economic uncertainty. We have seen a handful of larger transactions which have further reduced the available stock of bigger buildings.“

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Industrials set the pace

The buoyancy of the industrial market has spurred investment deals, in particular in the business parks and estates around Southampton. For example, Axa Real Estate Investment Managers has sold the 4,645 sq.metres (50,000 sq.ft.) Solent Gate Industrial Estate, Fareham through Lambert Smith Hampton to Threadneedle Property Unit Trust for £3.82million, or a yield of 8.2%. Axa’s Ian Pollard commented: “The sale crystallises the value we have created and allows us to look for new investments where we can add value for our client.” In Eastleigh, Oceanic Estates has paid Craigard Eastleigh LLP £3.8 million for the 9,290 sq.metres (100,000) Avalon warehouse in Parham Drive.

The warehouse is sublet to the Jamie Oliver Group and was an off-market transaction. Jerry Vigus, from Lambert Smith Hampton commented: “We have stayed close to this property, knowing that it could potentially be bought. We indicated that a quick decision had to be made and therefore approached Oceanic Estates, knowing that the business had the resources available to buy the property and move quickly. We were then able to negotiate terms and purchase the unit within 14 days of agreeing a price.”

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High for Highcross

Although city centre office lettings in the region are slow, the out of town business parks have really performed. Lakeside on the former IBM factory at Portsmouth has experienced a spate of lettings culminating in the Southern Co-operative taking 1,593 sq.m. The park now has 70 companies employing 4,500 people, including IBM which is still located there. Russell Mogridge of Hughes Ellard said: “The 130 acre park has attracted more than half of the lettings in the Solent corridor since January.

There are a further four deals totalling 11,148 sq.m. at various stages of completion.” The business parks may be where the action is now but Southampton City Council is pushing hard to make the city centre more attractive for business. It has welcomed the plan by Arcadian Estates, part of the London & Henley Property Group, for the redevelopment of the East Street Shopping Centre. It will be demolished and a Morrisons’ food store constructed on the site in partnership with Centros. As part of the scheme, there will be new access between East Street and Evans Street. In turn that will help, said John De Stefano of London & Henley, “our nearby Capital House office building.”

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MAG builds more at airport

MAG Developments has the determination to undertake significant development at its UK airports even if Manchester is far and away its most important facility.

At Bournemouth, it has a 10 year programme and has submitted a plan for 41,991 sq.metres (452,000 sq.ft.) at its Aviation Business Park. The majority of this will be warehouse and industrial space on the 35 acre site.

It is part of a phased plan to expand the capacity at the airport, where it has recently invested £45 million. David Roberts of MAG commented: “These plans provide a clear long term strategy for the business park and will complement existing stock on the estate. That will attract investment through development opportunities.” It has proved its point with Aviation Business Park where there is an occupancy of around 95% after two lettings totalling 2,320 sq.metres (24,967 sq.ft.), one of which was to Talard Thai which relocated from nearby Christchurch. The company supplies a wide range of foodstuffs and flowers from Thailand.

The other letting was to the specialist aerospace interiors manufacturer, AIM Aviation. The two lettings follow a 3,279 sq.metres (35,295 sq.ft.) pre let to City Link. City Link’s Steve Jones said the relocation from a nearby property would allow the company to expand its operations in the Bournemouth area. “The demands of our customers have changed dramatically. They are very different from 10 years ago and we have to accommodate that,” Jones added.

Aviation Business Park currently provides 139,350 sq.metres (1.5 million sq.ft.) of mixed use business space and is home to 140 businesses with a working population of over 2,000.

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Developing Southampton

Three developments in Southampton, one completed, one with planning permission and the other in the planning stage, continue the improvement to the city. Planning permission has been granted for a new 9,290 sq.metres (100,000 sq.ft.) arts complex, retail space and restaurant units in a joint venture between the council and Grosvenor.

There will also be 29 flats on the site which is around the Guildhall Square. Councillor Royston Smith commented: “Another key development in the Cultural Quarter is coming to fruition. It will be a place where all the arts can thrive and draw in hundreds of thousands of visitors every year.” The second new scheme is a 155 bedroom Premier Inn at West Quay which Cllr. Smith said “is a key element of the West Quay development, which is part of the city’s renaissance plan.” The third project is a plan for Southampton’s tallest building. The residential scheme at Ocean Village with 28 storeys is being developed by Allied Develeopments.

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High in Eastleigh

Eastleigh has been one of the best performing towns in the region with all the markets benefiting from the fine transport system of the M27 and M3 motorways, fast rail connections and the airport. In the office sector, occupancy remains high, said Ben Welch of Goadsby, helped by “affordable accommodation.”

Welch cites the success of Eastleigh Borough Council in disposing of their properties, such as the Black Horse Building where only a small amount of space is vacant. It is a similar picture for industrial property, typified by the council’s Shakespeare Business Centre which is almost fully occupied. Paul Ramshaw of Eastleigh Borough Council said: “The town centre continues to go from strength to strength, such as the arrival of the Cheque Centre which has brought new jobs and helped maintain the high level of high street occupancy.“

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Fair wind for Weymouth

While many parts of the UK have experienced trying commercial property markets, the south coast has bucked the national trend with a period of improvement.

That applies from Hampshire to Dorset. The major urban areas have benefited from their broadly based economies, taking in services and manufacturing, but it is noticeable how Weymouth, not noted for either of these two activities, has become more dynamic. Of course that is mainly due to it being the host for the 2012 Olympic yachting events but the hope must be that it has been given a new lease of life that will break the log jam of development.

It is clearly apparent how the town now buzzes with activity, helped by a new main road. At the moment it appears that Weymouth is a star performer for the regeneration lobby. The market in the core area of Southampton and Portsmouth, (the Solent corridor) has been solid and even retailing has not been as poor as in many parts of the UK. Russell Mogridge of Hughes Ellard said: “The office level of take up in the region is above pre-recession levels at the end of the third quarter, reaching 32,515 sq.m. compared with the 10 year average of 23,225 sq.m.“ A significant part of this has been at Highcross’ new business park, Lakeside in Portsmouth. This has reached a 65% let in building 1,000 by achieving 9,290 sq.m. of lettings this year. Phase two of the development will begin soon.

Among the trends noted by Mogridge are companies relocating to single floor plates to aid team performance and staff morale as well as improving their working environment. “We have seen movement in the professional service sector, such as recruitment, legal and accountancy,” he added. Nik Cox of Hughes Ellard said: “We are hoping that the out of town activity will percolate to the Southampton city centre, which has seen a limited office take up, probably reflecting the lack of Grade A space available.” Cox also noted that the manufacturing sector had been active and reflected the diverse economy from shipbuilding, defence and high tech. Jones Lang LaSalle’s Jason Webb said: “There are still significant opportunities for occupiers to obtain costs savings on the M27 but the lack of speculative office development means that the pipeline will remain severely limited and as Grade A supply reduces further, the window of opportunity for tenants is expected to close.”

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Asians Buying

The foreign buying of property in London covers commercial and residential and it is significant that Asian buyers were responsible for 60% of the new build deals in the six months to April. They have been active across London, such as in the mixed use scheme at Kings Cross which was extensively marketed in the Far East. This helps to fuel the enthusiasm for new residential schemes, such as at Kings Reach Tower, SE1, where CIT Group and Jadwa Investments have a mixed use project with 173 flats.

Nearby, the refurbished Sea Containers House will become an hotel run by the US group, Morgans. In the City, there is strong opposition to the conversion of office buildings to hotels or residential led by Planning Chief, Peter Rees, who has asked Secretary of State Eric Pickles to exempt the city from planning changes that encourage switching from offices to homes. The City of London receives around 10 enquiries a week on conversion of properties to residential use.

Summer Break

After a buoyant recovery comes the adjustment as the UK economy slows and the office market comes up against the shortage of Grade A space. The question at the moment is whether the slowing of the momentum will last for a lengthy period or whether it merely reflects the current market and economic realities, particularly as worldwide confidence has dived.

Many of the fundamentals still signal growth, such as the fact that the economy in London is bucking the national trend and growing at a reasonable rate. Also there remains demand for offices in all sub markets. For example, Colliers reports that availability in central London has declined to a 30 year low and Grade A space is down 17%.

Another way of looking at it is that net absorption in the West End in the first quarter of the year was at the fastest rate since 2005. Mike McKeith of Colliers commented: “Competition for Grade A space will remain the key driver of rental uplift during 2011. Absorption appears to have peaked in the city and is close to doing so in the West End. We expect to see increased absorption of good quality second hand space as Grade A becomes scarcer.” Tony Joyce of GVA notes that the “market has been quiet for some months although there are lots of requirements.”

Even so, the serviced office market continues to perform strongly with officebroker.com reporting a 20% increase in deals in April-June compared with the same period a year ago. That can be evaluated against figures from Capita Symonds that take up in the second quarter in central London was below average, with the City down 36% on the same period of 2010 and the West End down 9%. Another shift in the balance of the market is the increased amount of prime residential development which cost consultant EC Harris calculates at £21 billion over the next nine years in a total of 9,000 units.

Industrials to the fore

Confidence is coursing through the commercial property market throughout the region led by a buoyant industrial sector. This has been enhanced by the widespread backing for the Solent Local Enterprise Partnership from the major companies, universities and the public sector.

In Southampton substantial new developments have been given the green light and the strength of the market has persuaded developers to ready new plans. This indicates a healthier situation for pre lets. The economic improvement highlights the natural advantages of an area with major ports, a highly skilled workforce and good communications. Adrian Whitfield of Lambert Smith Hampton (LSH) said: “There has been a high take up of industrial space since mid 2009 but in the current year this could be down because of a shortage of stock. There is a lack of development on a speculative basis.” That has led to more design and build schemes spurred by the shortage of sites.

Another effect is that landlords have been able to rein in the length of rent free periods to about 1 year on a 5 year lease. Andrew Hodgkinson of Goadsby commented “It would not be a surprise to see rents in this sector begin to rise in the second half of 2011.” The central problem is that the shortage could mean that occupiers will look outside the region for their properties, although that situation has not been reached yet. For example, one major site being developed is the 140 acre former power station site of Oceanic Estates’ Marchwood Industrial Park, Southampton. This is being marketed by Adrian Whitfield (LSH) and Matthew Poplett of King Sturge who said: “Marchwood is a unique industrial estate offering opportunities for a variety of occupiers.”

The buoyant industrial market suits SEGRO very well and it has achieved a host of transactions. At Vista Park, Nursling, Pneumax has bought a 1,247 sq.metres (13,427 sq.ft.) unit and SEGRO has also sold two sites on its Voyager Park, Portsmouth. Wernick Group, a hirer of portable and modular accommodation, has bought a 2.5 acre site for a regional depot and Landscaping Supplies has purchased a 1 acre site. SEGRO’s Chris Davies said: “This represents real progress achieving our strategy of selling serviced land parcels at Voyager Park North.”

Leading the way in Southamption

The improvement in the commercial property market is being underpinned by the determination of some local authorities to push the green button for regeneration. What will gratify the government is the emphasis on manufacturing and industry, whether established businesses or start ups. A good example of this is a new maritime and marine innovation quarter at the former Vosper Thornycroft shipyard at Woolston, Southampton.

The South East England Development Agency (SEEDA) has linked with Southampton City Council, with the backing of private finance, to drive this
forward on the site of Centenary Quay. Together with 1,600 residential units, shops and offices, there will be buildings for marine businesses to encourage
new products and innovation through access to top research.

According to SEEDA, manufacturers have expressed considerable interest in participating in the new marine quarter. SEEDA’s Chief Executive, Pam Alexander, said: “We will see a thriving hub of marine manufacturing emerging, linked closely to the higher education strengths of the city.” The development will be helped by the creation of the Solent Local Enterprise Partnership which has been driven by the local business community and is supported by the four universities in the area together with the local authorities. The area has a population of 1.3 million and 50,000 businesses. Doug Morrison of Associated British Ports said: ”The port is at the heart of the vitally important maritime sector and ABP welcomes this initiative of a business led LEP that is focused on putting the business community at the core of economic growth in the Solent area.” On top of this, Morgan Sindall Investments (MSI) has been appointed by Southampton City Council as the preferred developer for the £450 million Royal Pier Waterfront scheme. MSI’s Ernie Battery said: “This key site provided the opportunity to position Southampton at the forefront of internationally recognised waterfront schemes.”

Another major scheme in Southampton is Admiral Quay, Ocean Village, where Allied Developments has bought the site for a major mixed use scheme of residential and leisure from Barratt Homes. Confidence is coursing through the commercial property market throughout the region led by a buoyant industrial sector. This has been enhanced by the widespread backing for the Solent Local Enterprise Partnership from the major companies, universities and the public sector. In Southampton substantial new developments have been given the green light and the strength of the market has persuaded developers to ready new plans. This indicates a healthier situation for pre lets. The economic improvement highlights the natural advantages of an area with major ports, a highly skilled workforce and good communications. Adrian Whitfield of Lambert Smith Hampton (LSH) said:
“There has been a high take up of industrial space since mid 2009 but in the current year this could be down because of a shortage of stock. There is a lack of development on a speculative basis.”

That has led to more design and build schemes spurred by the shortage of sites. Another effect is that landlords have been able to rein in the length of rent free periods to about 1 year on a 5 year lease. Andrew Hodgkinson of Goadsby commented “It would not be a surprise to see rents in this sector begin to rise in the second half of 2011.” The central problem is that the shortage could mean that ccupiers will look outside the region for their properties, although that situation has not been reached yet. For example, one major site being developed is the 140 acre former power station site of Oceanic Estates’ Marchwood Industrial Park, Southampton. This is being marketed by Adrian Whitfield (LSH) and Matthew Poplett of King Sturge who said: “Marchwood is a unique industrial estate offering opportunities for a variety of occupiers.”

The buoyant industrial market suits SEGRO very well and it has achieved a host of transactions. At Vista Park, Nursling, Pneumax has bought a 1,247 sq.metres (13,427 sq.ft.) unit and SEGRO has also sold two sites on its Voyager Park, Portsmouth. Wernick Group, a hirer of portable and modular accommodation, has bought a 2.5 acre site for a regional depot and Landscaping Supplies has purchased a 1 acre site. SEGRO’s Chris Davies said: “This represents real progress achieving our strategy of selling serviced land parcels at Voyager Park North.”

Space shrinks

Bristol’s industrial and distribution market performed strongly in 2010 with 193 transactions totalling 213,670 sq.metres, the highest total since a peak in 2007. The driving forces were improved manufacturing and distribution space for retailers.

Chris Miles of King Sturge, Chairman of the Western branch of the Industrial Agents’ Society, said: “The industrial and distribution market in Bristol remains relatively buoyant. It is very encouraging to note that the UK manufacturing sector finished strongly and indeed the last quarter of 2010 saw it record its best trading conditions for 16 years.” DTZ’s Simon Lloyd said: “The South West continues to have the lowest availability of stock in the UK with a limited amount available to occupiers.

The market was, however, buoyed by a number of larger transactions in retailers Morrisons and the Co-op but these were land acquisitions.” Avonmouth is the key location for distribution which is why the Co-op wanted a distribution facility here. This is now being funded by AXA Real Estate Investment Managers. The 40,412 sq.metres scheme is being developed by Stoford and Gallan Group. Stoford’s Dan Gallagher said: “In the current economic climate, forward funding is one of only a few forms of development capital available and we are pleased to work with AXA and continue our long term relationship with the Co-op Group.”

Big sheds dominate

Major distribution facilities are at the heart of a vibrant industrial sector which has emerged strongly from the recession. That is because geographical necessity plays a significant role. That applies to Swindon where the Japanese car firm Honda performs so well and could play a bigger role in the immediate aftermath of the earthquake in the home country.

Its key location brought DIY firm B&Q into a massive 74,007 sq.metres (796,649 sq.ft.) shed on Gazeley’s G Park, South Marston, which was completed two months early. That is a change from the phased occupation that was originally planned. The site has the capacity for two more large sheds, although smaller than B&Q’s, at 40,876 sq.metres (440,000 sq.ft.) and a quarter of that size.

Gazeley’s Charles Blake commented: “Deliverability is the key. The buildings have planning permission and the roads are going in because of B&Q.” In this case the DIY firm bought the freehold. Another substantial development is by UBS Triton Property Fund which has demolished the former Woolworth shed and, working with Graftongate, is seeking planning permission for a 41,805 sq.metres (450,000 sq.ft.) facility although it might opt for a solar photovoltaic park. Also at South Marston, RO Developments (ROD) has sold a 384 sq.metres (4,136 sq.ft.) unit at South Gate for £340,000. Richard Bourne of ROD said: “RO24 Swindon continues to prove popular with local businesses and private investors. We only have 5 units remaining and we expect these to go soon.”

Meanwhile, there has been an improvement in the office market in Swindon, said Kenington’s Jeremy Sutton, with an increase in enquiries in the first quarter and more buildings going under offer. “There are opportunities in lease renewals and companies are now looking to move to better space. This is mainly smaller occupiers although there are some more substantial enquiries in the market.” He expects the totally rebuilt Station Square office property, which at 4,645 sq.metres(50,000 sq.ft.) is one of the largest in town, to do well.