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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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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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.

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.”

Cambridge builds for student boom

As part of a mixed use scheme on 26 acres around Station Road, Cambridge, Powell Williams, the project management firm, is to manage the £40 million construction of student accommodation.

Student housing has been one of the growth sectors for the property industry in the current period of hard economic times. In the case of Cambridge, it will be 511 bedrooms in three buildings for Anglia Ruskin University. Andrew Marshall of Powell Williams commented: “The growing requirement for high quality student accommodation shows no sign of waning and demonstrates how this one area of the market is booming, while others are suffering. Such schemes are offering one of the only streams for new build investment opportunities in the current market.”

The key to this is that such schemes can raise private capital; in this case forward funding from LaSalle Investment. John Yeend of LaSalle said: “This project offers a unique opportunity to participate in the reinvigoration of this part of Cambridge through the development of new facilities for Anglia Ruskin University, alongside the wider development of new homes, hotels, shops, offices and public space.”

The scheme has been designed by TP Bennett Architects and is designed to meet the BREEAM excellent sustainability rating, which is an increasingly important requirement on new buildings. According to Mike Ayton of Juniper Estates, the Cambridge office market continues to be active and the first half take up, together with deals in the pipeline, indicates that the total for the year will be over 37,160 sq.metres. “Companies like Jagex and Arm are expanding and we are getting to the point when developers need to go for speculative schemes. The vacancy rate for good buildings is only 3.5%.”

More space for Amazon

Amazon continues on its massive expansion which has led to a series of large industrial lettings in the UK. The latest deal is that the online bookseller is negotiating with Murphy & Sons for a 43,200 sq.m. shed, “Mammoth,” in Hemel Hempstead which was partially destroyed by the Buncefield oil depot explosion.

Murphy acquired the site from Blackstone Real Estate Partners in 2009. To understand the scope of Amazon’s expansion, this follows it taking the 65,030 sq.m. Flair building on Gazeley and Metlife’s G.Park, Rugeley and it is negotiating with Prologis for a much larger shed at the Widnes Freight Park, Cheshire.

Spreading a little happiness

West London has benefited from the market improvement in the capital which could bolster growth along the Thames Valley. That has led to rental increases in such centres as Hammersmith where Grade A space is now £339 a sq.metre and a return of the development cycle. Ever quick to spot a development opportunity, Stanhope is negotiating with the Irish National Asset Management Agency (NAMA) to buy the former headquarters of Gillette. The 10.5 acre site was owned by Bonnington Group who had a plan to build a 500 bedroom hotel and offices after paying £30 million for the Grade II listed Art Deco building. Stanhope is bidding £15 million for the Isleworth site.

Another Art Deco gem is due for refurbishment with Cathedral Group and Development Securities buying the London Business Park, Hayes, Middlesex from JER Partners, Blackstone and Resolution. The new owners intend to spend £250 million on the park, which was the former headquarters of EMI, the music Group. The estate was designed by one of the most successful designers of Art Deco buildings, Wallis, Gilbert & Partners, who were also responsible for the Hoover Building and the Firestone Factory, now demolished, both in West London, and Victoria coach station. Sadly many of the buildings, said Cathedral, have been forgotten and the park is “a special place that had not been recognised by its previous owners.” Cathedral‘s Richard Upton said: “This site is part of the magic of the UK‘s industrial and architectural history, but it has been hidden and forgotten for decades.” So his crusade is to uncover the park‘s heritage and restore its full glory. As part of the development, the amount of commercial space will increase from the current 69,675 sq.metres.

Long road to recovery

The Thames Valley office market is ratcheting up steadily as the recovery broadens and speculative activity is renewed. That brought a strong first three months of the year with a surge to a record performance, said King Sturge (who have now
merged with Jones Lang LaSalle). It calculated a 37,996 sq.metres (409,000 sq.ft.) take up, which
beat the five year average and was a 37% rise on the same period of 2010.

The encouraging change for long term growth is that total availability declined by 10% compared with a year ago to 641,010 sq.metres (6.9 million sq.ft.). Piers Leigh of Jones Lang LaSalle commented: “Due to the slow progress of large transactions, we are still forecasting a slightly below average take up for the year of 139,350 sq.metres (1.5 million sq.ft.).” He noted Grade A supply could fall to a critical level in west London which means rents will rise. For the future “we have seen a significant rise in speculative development with four key schemes within the M25 under construction or due to start within the next six months.”

Knight Frank highlights the dominance of manufacturing and pharmaceuticals which account for a third of total demand. It also noted that active demand declined in the first quarter by 14% to 472,119 sq.metres (508,201 sq.ft.) after a number of requirements were satisfied. While the agent welcomes the rise in speculative development it believes that it will be limited and confined to prime locations. According to Knight Frank, Maidenhead had four deals in the first quarter, the largest being 4,645 sq.metres (50,000 sq.ft.) to Adobe in Market Street in the centre of the town which only completed in the final three months of 2010.

As far as the M25 market is concerned, the agent cautiously predicts a 5% increase to 213,670 sq.metres (2.3 million sq.ft.) this year compared with 2010 but expects little change on the total for the M4 and even a 15% decline in the M3 take up.

Sheffield City Region takes off

A test of the government’s new policies of promoting regional regeneration and economic growth could come in Yorkshire with Doncaster winning £18 million funding for its scheme. There was stiff competition for the government’s seed capital of £450 million and Doncaster got the cash for its Gateway to the
Sheffield City Region project. It fits with past success in pushing regeneration and continues the policy of boosting economic growth and becoming a catalyst
for attracting investment. Part of the project is the
construction of the Finningley and Rossington Regeneration Route Scheme (FARRRS) which is
the infrastructure needed to unlock the project.

Peter Dale of Doncaster Council commented: “This is tremendous news for Doncaster and the Gateway has the potential to deliver approaching 24,000 jobs in the area. The fact that we have received double the average successful bid of £9 million clearly demonstrates the confidence the Government has in Doncaster to deliver such an important scheme.”

One of the vital parts of the Gateway project is the expansion of Robin Hood Airport. Nigel Brewster, Doncaster Chamber President and Local Enterprise Partnership Board Member, said: “Improving access to the airport will have a transformational effect on the whole City Region. We must now capitalise on this
by encouraging local businesses to trade internationally and encourage new investors to locate on the airport business park and other key sites within the City Region.” Brewster said a particular objective of the chamber was to “create significant positive momentum for economic growth in the area.”

The airport, which is owned by Peel, is considered to have considerable potential for increasing freight traffic and as a location for business parks. Howard Gannaway, also of the Chamber, said: “The next
opportunity for the City Region will be around Enterprise Zones; we hope this announcement will
dovetail neatly with any proposals to create additional opportunities for the area.”

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 as 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.

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Minton success

The Minton Business Centre in Far Cotton, Northampton has been one of the town’s success stories during what has been a period of reduced transaction activity in the commercial sector. The Airflow Streamline site, purchased by the Minton Group, has provided an almost unique opportunity for good value freehold industrial space in close proximity to Northampton Town Centre, St James Retail Park and Junction 15a of the M1.

Joint agents Lambert Smith Hampton and Budworth Hardcastle have successfully sold 79% of the scheme, with recent transactions including 48,000 sq.ft. sold to Bearwood Engineering and 16,000 sq.ft. sold to Keystone Roofing. Other occupiers on the scheme include InTown Automotive, Kis Coaches and Stagecoach.

The site’s location and building configuration have also provided unique opportunities for Trade Counter occupiers and Leisure uses such as The Pinnacle Challenge Climbing Centre, where the high eaves of Unit 1 has enabled them to erect a 12.5m climbing wall, which is one of the highest in the region. Ashley Bourne of The Minton Group comments, “we are absolutely delighted with the progress made to date, and expect the three remaining units to attract further purchasers shortly.” In this respect, the Agency Team are also delighted to report that they are in discussions with a number of interested parties, but welcome new enquires on the remaining 46,700 sq ft.

Hark watches Portas

As confidence in the property market rises, so the appetite for town centre regeneration becomes sharper. Historic plans are being reassessed and new schemes being given the green light.

That is the experience in the Midlands where Compendium Living, the joint venture of Lovell and the housing association Riverside, has been selected for the Urban Village scheme in Derby.

This is a large urban scheme of commercial space and 800 residential units together with community facilities with the first phase scheduled to start in Spring 2012.

In Telford, Hark Group, which owns the 92,900 sq.metres (1 million sq.ft.) shopping centre, is examining its long desired plans for redevelopment. One reason for the review is that the government has appointed Mary Portas to examine the current situation of high street retailing in the country.

Hark want to develop a multiplex cinema and new restaurant complex. A spokesman for the company said: “Recent positive developments at both national and local level have prompted us to consider how best to continue the growth of Telford town centre,” Those words will hearten other owners of town centre sites.

Sparkle in the Highlands

Although it appears to be far north in the Highlands, Inverness has recently had a sparkling commercial property market. The most significant transaction is Roxhill Developments starting on a seven year plan with Inverness Airport Business Park to develop 37,160 sq.metres (400,000 sq.ft.) at the airport. Roxhill’s David Keir said: “This is one of our most significant investments to date. Inverness is a fast growing city, yet it has a real shortage of industrial space.”

According to agent Graham & Sibbald, it has had 14 transactions in the past two months “which is an encouraging sign of increased activity throughout the Highlands and Islands.” These deals included six industrial units ranging from 12,995 sq.metres (139,880 sq.ft.) to a small unit as well as city centre office investments in Inverness, Lochalsh and South Uist. In Skye and Lochalsh demand for industrial units exceeds supply, the agent said.

Chatham Waterfront

Chatham has proved to be a highly successful regeneration and is now entering a new phase. Chatham historic wharf has obtained planning permission for a £25 million mixed use scheme as the first stage of awider development of the Chatham Waterfront. It will be developed by a combination of Medway Council, A2 Dominion Housing and Watts Charity and will have an 80 bedroom hotel, leisure and commercial space in an area which has been attracting an increasing flow of tourists.

Plans for the regeneration of the sanofi-aventis site in Dagenham have moved forward with the appointment of Savills as advisers on the scheme. This is a major project on

108 acres and Mark Bass of sanofi-aventis said: “Our focus throughout the process of creating a lasting legacy has been to work with proven experts in regenerating commercial/scientific premises in an effort to transform the site into a facility that offers long term benefits to the people of Dagenham.”

Savills’ Neil Rowley commented: “Our master planning expertise will deliver a planning consent that enables such a legacy to be delivered.” Overall management of the regeneration (the existing operation ends in 2013) is with SOG Ltd. Another company, ARCADIS, has already commenced the routine clean up of the manufacturing site.

A master plan for the regeneration process is being drafted with an emphasis on creating new jobs and new business opportunities. Multiple uses are under consideration including office space, laboratory/research & development facilities, manufacturing, warehousing, retail, health and leisure. Once a major manufacturing area dominated by Ford, Dagenham has widened its business horizons. For example there are large sheds for the logistics business. Wolseley, the plumbing business, leased a 13,011 sq.metres (140,000 sq.ft.) shed in Choats Road recently. Driven by the upcoming Olympic Games, there has been considerable development in the area. Another scheme is for a Creative Industries Quarter on an industrial site close to Barking town centre on Abbey Road.

This will have a mix of residential and commercial space developed in two phases around a series of courtyards and riverside spaces that have direct links both to the existing urban developments to the east and the future sites to the west. The plans also encompass the proposed East London transit bus route and a new bridge over the River Roding.

The development, which is designed by Cartwright Pickard Architects, is due to go on site this year. It will have four blocks of 272 units of residential housing together with commercial/office, retail and creative industries uses, new ublic amenity space and a riverside walk.

Ransted takes space

The expansion of the recruitment business has become one of the new growth points for the commercial property market. One of the more aggressive of these recruitment companies appears to be Randstad which has centralised its operations in Hertfordshire into Rosanne House, Welwyn Garden City, Randstad’s Rudi Verhaak said: “The position and configuration of Rosanne House provided the ideal centralised facility for consolidating a number of newly acquired companies into the group structure. It will provide a platform for developing our established businesses locally.” Rosanne House now has only a small amount of space available following the refurbishment by Eagle Welwyn LLC advised by Brasier Freeth and Davies & Co.

In another deal Randstad has taken space in Imperial Court, Luton, a 1,533 sq.metres (16,500 sq.ft.) property which Valad has now sold to Kingston Estates. Valad’s Rob Howe said: “The sale of the last two units brings the development project to a conclusion for us.

Morrisons lease office

Having a major company headquarters in an area helps the commercial property market. Morrisons, the supermarket group, provides a classic example of this for Yorkshire. In its latest transaction, through Edward Symmons and Savills, it has leased an 807 sq.metres office at Great Eastern House, Junction 7 Business Park, M62 Leeds. The office is for Morrison Facility Services and is on a 10 year lease. Richard Corby of Edward Symmons said: “This is a sizeable letting for the Leeds out of town market at present and, coupled with the recent lease renewal of another existing tenant, it is clear that this business park remains an attractive location for occupiers.” That is proven by the fact that there is only one small building still available at the business park.

Slow improvement beckons

While the worst is over for the Midlands commercial property market, the recovery is expected to be slow although also steady. The problem lies in the future as the top grade offices get absorbed at a time when developers are still shying off building again. At the moment the market in Birmingham is dominated by deals at the smaller end of up to 465 sq.metres (5,000 sq.ft.). Nevertheless, a surge of lettings including a large one of 107,000 sq.ft. at Calthorpe House in the third quarter pushed the 2010 annual figure above expectations at 62,094 sq.metres (668,392 sq.ft.)) reports Jonathan Carmalt of King Sturge. “These figures show the breadth of occupiers in Birmingham with the outcome fitting into the long term average. With no new space being delivered this year the supply of Grade A will steadily diminish. In our view the current year will be challenging, particularly as the public sector is largely out of the market.”

In the broader context what is encouraging is that manufacturing is leading the UK economy out of the recession which is certain to impact on the Midlands industrial market, already noticeable with the decision to rescind the closure of a Jaguar car plant. The improvement in manufacturing is coming through the traditional industries of engineering and machinery which has always been at the heart of the Midlands economy. There is, however, some danger in the rebalancing from a consumer/public sector economy to more reliance on manufacturing. For example public sector employment is declining which Oxford Economics expects to limit employment in Birmingham this year, despite increased industrial output.

Another danger is increased inflation which has been persistently above target for some time. As the supply of properties declines, that could mean increased rents. At the moment the top rent reached for Grade A in Birmingham is £301.28 a sq.metre (£28 a sq.ft.) which Jonathan Fear of Jones Lang LaSalle said is the limit for this year. DTZ notes that prime space is thinly traded and there are only 3 or 4 buildings in the city with space available to meet this definition. It also puts rent free periods at as much as 24 months.

Smooth Ride for the OlympicsApart from the demands of growth in the City, there is also the looming Olympic Games next year which will put pressure on

Apart from the demands of growth in the City, there is also the looming Olympic Games next year which will put pressure on the transport system. This applies particularly to Upper and Lower Thames Streets which will be kept clear for the movement of Olympic dignitaries. The objective of the City of London “is to keep central London ticking over.”

While the major institutions feature so much in the performance of the Square Mile, there is also a need to support small businesses with 85% with City businesses employing less than 50 people. The City is looking to support these businesses through promoting new initiatives such as the Government backed Innovation Warehouse scheme and through introducing guidance packs for SMEs setting up in the City.

Shoppers Flock In

The City of London’s promotion of a broader economic base with increased leisure and retailing has been justified in spectacular fashion in the past year with the opening of the New Change retail complex. This is at the core of the move to a ‘seven days a week’ shopping offer which is gradually widening away from Cheapside to include peripheral areas. New Change, with its 58 shops, (30 of which have never been in the City before), has proved very popular with the 300,000 visitors in December, which despite the poor weather was a figure higher than anticipated. To add to the attractions of hopping, the City of London is seeking powers to allow trading as part of street events, which could prove attractive with the City’s easier parking for cars at the weekend. In time it is hoped that all the retail areas will link, from West (Cheapside) to East (Spitalfields) drawing in the historic Leadenhall Market which is 600 years old this year. The City of London has invested £6 million in the area around New Change to improve the environment, including widening the payments.