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."

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.”

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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Cleaning up to Success

A tired industrial estate of 24 units at Carter’s Yard, Kiln Farm, Milton Keynes has been transformed by the property group Kindale after advice from agent Douglas Duff and had immediate success with new lettings.

The estate had suffered from high vacancy rates until Douglas Duff’s Graham Young produced a comprehensive improvement plan. Kindale director Peter Hughes said: “He gave us chapter and verse about what was needed to turn the situation around and I am delighted to say he is being proved right.”

So far, 5 of the smaller units have been taken. Young said: “If you make the environment attractive not only does it appeal to new tenants, but existing tenants begin to take pride in their surroundings.” All the units have had their external cladding cleaned, landscaping has been refreshed and additional car parking created. Internally, the refurbishment has transformed the appearance and facilities of the units.

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.

Hemel and Watford set the pace

After a lengthy period of quiet activity there has been an improvement in some key areas of the region as companies move from a watching brief to more active participation. This is the theme for Hemel Hempstead and Watford, while Milton Keynes continues to perform steadily and Cambridge remains buoyant.

The improvement in Watford is particularly apparent. Peter Brown of Brasier Freeth lists a whole series of lettings in the office core of the town. These were all to blue chip companies, such as TK Maxx taking 929 sq.metres (10,000 sq.ft.) and the big construction company Vinci slightly less. Ivico has also taken space, as have others in Grade A offices.

Brown said: “It has been a reasonable period but the reality is that we happened to have done a number of deals in a period of a few months and fundamentally the office market is still relatively quiet.”

He also feels the market has benefited from the 5 year cycle of lease renewals and is not completely confident about the performance for the rest of the year. In fact rental levels and incentives have not changed much. Some areas close to London are also experiencing a rise in activity, such as Wembley, where Quintain has a major project and St Modwen has a town centre scheme based on the railway station.

Clearly this will make Wembley a nodal point for London since the Quintain scheme is so large and a bet by Chief Executive Adrian Wyatt on the health of the London economy. But he has shown in other places, such as Greenwich Peninsula, that his instincts pay off.

Another area with long term potential is Dagenham where the dramatic changes in the UK’s industrial base have meant the potential for massive development, the latest being the Sanofi pharmaceutical plant which is due to close in 2013.

The interesting point about Dagenham is that the closure of Sanofi to join Ford brings a lot of land onto the market at a time when the government argues that a shortage of sites is holding back the economy, so the

planning laws must change.

Winning design?

A reminder of the quality of the new developments in Salford Quays has come with the short listing of the MediaCity footbridge for an award by the Institution of Structural Engineers.

The structure is a cable swingbridge providing pedestrian access over the Manchester Ship Canal into the heart of MediaCity. According to the organisers of the award for structural and engineering excellence, the footbridge has been designed to respond to the particular geometrical constraints of its location. It anticipates future redevelopment of Trafford Wharf to the south and in conjunction with the existing Lowry Bridge enhances pedestrian links for the area as a whole.

The results of the competition for the award, which has been in operation since 1966, will be announced in November. The impact of MediaCity on Greater Manchester has been highlighted by Property Secrets, an investment organisation.

It listed a number of positive points for the city, namely:

• The movement of thousands of BBC personnel from London is having an impact on the residential market and a range of media and creative organisations;
• A 2.7% increase in the turnover of retail businesses in the year to March, according to the data organisation CityCO;
• A 12.8% rise in passenger numbers at Manchester Airport between February and March;
• A report by Knight Frank dubbing Manchester as one of the UK’s best cities with the strongest investment potential.

Alan Forsyth of Property Secrets said: “Demand for new properties in prime locations is experiencing strong growth and increased job opportunities, such as in Manchester, has meant an increased number of people buying properties in the city.” A similarly upbeat analysis of the impact on the local office market has come from officebroker.com. It reports increased demand from local businesses for office space in the area through the impact of 2,500 employees moving into MediaCity.

Jim Venables of officebroker.com said: “As a company we have witnessed an increase in demand in and around Salford Quays since the beginning of the year, a rise which is reflected in the personal experiences of many local providers we work alongside.”

Mark Canning of Canning O’Neill said: “Our experience backs up the optimistic views of Salford Quays where, for example, half the Metro building has now let with Insight taking 1,672 sq.metres (18,000 sq.ft.).”

The impact of MediaCity has brought a host of lettings at Digital Park and Digital World Centre. For example, Swiss Post has taken Unit 3 at Digital Park as an extension to its existing facility. Canning said of another new scheme, the Soapworks development, that “we are seeing considerable interest from potential occupiers.”

Weathering the storm

There is a depth to the West End office market that helps it to weather the market gyrations between the highs and lows of sentiment. For example, in the second quarter when the shortage of Grade A space grew, bringing a 30% decline in take up, second hand space took up the slack and grew strongly so that the total for the quarter was an average 102,190 sq.metres (1.1 million sq.ft.). Knight Frank reports that the vacancy rate is the lowest for three years at 5.6%.

That has pushed speculative development up by 10% in the second quarter. Richard Scott of Mellersh & Harding commented: “The market has been quiet in August but there is a lot of money chasing safe havens. The hedge funds and commodity traders are still seeking space.

Apart from the shortage of Grade A for letting, there is also the lack of top space for investment.” Among the Mellersh & Harding deals, there is the sale of a mixed use property at 73-77 Kings Road, SW3 to a private client of Concorde Capital for £13.5 million, a yield of 5.25%. While there is always a shortage of large development sites in the West End one that bucks this is the former Middlesex Hospital in Fitzrovia.

The consortium of Exemplar Properties, Aviva Investors and Kauphing has a new design for it with a mixed use scheme of 53,418 sq.metres (575,000 sq.ft.) that uses a mix of facades to merge with the surrounding area, rather than a modernist approach as proposed by MAKE. Part of the office content is designed to appeal to the media as befits the area while the residential space has been changed to 250 small private flats from 181 larger ones.

EMA signs for 25 years

In a period of shorter leases, the European Medicines Agency (EMA) has signed a pre let for 25 years for half the 46,450 sq.metres (500,000 sq.ft.) in Canary Wharf’s 25 Churchill Place, Docklands.

The agency will get a 37 month rent free period but has agreed no break clauses in the lease. This building will complete the original plan for Canary Wharf. In another deal at the nearby One Canada Square, MetLife is moving into the top floor of the skyscraper where it already occupies the 28th floor.

At the moment EMA is housed in 11 Westferry Circus, E14, which the German open ended fund Union Investments wants to sell. The price tag on the 10,591 sq.metres (114,000 sq.ft.) property is around £75 million. It was formerly the headquarters of Readers Digest. Ballymore has chosen the Royal Docks for a major scheme of 232,250 sq.metres (2.5 million sq.ft.) on a 41 acre site at Minoco Wharf.

It would be part of the area’s new Enterprise Zone and would include a new town square and park. On the assumption that the current development phase is coming to an end, the market may shift to a bout of pre letting as companies realise they have to find space for future growth.

Certainly, CB Richard Ellis expects an increase in pre letting as the only option for large occupiers as availability has fallen by 706,040 sq.metres (7.6 million sq.ft.) since 2009. That situation is reinforced by there being only 603,850 sq.metres (6.5 million sq.ft.) under construction in central London, of which nine cater for large occupiers. That makes the timing of Sellar Property’s The Place, a 17 storey scheme of 55,740 sq.metres (600,000 sq.ft.) at London Bridge Quarter to add to the Shard, a good piece of timing. This part of London is being transformed with a new public piazza, railway station concourse, underground, shopping mall and bus station. Irvine Sellar, the developer, said: “The Place will be London’s largest and most efficient office building to hit the market in 2013, at a time when there is expected to be a real shortage of Grade A space available.”

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Up 65% in Western Corridor

The confidence is flowing back into the Thames Valley market as agents experience a rise in lettings and key towns perform again. The figures bear this out with Jones Lang LaSalle reporting a 65% rise in office take up for the Western Corridor in 2010 compared with the previous year to a total of 5,090 sq.metres (2.1 million sq.ft.). The impetus in the third quarter came from a number of large deals. What is gratifying is that the average deal size was up substantially on 2009 at 1,830 sq.metres (19,700 sq.ft.). JLL’s James Finnis commented: “Office take up in the Western Corridor was relatively silient in 2010.

The deals were generally driven by lease events and consolidation rather than expansion, with the focus of activity remaining in town centres, which accounted for more than two-thirds of last year’s expansion.” Bracknell is a good example of this trend with Simon Fryer of Fryer commercial reporting that “the office market fared well last year with close to 18,580 sq.metres (200,000 sq.ft.) let which is not far off the five year average.” In his opinion, companies view Bracknell as “offering the best value office accommodation in the region.” As in the rest of the UK, the market is dominated by short leases. Fryer believes that Bracknell suffers from a shortage of quality small office suites, which Fenchurch Estates is seeking to remedy through their 2, The Braccans, London Road scheme, which was previously occupied by Johnson & Johnson. Fryer Commercial has let one unit and has other potential occupiers lined up.

At One the Braccans, Brocade Communications, a US technology firm, has leased 2,276 sq.metres (24,500 sq.ft.) at £193.68 a sq.metre (£18 a sq.ft.) through Studley. James Page of Page Hardy said: “With prime rents at around £193.68 a sq.metre (£18 a sq.ft.) in Bracknell and substantial incentives on offer, it has become very inviting for occupiers which has brought a good deal of activity over the past year.” He added that there is also a degree of demand from other use classes demonstrated by the sale of Benedict House to Fisher for serviced apartments. Strutt & Parker and Fryer Commercial were joint agents. “There are encouraging signs for 2011 which has started with a number of active requirements touring the town. There are also signs of strong demand from residential uses for some of the vacant offices,” Page said.