Yorkshire grit payout

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

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

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

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

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

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

Looking at enterprise

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

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

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

Highcross Invests

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

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

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

Look ahead

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

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

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

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

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

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

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

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.”

CLICK HERE TO VIEW COMMERCIAL PROPERTIES IN THE SOUTH COAST AREA.

Bring on the Big City

With its intense commitment to making Birmingham a world class city, the council is expecting a major boost to its plans from the creation of an Enterprise Zone, (EZ) in the city centre.

The logic of its Big City Plan is that the 304 acre centre covering five areas (Southern Gateway, New Street Station South, Westside, Snow Hill and Eastside) is the key to the economic future of Birmingham.

So it maintains its long term ambition which has already seen considerable change with the EZ offering the prospect of 1.49 million sq.metres (16.1 million sq.ft.) of new floorspace. The EZ also includes the site of a new railway station for the High Speed 2 rail link to London. That, combined with a rebuilt New Street Railway Station, will give the city exceptional transport links to boost economic growth.

Jones Lang LaSalle’s Peter Leaver commented: “The city core is the most effective location for an EZ because it will have the greatest ripple effect.” Like other property professionals, he believes an EZ will speed up regeneration.

Certainly the lessons of the 1980s are that EZs can play a significant role in boosting economic growth and changing cities, as witness London Docklands and Salford Quays. As far as the Midlands is concerned, Nottingham has already been granted an EZ for the Boots campus.

Meanwhile, Hines and Ballymore are to directly develop the key site of Two Snowhilll which Colliers International said would alleviate the looming office supply crisis. The firm’s Craig Satchwell, who advised Hines, said: “Two Snowhill will be the first significant office development outside London constructed post credit crunch with an element of speculative space. It will come to the market in 2013 when most of the existing Grade A space is likely to have been absorbed. This will not only help to boost supply it will also help attract inward investment.” Colliers International’s figures show that take up of office stock in Birmingham is the highest for five years with total occupancy up 20,608 sq.metres (221,825 sq.ft.) in 2010. Hines has already shown its commitment to Birmingham in joining with Moorfield to buy eight buildings at

Yorkshire scores in job creation

On the face of it Leeds and other towns and cities in Yorkshire have a problem in overcoming the effects of the recession. The effect can be most clearly seen in the case of Leeds where, said Jeff Pearey of Jones Lang LaSalle, take up was only 26,941 sq.metres (290,000 sq.ft.), below the ten year average. In other cities, notably Sheffield, the market difficulties have been increased by the government spending cuts.

Yet there is another side to the picture. A report from the Centre for Cities gives a glowing report on the prospects for growth in Leeds and also gives star status to Hull and Doncaster for being in the top spots (with Northampton) in reducing the claimant count in unemployment between March and November 2010. Alexandra Jones, Chief Executive of the centre, commented: “Buoyant cities like Leeds (and Bristol), which have been fast growing and have lots of private sector jobs are best placed to lead the UK’s recovery.” She suggests that these places should have new financial freedoms such as full control over the local business rate, and new powers to raise money as well as benefiting from London style mayors.

Pearey points to the healthy start up sector as well as the firmer start to the year after the tough 2010. We have had more viewings and there is a healthy level of enquiries for city centre and out of town offices.” The public sector accounts for only 10% of the Leeds office market, so the spending reductions will have less impact. “On the basis of recent evidence, we expect to have a better year in 2011, particularly as companies know this is a good opportunity for better deals,” said Pearey. A typical deal in Leeds last year was JLL letting 660 sq.metres (7,104 sq.ft.) In Evans Abstract Limited’s Capital House to Synapse Learning for its first office in Yorkshire and ninth in the UK. Evans’ Harlan Pollitt said, “I am confident this letting will kick start further activity both in this building and in our newly refurbished Minerva House (next door).”