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Monday 8th August 2005
Expansion hotspots
Some areas of the UK are bending over backwards to encourage business growth, be it relocation or expansion. GrowthBusiness investigates ten hotspots your company should consider.
Spotting the best geographical areas for business used to be easy – you just looked at the main urban centres. But there is less upside now and most of the best development opportunities have gone.
So for the first time in years, investors and developers are actively checking out what secondary markets across the UK have to offer. The answers they find are surprisingly positive, particularly as the domestic economy as a whole has held out better than the more internationally exposed south-east region alone.
In sizing up potential locations, the first step, clearly, is to measure them against projected property returns. This is the combined return on the growth of property value and increases in rent. According to Experian’s latest forecasts for commercial property, the industrial market is expected to be the strongest performer up to 2008, with average returns of ten per cent a year across the UK, but with better results where manufacturing activity is recovering. Office returns are close behind on 9.8 per cent with retail further back on 8.7 per cent.
Other considerations are also necessary before committing to an expansion project or opening a new unit. What is the rate of economic change in a location? How young and affluent is the population? And what is the impact of planning and regeneration in setting the property market on a new course? So, alongside any projected figures, master plans, major events, city living and new transport can all have an influence on whether you decide a hotspot is for real or not.
Liverpool
In the run-up to Liverpool’s year as European city of culture in 2008, returns on retail property are expected to be 13.9 per cent a year, 48 per cent ahead of the UK average, according to a recent forecast from Experian. On office space, returns of 13.6 per cent are expected, which is 56 per cent more than for the UK as a whole.
‘The Liverpool skyline is currently littered with cranes, as significant residential and commercial property goes up to house those being attracted by the business and lifestyle opportunities that Merseyside now offers,’ says Neil Sturmey, partner at Grant Thornton in Liverpool.
The average take-up of office space is currently 400,000 sq ft a year in the prime core and the focus is moving towards creating Grade A space for large occupiers. In retail, Grosvenor and Land Securities are squaring up with their Paradise and St Johns/Clayton Square projects.
‘As long as planning policy, process and delivery can keep pace, we should be in for exciting times in Liverpool,’ says Sturmey. ‘While there is 1.1 million sq ft of office accommodation available in central Liverpool, the number of quality Grade A developments is very limited.’
Sheffield
Private funds are flowing back into Sheffield after 25 years of concentrated regeneration and development. ‘There is now more activity here than in almost any other regional centre in the UK,’ reports Stephen Hodgson at Knight Frank in the city. ‘The economy has regained its balance and has become more bullet-proof.’
In the last year, office rents have risen from £15 per sq ft to £18. Sheffield’s flagship project is St Paul’s Place, developed by CTP St James, where the first building has just been completed at a cost of £23 million with two more to follow, giving a total of 200,000 sq ft of A grade office space with an additional 50,000 sq ft of leisure space and 300 apartments.
City living is an important part of Sheffield’s revival, with low-cost residential sites just outside the centre being snapped up by buy-to-let investors. New bars and restaurants are attracting people to the centre in the evenings. Sheffield’s credentials as a prime location are being strengthened by Hammerson’s development of a new 600,000 sq ft retail quarter with John Lewis as its anchor tenant.
Stratford
When athletes arrive in London for the Olympics, most will be staying next door to the main stadiums in a new £3.5 billion scheme at Stratford City. Developed by Westfield, Stanhope and LCR on the site of derelict rail sidings, 5,000 new homes are being built alongside five million sq ft of offices and 1.5 million sq ft of retail and leisure.
‘Stratford City will transform this area of east London into a thriving new urban community,’ said Ken Livingstone, the Mayor of London, launching the scheme in October last year. ‘The homes, jobs, retail and transport planned for the site will substantially improve the facilities on offer to visitors to the London Olympics.’
Situated three miles east of the City and two miles north of Docklands, Stratford is already a location waiting to happen, thinks Jonathon Saxon, who covers the Thames Gateway and Docklands for Knight Frank. ‘During the Olympic bid, the market has been dominated by shortage of supply, even though there is healthy demand at £18 per sq ft. Only two significant developments have gone ahead. We might start to see developers looking at off-plan pre-lets, although the built environment probably has to improve before we see too many large occupiers.’
Where Saxon expects to see most demand in the next three to five years is from smaller companies working for the Olympics and he is confident that rents will soon start to push through £20 per sq ft.
Newquay
For those looking for amazing offices with fantastic views of the sea and a great nightlife, then try Newquay in Cornwall. The entrepreneurs who helped build Britain’s surf capital are looking to widen Newquay’s commercial appeal and draw in young, creative enterprises, says Danielle Atkins, investment manager at Cornwall Pure Business.
A new growth area has been set up next to the airport. The site is mixed-use, with both exclusive and affordable housing, targeting product designers in the leisure industry. For the more traditionally minded, the Duchy of Cornwall is applying to build a follow-up to its model village of Poundbury in Dorset, which locals have already dubbed ‘Surfbury’.
There is money behind the town’s efforts to make itself an all-year round attraction for business. Along with the rest of Cornwall, Newquay qualifies for Objective 1 EU funding. A £360 million programme is running up to 2006 and is likely to be renewed for a further five years. The funds are not being used on direct grants, but on building up Cornwall’s infrastructure, ensuring, for instance, 98 per cent broadband coverage.
One company that has seen the attraction of Newquay is Infoteam, which repairs Sony Playstations in Europe. The CEO, Glen Coffey, was originally going to move the business from Uxbridge to Slovakia. Instead he chose Newquay. ‘From a pure numbers point of view we should have gone to Eastern Europe, however there was an emotional pull. Since relocating we have realised an 18 per cent efficiency gain. The productivity we get is exceptional here.’
Adam Jolly
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