When it comes to prime examples of office markets being hit by economic downturn and the demise of the dot.com boom, Basingstoke is the place to go. At the pinnacle of the 1990s boom, take-up topped almost 400,000 sq ft and rents were riding high at £19 per sq ft. Since the downturn, however, local agents describe the market as “rather tricky,” and “faltering”, as rents have slid to £13 per sq ft.
Jim London of London Clancy estimates current office supply to be around 1.16m sq ft the equivalent of, at best, five years’ take-up, and at worst, seven years.
But although the office market is suffering, Basingstoke has not stood still. On the contrary, the town’s retail and residential sectors are flourishing. In fact, it is the mismatch between the various markets that local commentators are finding most worrying.
More and more residential is coming into the town, taking over office sites and buildings. An initial response is to welcome the trend, as vacant office space is taken off the market. But regarding long term, questions are being asked about whether Basingstoke’s town centre is becoming a free-for-all for residential developers, and what are the forces pushing the developments?
Grosvenor’s 1m sq ft Festival Place shopping centre, which opened 18 months ago, seems to be key. Rob Price, land director with Connells, says: “This nice new shopping centre has created a catalyst for development in the area.”
The area in question is around Alencon Link, which divides the Festival Shopping Centre from the railway station. It is here that most of the redevelopment and conversion of former office buildings into residential is happening.
Around 800 residential units have been built or are under construction in the town centre. Two of the biggest developments are Realto Homes’ 375 apartments on former railway land near the railway station, and Barratt Homes’ 288-unit Crown Heights project, next to Festival Place, on land that used to accommodate the former Crown Buildings.
It is not just a shopping centre that is pushing all the development, however. “Market forces have most recently dictated the emergence of the residential invasion into commercial or brownfield sites previously zoned for employment use,” says Richard Thomas of Baker Davidson Thomas.
Barratt Homes is one such developer that is actively looking for town-centre development opportunities. The company targets former office buildings, and is now working on its 21st office-to-residential conversion in the South East. Barratt’s southern chairman, Clive Fenton, describes Basingstoke as a”classic example of what is happening around the region”. He adds that people want to live in the centre because it is on the “door step” of Festival Place, and the fast commuter services to London is 45 minutes – minimum.
Some four months before its completion, around 85% of Barratt’s Crown Heights development has been sold, half to investors and half to owner occupiers.
The residential conversion process sees no signs of abating. Basingstoke & Deane council’s central area action plan, published last year, is looking at the future of Basing View. The area is home to a collection of 1960s and ’70s buildings in the heart of Basingstoke, the main business district.
Mike Davies, the council’s head of property services, says there is not yet a specific plan, but the council is keen to see more residential in the town because “it would help the vitality of the area”. The council is in negotiations with a major developer “who has expressed interest in becoming a strategic partner for the regeneration. But we are not insisting on just office use. It will be mixed use,” says Davies.
Meanwhile, Davies reveals that there are a number of office buildings in the town that residential developers, owners and occupiers would like to see converted into residential. And the council has earmarked three of its own buildings for possible conversion, the largest being the 150,000 sq ft Alencon House.
But Davies is keen to stress that residential conversion is not a free-for-all, and any change is carefully regulated by the council. “We are talking to the lessees and seeing if there is a financial package for them to take to do conversions,” he says. “Any agreements we reach would have to be reported to the councillors, and it would be a matter of policy as to whether they would want to see employment go out of the city, because once buildings are converted to residential there is no going back to offices.”
And despite the government’s eagerness for more residential, Davies adds there is no pressure on the council to encourage conversions. “The council is making money on buildings whether they are empty or not because the lessee is still paying.”
With the state of the office market, it seems logical to pursue a booming residential market, and developers are not going to readily add more stock to an overcrowded market. But what happens when or if the market turns and there are no office buildings left in the centre of Basingstoke?
Thomas believes the council is in an invidious position, with its need to meet both the government’s and the county council’s requirements for housing stock and the need to attract and sustain a workforce. The latter in particular will “fuel the economy and the awaited improvement in the commercial market”.
He claims the answer is providing residential now and protecting future office development with mixed-use schemes. “Injecting some activity back into Basing View with mixed-use schemes would offer some much-needed assistance to the area. Any mixed-use scheme is likely to emerge at a time when the economy strengthens and demand improves,” he says.
According to London, there are already indications of improvements in the office market, although it is at the smaller end of the scale. “We are finding that the general number of viewings has increased lately, although the market still remains tough. However, freeholds remain popular with low interest rates and access to borrowing remaining good,” he says.
And as Davies points out, the housing boom will not last for ever. “There’s got to be a limit to this residential market. There must be a limit for a town the size of Basingstoke.” In the meantime, office developers are waiting for that limit to be reached, and their own market to bounce back.
