Seaside struggle: Despite take-up of just 40, 000 sq ft, Terrace Hill is planning a speculative scheme. Daniel Cunningham asks, is this brave or foolhardy?
It would take guts to speculatively build offices in Southampton at the moment, and Terrace Hill claims it has them. If the developer delivers on its promise and starts construction of 100,000 sq ft of grade A offices at Mayflower Plaza, local agents will unanimously tip their hats to it.
City-centre take-up of just 40,000 sq ft to September 2007, and the fact that one of the last office buildings to be constructed in Southampton is completely empty, might suggest Terrace Hill is unwise rather than brave, but agents say that without new-build, the market will stagnate.
Southampton is one of those office centres that constantly interests occupiers and developers, but rarely wins complete confidence. A bumper 2006 saw three major prelets totalling 400,000 sq ft land at the port, but only cruise operator Carnival opted for a city-centre scheme – a 147,500 sq ft prelet at Development Securities’ Aqua, at the WestQuay phase three project. Agents say it was a blatant sign that central Southampton lacks quality offices.
The 1.7-acre Mayflower Plaza site, which has sat derelict since the 1980s, is a key example of developer hesitancy. Despite existing consent for 100,000 sq ft of offices and 190 flats, successive owners – the last being Clerical Medical – have failed to do anything with it. Agents say the fact that site constraints would require the offices to be built in one fell swoop has dissuaded developers.
But since Terrace Hill bought the site for £7.4m earlier this year, it has been hatching plans and, with a steely determination, the firm’s development executive, Richard Myers, confirms it will submit a fresh planning application for 100,000 sq ft of offices, a four-star hotel and 190 flats this December. The developer could be on site next spring for a 2009 completion.
The move is either brave or foolhardy, and local agents know that requirements such as Carnival’s do not pass by Southampton every day. “It’s a bold call,” says John Butt, head of Lambert Smith Hampton’s Southampton office. “The office building can’t be phased and, if Terrace Hill takes the chance, it would sorely test Southampton’s ability to grab the big occupiers.”
But Myers is bullish: “The fact is that there is no grade-A space in Southampton apart from a floor at Deeley Properties’ 1 Dorset Street.”
Ominous presence
That is only half the story. Perhaps unfairly, some shy away from calling McAleer & Rushe’s 83,000 sq ft office block at Charlotte Place grade A, but Southampton’s agents know the building, which has been empty since completion a year ago, is an ominous presence on the edge of the city.
Agents play down Charlotte Place and call it a unique case. Most argue that it is not a prime location – compounded by the fact that it is on a traffic island – and the developers’ decision to only complete the shell and core has not done it any favours.
Savills director Martin Hastelow, who has the unenviable task of letting it, says firms he is talking to are eager to see the finished product, and confirms that McAleer & Rushe is embarking on a complete fit-out. “We’ve had to accept the need to fit the scheme out fully, and that will be completed by the end of the year,” says Graham Mitchell, development surveyor with McAleer & Rushe.
“However one criticises Charlotte Place, it is still quite a call to build offices while something like that is standing empty,” admits Humberts commercial director Andrew Archibald. “If I was to build offices now in Southampton, I would go small where I could let 2,000-5,000 sq ft. I’m not convinced there are larger requirements.”
That might be the sensible option, but agents are generally happy to see Mayflower Plaza draw nearer to construction. Rather than look at Charlotte Place, they are eager to point to a recent success story, Deeley Properties’ 25,000 sq ft 1 Dorset Street, a speculative scheme that was completed this summer, with lawyer Grant Thornton taking two-thirds at a record city rent of £21 per sq ft.
Salt in Charlotte Place’s wound comes courtesy of the fact that the lawyer considered it and walked away from a deal there.
Small confidence
Dorset Street is hardly a major development, but it is a confidence boost for a market in which named requirements are slim. At the moment, 30,000 sq ft for solicitor Moore Blatch and up to 8,000 sq ft for the Marine Accident Investigation Bureau are the only two mentioned.
There is speculation that last year’s 50,000 sq ft prelet at the University of Southampton for Lloyds Register of Shipping is on shaky ground because of planning issues.
Perhaps that is why the scheme that most tip to come forward before Mayflower Plaza is Linden Homes’ The Avenue. Located on the former New College site, it is aimed at a smaller bracket of the market.
Linden Homes is seeking consent for an 8.5-acre mixed-use project including three medium-sized office buildings of 14,000 sq ft, 26,000 sq ft and 29,000 sq ft. It will soon seek a commercial developer.
Atisreal director Simon Neilson points out that other schemes are being worked up. For example, at a former NHS primary care trust site nearer the city core than Charlotte Place, Imperial Developments is close to achieving section 106 agreements for 85,000 sq ft of offices alongside a hotel and apartments, to be called East Park Terrace.
Southampton seems to beever-teetering on the verge of interesting development so, if Mayflower Plaza and The Avenue schemes get on site, the market will have the ammunition to prove it has pulling power. With rents stalling at £21 per sq ft and a lack of lettings, proof is most certainly needed.
Southampton sees a start of the pier show
Anything Portsmouth can do, Southampton wants to do better. That is why any scheme that can reclaim its inaccessible waterfront is welcomed with open arms by a city painfully jealous of Portsmouth’s Gunwharf Quays.
News, therefore, that Southampton’s derelict Royal Pier is subject to redevelopment plans, is welcome.
Its owner, Associated British Ports, is working up plans for the pier, but declined to speak at this stage. Speculation suggests redevelopment will include homes, shops, bars and restaurants, as well as enhanced public realm.
Some, however, may feel a sense of déjà vu. Eighteen months ago, ABP walked away from a project to reclaim land for a 50-acre scheme incorporating 3,500 homes. It feared the investment would not pay dividends.
This time round, the less complicated plans are thought not to involve the Crown Estate – owner of the surrounding seabed. And the council’s Mayflower Park will be involved.
Tim levinson, the council’s head of city development and economy, says that discussions for a preferred developer are on-going. He also says that there are plans for an extension to Mayflower Park to provide a permanent home for the Boat Show.
Southampton is also hoping to beat its Portsmouth rivals in retail. The fate of one of the south coast’s most sought-after retail requirements will soon be known. Morley is awaiting the planners’ decision regarding a four-storey, 350,000 sq ft store for homewear giant IKEA.
Although the site falls just outside Southampton council’s accepted retail zone, agents expect a positive decision by December. The alternative is that IKEA heads for Portsmouth’s Victory Park.
“Southampton is IKEA’s first choice,” says Lambert Smith Hampton’s John Butt. “It’s an established city-centre site with established retail.”
