Difficult position: The town is in a tight spot – rents need to rise to stir new development, but there is little space.
Basingstoke’s Vertex building almost seems to wear a frown. The 100,000 sq ft office building is everything a modern, shiny, glass box should be. Shortlisted for a BCO award five years ago, many agents call it the best building in Basingstoke. Yet it has sat empty, looking sad and forlorn, on its bankside location ever since.
Around 8,500 sq ft is now under offer to a local occupier. So, while there are signs of a turnaround, like the wider market, it is far from an all-out recovery.
The past few years have been a bitter pill for Basingstoke to swallow. From a nadir in 2003 of 1.2m sq ft of empty offices, recovery from its early noughties hangover has been slow.
Now, with supply down to around half that figure – and only around 20,000 sq ft of that grade A – agents are starting to cast around for the next slug of shiny space to entice those all-important investors to the town.
Unfortunately, developers are finding it harder to be optimistic. Prime rents scrape in at £17 per sq ft, making development proposals difficult to stack up, particularly with rising construction costs.
In addition, the council holds the freehold on 40% of Basingstoke’s commercial land, doling out leaseholds to private developers, which makes it all but impossible for companies to fund viable projects – even before the money markets tightened their belts.
As a result, Basingstoke is heading for a classic catch-22. Without developments, it will never attract large-scale inward investors and rental growth. Without rental growth, it will never convince developers to speculate.
The severity of the town’s situation was brought into sharp relief by words last year from Rupert Batho, managing director for MEPC’s Chineham Park.
Pointing to yield shifts of 1.5%, he said: “Without yields getting hotter in the way they have been, nobody would be building at all.”
Today, with yields softening across the country, those words hang ominously over the market. Now, one local agent admits: “Anyone not on site is unlikely to start now.”
Peter Woodford of local agent Woodford & Company agrees. He says availability is still too high to stimulate substantial speculative development. “We need rents of £21, £22 or £23 per sq ft to make it viable,” he says. “We can obtain only £17-£18 per sq ft. Rents need to go up by 30%, and that is a lot.”
Take-up is improving, but it is hardly setting pulses racing. To this September, Woodford & Company estimates that 165,000 sq ft of space has been signed for – well on course to improve on last year’s 185,000 sq ft.
Market boost
Supply has reduced by 20% since 2004. However, nearly half of this was accounted for in one deal, when consultant Scott Wilson signed up for the overriding lease on the entire 68,000 sq ft at Hermes’ refurbishment, Midpoint.
This was a big boost to the market, especially as agents say Hermes originally wanted to turn the site over to residential.
Faith also returned in the guise of Belvedere on Basing View. Conceived in the late 1990s, agent Woodford says it twice came close to securing a single tenant. “It didn’t happen and we had to split it up,” he says.
Four lettings have followed, including signings to automotive specialist Continental, and IT recruitment agency Voyager. Two further units totalling 8,000 sq ft are under offer to a local firm.
But, if another ScottWilson-sized deal came along, Woodford says there would be nowhere to put it. “In the town centre, there will only be 20,000 sq ft left, on the Viables estate,” he says.
Agents believe the council has it within its powers to jump-start the market by releasing some of its land. Its portfolio includes Basing View to the north of the town, and arguably the best location for large-scale speculative development.
“At present, the built environment is very tired. It is vital that we get the situation sorted out,” says Nick Olliffe, partner at local agent Hollis Hockley.
The council is rumoured to have tentative plans to sell part of this land, but political will is questionable. Receipts from the land account for nearly one-third of its annual budget. Few think politicians will be willing to relinquish this.
Helen Harbour, head of property at Basingstoke and Deane council, says it is reviewing its policy for restructuring leases – one of the actions from last June’s illustrative framework to improve the area – rather than a sell-off.
Part of this framework proposes to alter the road network at Basing View’s entrance, put a new boulevard in place, and improve links with the centre and the railway station. This went before the cabinet in June, and Harbour hopes a start will be made on the overall proposals in “closer to one year than three – subject to the market conditions being right”.
Longer leases should allow developers to more easily secure funding. But, while the market may have been flush with money last year, going to funders now could prove to be a tough sell.
Harbour defends the implication that the council has missed the boat. “A year ago we were negotiating with Berkeley Group to regenerate the area, but this fell apart last summer, and so we are proceeding with another route.”
Hopes pinned
For now, most agents are pinning their hopes on MEPC’s latest development at Chineham Park. It is on site with two buildings, Central 40 and South 60 on the 90-acre park. The developer is hoping to achieve rents of £22.50 per sq ft on the latter – a 60,000 sq ft office building.
Andrew Newman, partner at Hollis Hockley, agent on the scheme, says lettings will have to emerge from the local market. “Relocations are few and far between,” he says. “Since 1982, I can count five major ones.”
Newman says he will sell South60 on its green credentials, saying lower occupational costs will more than outweigh a few extra poundson the rent.
Local commentators say MEPC will be helped, not just by having held the site for a while – so reducing its land costs – but also by having a large occupier base already on the park. “It will be able to do comfortable, good management deals, and convince existing tenants to pay extra by getting rid of their dilapidation costs,” says Brian Pickett, director at Woodford & Company.
Market at a glance
Office take-up to September was 165,000 sq ft, compared with a total of 185,000 sq ft for 2006
Office supply was 855,000 sq ft, a 20% drop on 2004
Rents are £17 per sq ft for grade A office and £13 per sq ft for secondary stock
Source: Woodford & Company
Theatre gives Wote Street new lease of life
A reopened and revitalised Haymarket theatre has given restaurants and shops at the top of the town around Wote Street a new lease of life. The theatre was recently brought under the management of the town-council-owned venue The Anvil theatre and refurbished.
“Italian, Far Eastern and a lot of Thai and Chinese restaurants have come back into the town,” says Brian Pickett, partner at local agent Woodford & Company.
This is good news for local foodies and independent eateries, alike. The latter had suffered after Grosvenor’s Festival Place opened up its mass-market offer five years ago.
While leisure suffered at the hands of Grosvenor’s 850,000 sq ft shopping centre, retail has benefited from improved trading in and around the centre.
Pre-Festival Place, zone A rents had stagnated at £50 per sq ft. Now, Pickett says, £65 per sq ft is more common. Further rises, however, are not on the cards.
“We’ve reached the peak for now on Wote Street,” he says. “One or two retailers are starting to be a bit more cautious as we assess where the economy is going.”
