Tumbleweed may be blowing through large swathes of the region’s office and retail markets, but some gold-rush towns remain. Adrian Morrison reports
For decades, the fortune-seeking advice “go west, young man” could easily have been applied to the western Home Counties of Berkshire, Buckinghamshire and, further west, Oxfordshire.
Among their assets they can list the global technology powerhouse that is the Thames Valley, as well as several world class universities. But they also have their fair share of one-horse towns and spit ‘n’ sawdust saloons. The proverbial good, bad and ugly can easily be found in the tri-county area.
THE GOOD
The Berkshire hot spot of Reading last year experienced its lowest annual take-up since 2003, yet it is still positioned to emerge from the downturn as one of the UK’s strongest economies.
It was highlighted in a report by Experian last month as the UK city most able to survive the economic downturn. Its Resilient local economies report forecast that its gross value added between now and 2026 would be 3.5% – besting London, Edinburgh and Cardiff.
The accolades continue. A recent Centre for cities report shows that Reading has 40% of its employment base rooted in the top 20 exporting sectors – the highest level in the UK. This year, it was named by Foreign Direct Investments magazine Best Micro City in the UK for Infrastructure, and eighth in Europe.
In July, the Work Foundation rated Reading one of the best towns in which to find employment, and it was highlighted as a top-10 English credit-crunch-resistant centre in CACI’s annual Retail footprint briefing.
The Reading Diamond, the area extending along the A329(M) corridor to encompass Bracknell, is home to many global technology and bioscience companies, which agents say will drive the economy in the future. Stephen Head, partner with Reading-based Hicks Baker, says: “We talk casually about occupiers such as Microsoft, Dell and Oracle.”
Pharmaceutical giant Quintiles has seen the attraction of Reading. It is moving its UK HQ out of Bracknell next year and creating its European HQ in a 120,000 sq ft building on PRUPIM’s Green Park.
However, Reading does have an offices overhang of 2.3m sq ft, including more than 90,000 sq ft in PMB Holdings’ and Aviva’s 110,000 sq ft The Blade. Other than this, the majority of empty space is out of town.
Elsewhere, aspirations have always been high for Milton Keynes, in north Buckinghamshire, since its formal designation as a new town in 1967. Network Rail has committed to a 300,000 sq ft National Transport Centre in the town. Its delivery will be phased – more than 90,000 sq ft has been let at Milton Keynes Central on short leases, while its new HQ is built on the adjacent former National Hockey Stadium site.
“Milton Keynes as a town has probably outperformed all other locations,” says Charles Macdonald, partner in charge of Bidwells’ MK office. Relatively strong occupier demand has kept rental values steady, while secondhand office rents have grown by 8% since mid-2009 to £12.50 per sq ft, according to Bidwells.
Oxford benefits from the life sciences cluster on its ring road at nearby Didcot and at MEPC’s Milton Park. However, despite laboratories being proposed at Harwell and Milton Park, there is a shortage. The Harwell Science & Innovation Campus opened near Didcot in June, building on its international reputation for nuclear power research.
A recent office overhang is being addressed. Supply has fallen across Oxfordshire from 5.5m sq ft in 2009 to 4m sq ft in Q1 this year, and it is expected to drop to 3.5m sq ft by the end of Q3.
There is 870,000 sq ft available in Oxford – the vast majority of which is on the business parks – down from almost 1.2m sq ft in 2008. Take-up was above the 10-year average in 2009, although it fell back again this year. “Businesses with some relationship to Oxford University have provided the greatest part of take-up,” says Charles Rowton-Lee, head of Lambert Smith Hampton’s Oxford office.
THE BAD
High Wycombe in Buckinghamshire was once regarded by many in the western Home Counties business community as a premier office location. But the town’s fortunes have changed in a generation to such a degree that one local agent has predicted that its massive office oversupply is unlikely ever to be sold or let.
John Roberts, Aitchison Rafferty’s head of agency, says: “We struggle to attract tenants, full stop. We will have a situation in the next 10 years where lots of buildings will sit vacant.”
One recently refurbished scheme, the 15,500 sq ft Tempus Court on Bellfield Road, is centrally located on the road network and near the station, but has been empty for six years.
Slough in Berkshire suffers from what one agent called “the Slough factor” – people simply do not want to be there. This is largely because of the physical environment, which is dominated by 1980s office blocks and major trunk roads.
The Heart Of Slough regeneration project, a joint venture between Development Securities and Slough council, has stalled due to the economic climate.
Office availability has increased by 23% over the past 12 months and prime headline rents fell by 26% by the end of Q1 2010. They are expected to remain at that level until 2014, though out-of-town rents should return to growth before then.
Experian, conducting research on behalf of the BBC, recently identified Slough as the Berkshire local authority least equipped to deal with public spending cuts, mainly due to its high unemployment figures.
It is hoped that Research In Motion’s 45,000 sq ft letting of Thames Valley Court on the Bath Road heralds a reversal of fortune. Slough saw strong take-up in the first six months of 2010.
THE UGLY
“Ugly” is an ugly word, but if we are calling a spade a spade then Bracknell in Berkshire is a shovel. Bizarrely, it is home to the highest concentration of foreign-owned companies in England. But instead of a California gold rush, these intrepid pioneers stumbled into Tombstone.
Its lack of appeal stems from within. The 1950s new town lacks a heart. Its concrete collar, The Ring, chokes the life-blood out of a retail core that barely deserves the name. What it contains is rundown and dated.
A £750m regeneration partnership between Legal & General, Schroders and Bracknell Forest council is now widely seen as on the back-burner indefinitely. More than 600,000 sq ft of retail and 667,000 sq ft of commercial, as well as leisure and residential, was proposed. The first 200,000 sq ft phase of the office element was completed late last year. However, Terrace Hill’s Maxis scheme has, so far, served only to compound an oversupply problem.
BNP Paribas Real Estate director Simon Fitch says: “At present, there is a reluctance to go there if you are not already in Bracknell.”
Despite CPOs being put in place in 2008, there has been no progress with the regeneration. And early in 2009, the start date was put back to after the summer. This was so widely anticipated a few years ago that many leases were not renewed on expiry, and several buildings were boarded up. “Bracknell has dropped in appeal since then,” says Fitch.
Availability is 1.3m sq ft or 30% of all stock, with 93% in new-build or good-quality, secondhand accommodation. This equates to nine years’ supply, using 10-year average figures. According to LSH, office demand for 2009 was 44% below the 10-year average.
Five years ago, rents stood at £25 per sq ft. The much-touted 7,500 sq ft deal to Broadcom at Arlington Square was sealed in the region of £18.50 per sq ft. However, the soft rents are starting to create some demand, and a number of transactions are expected to be made this year and next.
To access all EGi news stories and commercial property data sign up for a free trial today, or visit the subscription options page to find out more.
