As the amount of available grade A office space dwindles around the M25, Reading is becoming an increasingly attractive option for occupiers who want new space. Mark Simmons reports
Retailers search for Home Counties bargains
Despite the gloom of the recession, Britons are still shopping, especially in the relatively wealthy counties of Berkshire, Buckinghamshire and Oxfordshire. As a result, retailer activity in these areas remains buoyant as stores compete for a share of local spending. So in major centres like Oxford, Reading and Milton Keynes there is steady demand (albeit little supply) for prime pitch space.
“Requirements have changed in Milton Keynes recently,” says Rob Williams, head of retail development at Strutt & Parker. “Retailers have moved away from smaller units to larger ones, above 5,000 sq ft.”
When the opportunity arises, there is still an appetite for even larger stores in the main shopping centres of Midsummer Place and thecentre:mk, where four units of between 10,000 and 25,000 sq ft are under offer.
Fashion retailers are particularly active, and Urban Outfitters, Forever 21 and Harvey Nicholls are all rumoured to be circling Milton Keynes. They will join other aspirational brands that have located there in the last two years, including Apple, Hollister and Superdry.
Even in secondary centres, retail agents are reporting a healthy level of demand, which in locations like Banbury may even stimulate new development (see box, right). In other towns, the arrival of a big-name brand is expected to attract other retailers. A 40,000 sq ft John Lewis At Home opens at Standard Life’s Parkway in Newbury later this year, and Williams notes: “Not only will it consolidate the existing shopping offer, it is likely to draw in other retailers.”
Recent arrivals include Mint Velvet and Jigsaw, and they could be joined by similar stores such as Whistles, Hobbs, LK Bennett and Cath Kidston.
Overlooked for many years as a small market town on the far-flung northern fringe of Oxfordshire, Banbury is now emerging as a retail and industrial hotspot. But the sudden influx of retail occupiers is not universally welcome.
This month, Barwood Developments is expected to submit a planning application for 80,000 sq ft of retail warehousing, plus a 60,000 sq ft supermarket, on a former factory site on Southam Road.
This appears to conflict with local authority Cherwell district council’s proposals to redevelop four acres of town centre land at Bolton Road, which also include a 60,000 sq ft supermarket and 30,000 sq ft of non-food retail.
In addition, the council could make a decision this month on a planning application for a retail park next to the M40 motorway – Banbury Gateway – where 292,000 sq ft of stores, including a 100,000 sq ft Marks & Spencer anchor, and a unit for Next – which already occupies two stores in the town – could be built by LXB Retail Properties. It would open in 2014.
Existing town centre traders are concerned that if all the developments go ahead, business will be sucked out of town.
Scottish Widows, owner of the town’s 385,000 sq ft Castle Quay shopping centre, has formally objected to the LXB proposals, writing: “It is stated that occupiers are ‘likely’ to be new to Banbury, but local agents consider this to be unrealistic.”
However, a 2010 retail study by Cherwell council found that 440,000 sq ft of additional non-food retail is required by 2016 to stem a 40% leakage of shoppers to other centres, including Oxford and Milton Keynes.
Plans for new distribution space are less contentious. Banbury’s direct access to junction 11 of the M40, equidistant between London and Birmingham, makes it an ideal distribution location, but for many years local planners have resisted big sheds. That is now changing.
“Employment uses are welcome, especially on brownfield land, and there is occupational demand on that relatively uncrowded stretch of the M40,” says James Harrison of Burbage Realty, agent on one of the town’s two major distribution sites, Banbury Cross, where First Industrial Developments and Standard Life Investments has consent for 600,000 sq ft of distribution and office space.
Across town, Barwood Developments is hoping for planning approval this month for 1.2m sq ft at its M40 Central scheme. No speculative development is planned at either location, but with several large requirements reportedly circling, tenants could be signing up later this year.
Reading has for a long time been a destination of choice for occupiers keen to be located in the Thames Valley. But now the Berkshire town may become a destination of necessity.
While available grade A space in many other centres has practically disappeared (see graph), Reading boasts more than 1m sq ft of prime stock, around 20% of it in the town centre.
Although there are plenty of requirements (see table), potential tenants are taking their time about making decisions. “This is a reflection of the fact that most occupational demand is linked to lease events,” says Nick Coote, head of Lambert Smith Hampton’s Reading office. “We are dealing primarily with indigenous occupiers.”
Some, like Reading council, have been making noises about moving for a long time, but have still not committed. The local authority was due to make a decision last year on where it would take up to 85,000 sq ft of new space.
Two buildings are now in the frame – Ivypark’s RG Squared and Aberdeen’s Bridge Street Plaza – and a source close to the council expects a deal to be announced this May.
Given the choice to stay or go, the consensus view among property professionals is that occupiers will opt to move to better premises in the Thames Valley, in spite of some hefty incentives to stay offered by existing landlords. “Obsolescence will definitely drive many businesses to move into new buildings. They want the operating benefits of a modern workplace,” says Knight Frank partner Ryan Dean.
LSH estimates that in the Reading area there are 24 buildings with space of more than 5,000 sq ft that may become vacant due to lease events this year. This totals nearly 460,000 sq ft.
The apparent abundance of available space is misleading, according to LSH’s Coote: “From 2013 there will be real problems for occupiers. Their perception is that there is loads of space and they can get anything they want. That soon won’t be the reality.”
Not all businesses are opting for Berkshire, however. Last month, software firm McAfee agreed a deal that will consolidate staff from smaller Berkshire offices into 42,000 sq ft of secondhand space at Sun Life’s Target House in Aylesbury. It was the largest letting in the Buckinghamshire county town for around a decade as most office activity is centred on Milton Keynes, where availability of grade A space has sunk to just 60,000 sq ft in the town centre.
Charles Macdonald, regional office partner at Bidwells’ Milton Keynes office, warns: “We are heading for undersupply within the next two years.” In the meantime, new occupiers are expected to appear once Network Rail starts to occupy its new 400,000 sq ft HQ above the town’s railway station from September this year.
Oxfordshire has the quietest occupational market of the three counties. Savills estimates that there is demand for 100,000 sq ft of space in and around Oxford, mainly on the business and science parks, although few occupiers are actually taking the plunge.
Nick Berrill, director of the firm’s Oxford office, says: “A lot of tenants dip into the market and then dip out again. Landlords are very keen to retain them, so they are likely to stay put.”
Getting cross in Banbury
Overlooked for many years as a small market town on the far-flung northern fringe of Oxfordshire, Banbury is now emerging as a retail and industrial hotspot. But the sudden influx of retail occupiers is not universally welcome.
This month, Barwood Developments is expected to submit a planning application for 80,000 sq ft of retail warehousing, plus a 60,000 sq ft supermarket, on a former factory site on Southam Road.
This appears to conflict with local authority Cherwell district council’s proposals to redevelop four acres of town centre land at Bolton Road, which also include a 60,000 sq ft supermarket and 30,000 sq ft of non-food retail.
In addition, the council could make a decision this month on a planning application for a retail park next to the M40 motorway – Banbury Gateway – where 292,000 sq ft of stores, including a 100,000 sq ft Marks & Spencer anchor, and a unit for Next – which already occupies two stores in the town – could be built by LXB Retail Properties. It would open in 2014.
Existing town centre traders are concerned that if all the developments go ahead, business will be sucked out of town.
Scottish Widows, owner of the town’s 385,000 sq ft Castle Quay shopping centre, has formally objected to the LXB proposals, writing: “It is stated that occupiers are ‘likely’ to be new to Banbury, but local agents consider this to be unrealistic.”
However, a 2010 retail study by Cherwell council found that 440,000 sq ft of additional non-food retail is required by 2016 to stem a 40% leakage of shoppers to other centres, including Oxford and Milton Keynes.
Plans for new distribution space are less contentious. Banbury’s direct access to junction 11 of the M40, equidistant between London and Birmingham, makes it an ideal distribution location, but for many years local planners have resisted big sheds. That is now changing.
“Employment uses are welcome, especially on brownfield land, and there is occupational demand on that relatively uncrowded stretch of the M40,” says James Harrison of Burbage Realty, agent on one of the town’s two major distribution sites, Banbury Cross, where First Industrial Developments and Standard Life Investments has consent for 600,000 sq ft of distribution and office space.
Across town, Barwood Developments is hoping for planning approval this month for 1.2m sq ft at its M40 Central scheme. No speculative development is planned at either location, but with several large requirements reportedly circling, tenants could be signing up later this year.
