Office take-up in Warrington last year may have been double the previous year’s figure, partly due to demand from the nuclear sector, but it is nowhere near flag waving time just yet.
According to the Warrington Review, a survey of the sector produced for the council by local agent BE Group, take-up in the Cheshire town’s office market stood at 180,000 sq ft in 2011. It was double the figure for 2010 but still the second-lowest figure recorded in the review’s 14-year history.
Agents say they have seen a surge of activity in the nuclear industry in particular over the past two to three years. But there are worries that demand may have dropped off.
Birchwood Park is a key national centre for the UK nuclear industry, with more than 4,000 people working there from the sector. Decommissioning agency Sellafield Limited houses its engineering design staff in Hinton House in Birchwood, and many other businesses have moved nearby.
Three-quarters of the deals done in 2011 were in the Birchwood area, underscoring its importance to the Warrington office market. Within that, the biggest deals have been to businesses in the nuclear sector.
Service company Serco took 32,000 sq ft at £18.50 per sq ft in Bridgewater House in 2011. It was the second-largest office leasing deal of the year in terms of space taken, the highest recorded rent, and one directly connected to Serco’s need to be near the Warrington nuclear cluster.
Colin Cawley of local agent Eileen Bilton says the nuclear requirements have cooled off a little, however. He says: “There was a surge of activity over the last 2-3 years but not so much now – other than existing occupiers rationalising their space requirements.”
The other big deal of the year was completed by Fircroft, which took 38,000 sq ft, also in Birchwood. The recruitment consultant bought, then sold and leased back, Lingley House, in a deal that saw the company consolidate two offices.
But these large deals were the exception, with most others less than a third of their size.
Take-up for the first quarter of 2012 stood at around 30,000 sq ft. However, in the past few weeks, Phonak, a Swiss hearing aid manufacturer, has agreed a prelet on a 44,000 sq ft office at £15 per sq ft in Centre Park, a business park close to the centre of Warrington. It could well be the biggest deal of the year for the town’s office market.
Councillor Terry O’Neill, leader of Warrington council, says he expects 2012’s take-up to match 2011. Equally optimistic is Jonathan Walsh, managing director of MEPC Birchwood, one of the major sites that make up the Birchwood business park. “I would hope our office take-up for 2012 would be in excess of 50,000 sq ft, hopefully close to 100,000 sq ft,” he says.
Walsh’s confidence stems from a number of named requirements that remain unsatisfied from last year. “The need and the desire is still there. Some are in the long grass but others I am more confident will happen,” he says.
But no one is expecting any deals to boost rents or reduce incentives. Cawley says rents have fallen to below £10 per sq ft in the town centre. They are higher in the out-of-town business parks, which are into the mid-teens, but still below the last peak when they were around £17 per sq ft.
Michael Williams of local agent Morgan Williams says: “There’s a lot of surplus space and a limited number of enquiries.”
And Cawley adds that the pressure on headline rents will be downwards.
Rupert Barron of Colliers International says occupiers are generally not looking for new space. He adds: “Those businesses that are growing are simply expanding back into their spare space. Businesses that have lease breaks or expiries are taking advantage of them to either vacate or renegotiate terms.
“Plenty of office space remains available on the business parks but much of it is of a poor quality.”
Warrington’s office market, it seems, is going to have to go a bit more nuclear before it shows genuine signs of recovery.
Omega still looking to find a foothold
Ten years on from gaining outline planning consent there is still little progress at Omega Business Park, at junction 8 of the M62.
A joint venture between landowner the Homes and Communities Agency, developer Miller and Royal Bank of Scotland, the grand plan is to provide 3.1m sq ft of office and warehouse space across two sites straddling the motorway.
Much in the market has changed in the past 10 years so it is no surprise that the plans are being revisited.
“Everyone involved has realised that the original consent and masterplan isn’t sustainable,” says Chris Cheap of GVA, one of the letting agents for the site.
One idea being looked at is the introduction of some other uses on the site, including residential.
Councillor Terry O’Neill, leader of Warrington council, suggests that one roadblock to development at Omega is the developer’s obligation to repay the HCA for the infrastructure costs incurred in building junction 8.
“I am quite confident we will see some significant movement on [how that is paid back] in the next few weeks,” says O’Neill.
But money and market conditions are not Omega’s only problem. The big one is the competition. Two junctions east along the M62 is Birchwood business park, which is already well-established with occupiers and ancillary services and it has vacant space.
Jonathan Walsh, managing director of MEPC Birchwood, disputes the idea that Omega is in competition with Birchwood, but nonetheless talks like a competitor.
He says: “If you had a 100,000 sq ft requirement would you go to an empty site, or to a place with a hotel, a gym, a nursery, and plenty more besides?
“Any big occupier would say [with Omega] ‘We will be on a building site for the next 20 years’.”
