by Colin Bird
During the last 200 years, over 26 fixed-link schemes have been proposed for the English Channel, none of which succeeded. The latest, by Eurotunnel, has brought to an end the seven-year itch which has surrounded previous activity. This renewed vigour is based on both political reasons and a heightening awareness on both sides of the Channel of the importance of Europe and the concept of a single market.
Even today, economic forces and geographical location mean that east Kent and the Pas de Calais are already inextricably linked; any improvement in the extensive passenger and freight services can only serve to enhance this situation.
Kent
Kent has long been something of a poor relation among the Home Counties: for many people it (and for that matter Essex) lacks the cachet of Surrey, Berkshire or Hertfordshire as a residential or business address.
The counties east of London certainly do not have the communication and transportation advantages which have encouraged the high levels of commercial growth seen to the south, west (and increasingly the north) of London. The M4, and to a lesser extent the M1, M40, M3 and M23, have acted as powerful development catalysts.
At the same time, major growth in Kent has been restricted by planning policies aimed at maintaining the green belt: while these have been marginally relaxed in the latest structure plan, it may take some time for the county to live down its reputation.
The Kent commercial property market was to a large extent dominated by local developers catering mainly for a healthy but small-scale local business demand. The building spree of the 1970s did not help to improve the image, particularly when large office developments in Chatham, Folkestone and Ashford remained empty for many years. This gloomy past has to a large extent been dispelled by recent events and there is now a great improvement in demand for both office and industrial property.
The development opportunities offered by the tunnel are twofold. In the short term:
- significant activity has been generated as a result of the need for land for construction, bearing in mind that the Channel tunnel scheme is among the largest civil engineering projects in the world.
- it has also been estimated by the Eurotunnel consortium that some 65,000 to 70,000 man years of employment will be generated and some 8,000 to 10,000 jobs will be created over the construction phase, which must have significant impact upon demand for housing and retail in east Kent.
In the long term:
- it is necessary to consider the likelihood of the scheme generating substantial savings in both time and cost to tunnel passengers, commerce and industry before assessing any directly attributable development potential. It is the cost factor that must have the strongest impact on future views, and the final outcome in this respect is still uncertain.
For positive effects to be felt in the property sector, some clear indications that the tunnel will generate business, as opposed to diverting cross-Channel traffic from existing carriers, will be necessary, and apart from the Channel tunnel terminal and developments around Ashford, it seems evident that the industrial and commercial property market is likely to be more directly influenced by the completion of current or proposed infrastructure work.
It is significant to note that Ashford Great Park, a 600-acre development proposal including housing, business and leisure, has met with much resistance and will now rest on the minister’s final decision. However, Rouse Associates, in tandem with Kent County Council, propose to develop some 505 acres at West Malling Airport near Maidstone to provide business space with hotel, conference facilities and housing, while a further business park proposal by Mountleigh and Ashford Borough Council to produce some 1.5 m sq ft of business space has received outline planning consent.
A brief look at rental evolution from 1985 to the present day confirms the trend (see below).
Yields in respect of Kent have also followed a steady path in general terms. As demand has increased and developments have been realised a slight drop in the yield rates has been detected over the last three to four years. It is extremely difficult to spot a trend in specific sectors since location and communications vary to a large extent. In general terms, therefore, present yields in the region are as follows (see over).
Northern France
Both central and local government have been relatively quick to spot the advantage of both rail and road link improvements for the Pas de Calais. The Pas de Calais has for many years been a depressed area, not only because of a decline in heavy industry and coal mining as principal employers but also because of the depressing effect of two world wars having been fought over a large part of it!
A view of property development over the last three to four years reveals that property market activity throughout the area caters primarily for local and regional needs, while the early motorway layouts and proposed extensions to towns such as Calais have improved the general area as a point of distribution not only for the rest of France but also for Belgium, Holland and Germany and the rest of Western Europe.
Added to this, the proposed TGV extensions have also had an impact on projected views as to the future viability of property development in the area.
To a large degree, therefore, present and future development in previously undeveloped areas is induced not simply by open-market forces but also by sympathetic forces such as local and national government and the relative ease of obtaining planning consents.
According to Debenham Jean Thouard Zadelhoff, prices for land and buildings have shown moderate growth in line directly with the cost of living index INSEE (some 2% to 3% pa) over the last three to four years.
In 1988, 41,500 m2 of office space was constructed in the Lille area. Some 31.5% was city-centre building and the remainder was spread around the periphery, Villeneuve d’Aseq and Roubaix Tourcoing.
Projection of new space available, including out-of-town, B1-type developments, shows Villeneuve d’Ascq at 8,800 m2; Pare St Pierre Lesqui at 2,630 m2; and Euroteleport Roubaix at 8,000 m2.
Rents during 1988 stood at Fr 650 per m2 in Lille city centre; Fr 520 in the periphery; and Fr 506 at Villeneuve/d’Ascq. In Roubaix they rose from Fr 500 per m2 to Fr 598 by the year-end, largely as a result of the Euroteleport.
Yields have not varied to any significant extent over the past five years and are around 8% to 9% for offices and 10% plus for industrials.
This brief outline of the Nord/Pas de Calais market-place reveals:
- No significant growth in rents or land price.
- Lille, being one of the principal markets, has shown steady but limited growth more in line with local demand requirements rather than possible international requirements heightened by the tunnel link.
- Where development interest has been shown it has been manifested primarily by British developers for land likely to receive the benefit of attractive planning consents and where land prices are low. Thus there is considerable activity in the Calais area by companies such as Arlington (a substantial mixed development offering principally a large retail complex and B1/warehouse space), City Gate (a B1/warehouse development) and Courtaulds.
Calais
All speculative development is clearly influenced by the Zone d’Activite Concerte (ZAC) released by the French Government for the creation of the tunnel entrance and shuttle area.
Traditionally, the French investor has looked to the sun, viewing the northern area of the country in a similar fashion to the way in which the north of England is viewed in the UK. Much political effort has been put into a drive to stimulate industrial and commercial interest in this depressed area, where unemployment runs in the region of 14%. To date, however, the excessive supply of sites for redevelopment has easily accommodated any increased demand that may have been generated by the tunnel without any noticeable increase in land or property prices. Growth in main centres such as Lille, Calais, Arras, Roubaix and Tourcoing has been steady and has, as in Kent, for many years catered principally for local or regional demand. Thus the tunnel effect in terms of land value increases has not been demonstrated to any significant extent.
The future
Both Kent and the Nord/Pas de Calais have been areas of low property development activity — although the restrictions on planning in Kent have meant significantly higher land value where development has been permitted.
Kent has seen considerable commercial property activity for probably non-tunnel-related reasons: Pas de Calais, on the other hand, is receiving strong financial and administrative incentives transforming a relatively low interest area for development and investment into a medium- to long-term prospect.
It can be argued that the additional push that has resulted in the present tunnel construction on both sides of the Channel is due, to a large extent, to the evolution of market perspectives in both continental Europe and the United Kingdom running up to 1992.
The quest for speedier and less costly links between main centres such as Paris and Brussels, added to the requirement for connections to the main distribution arteries to Belgium, Holland, Germany, Switzerland, Spain and Italy, has also added impetus to the overall view that communications should be improved between the UK and Europe.
The following effects may occur in the medium to long term, which will complement present projected views in special localised areas such as Ashford or Calais and may create other growth areas at other points on the clearly defined communication routes.
A high-speed tunnel link could result in:
(a) the creation of nodal distribution and related activities at or near major motorway junctions on the M25 as distribution bases not only for London but also for the rest of England. The ripple effect of increased commercial activity does not necessarily have to remain in Kent or indeed the South East — the better the communication, the greater the likelihood that these will be located elsewhere.
(b) On the European side, the motorway infrastructure is already well established to the extent that European areas such as Lille, Arras, Lens etc may well appear more attractive to those commercial companies wishing to benefit from the Europe-wide road infrastructure.
(c) While Belgium may not see a direct effect from the tunnel, the proposal for a motorway link between Antwerp and Calais, bypassing Brussels, will improve links with northern Belgium and Holland. It is possible that such distributions will stimulate development interest in hitherto underdeveloped areas in Belgium outside the Brussels region.
(d) Price differentials: the British suffer from chronic xenophobia and it is therefore unlikely that in the short term the price differentials between Kent and the north of France will have an impact on occupiers’ views. In the medium term it is quite possible that building occupiers will make the cost comparison and relocate to northern France.
(e) So far as foreign companies are concerned, both Japanese and American, for example, have already successfully implanted themselves in Europe and have fully appreciated the cost benefits of city locations such as Brussels and even Paris in comparison with London. Such companies’ views will be enhanced only by an improvement in physical links such as the tunnel.
Property opportunities will continue to generate interest in the Kent area in line with Home Counties’ pressures. It is highly likely that certain special areas around Ashford, Folkestone and Dover will benefit from the “Tunnel effect”. However, such effects will manifest themselves only as users and investors see the positive proof that the tunnel will not just divert but will actually generate additional traffic.
Across the water they have very little to lose and a lot to gain: a government-backed push in a presently underdeveloped area which has relatively cheap land and is also located at the crossroads between the UK, Holland, Belgium, Switzerland, Germany, central and southern France and Italy makes the whole northern area of France one where we can reasonably expect to see growth. This growth will occur in offices and B1 development — mainly in existing established centres such as Lille — as well as in distribution warehouses at the exits and entrances to the tunnel and along the axis of the A1 motorway at towns such as Lens and Arras.
This is a market in the making with limited restrictions where land prices and rents compare very favourably with those in south-east England or the Paris region. It is worthy of close scrutiny and with careful analysis should provide useful future performance.
