Figures from Knight Frank show that lettings on business parks fell behind town-centre deals in the first half of this year, the first time in half a decade. This is bad news for developers and investors in an already difficult market. Yet it is not the only threat facing parks.
A number of questions hover over their existence. As planning constraints tighten, and occupiers’ demands change, will the traditional out-of-town business park survive or will there be a move to edge-of-town schemes? How should developers and investors embrace mixed-use developments? Environmental legislation is also forcing change. How will this affect the design of buildings? And what are the costs involved?
EG brought together, at Slough Estates’ Farnborough Business Park, a group of property professionals to seek some answers.
Market share is down, planning is getting tighter and occupiers are demanding improved amenities. Is the business park dead?
Beastall: “Most business parks are incredibly hostile environments. The only advantages are big space at a relatively economic level, and you can drive there. Mixed use has to be the next generation of the business park.”
Lock: “The conventional out-of-town business park is a dinosaur. Staff want to be in an accessible place, not beached on a campus where they can’t shop at lunchtime. You can’t see your pals after work, and you have to drive.”
Lord: “We do recognise society is changing and business parks have to evolve. Businesses need to attract and retain staff. They demand better standards at the workplace, some buzz, some heart. We want to meet that.”
Going: “Investors have put too much in to let them die. Parks will evolve. I use the analogy of out-of-town retail. Back in late 1980s, we’d sit around the table saying it was buggered, let’s run back to the town. Now we’ve moved from bulky goods to A1 and brought leisure into it. Business parks will be the same.”
Davidson: “For us, the building is just the envelope in which we do our business. We want to recreate an environment that is conducive to flexible working, like a campus. Business parks can be either just a very cold, hard series of buildings filled with lots of different people, or you can get that campus feel.”
Going: “For that, you need single ownership. Fragmentation leads to only one route – isolated investments and buildings rather than a campus mentality.”
Davidson: “Single ownership would be great. Otherwise, you need a management firm – but with teeth, or we’ll just be back to the usual confrontation of landlord versus tenant. Rent and rates are just more costs that I don’t have any control over. Now, if a business park can help me manage better, if we could go to a park with a single supplier for waste management, facilities and cleaning firms, and get some benefits of scale, that would be worth having. Landlords need to move away from the pure investment side and look at business parks as more of a hotel environment.”
Are investors ready to effectively become hotel operators in order to sweat the asset?
Going: “REITs will help. We’ll get the liquidity, strengthen the market and bring parks into single ownership. Then you can afford to bring in other uses such as hotels and leisure. But I do see consolidation in our marketplace. The easiest thing is to attract a hotel operator such as De Vere. That brings a 100-bed hotel, a fantastic gym, audio-visual equipment and conference rooms. That won’t happen under separate ownership, because investors are driven by getting £30 per sq ft over 65 years.”
Davidson: “What is the point of 15 gyms and 13 private restaurants? It would be much better for me to not have to provide a restaurant as a food court is already on campus, and wouldn’t it be great if my car park, which is empty from 6pm in the evening until 7am in the morning, was used by other people? With mixed use, you have to recognise the different time zones. People go out in the evenings, so the uses are compatible, not competing.”
Beastall: “Centralised restaurants don’t work. Restaurants have become an extension of the workplace, and it is good for a company to have a heart.”
Going: “What a colossal waste of money for the occupier. You would never buy plant machinery that you use 16% of the time. If you want integration, put in breakout areas.”
Should business parks be out of town or edge of town?
Davidson: “At Vodafone, people want to live in the countryside, not in town, so driving is a necessary part of what we do. Out of town gives more flexibility.”
Lock: “You must appreciate that that is not a very sustainable way into the future.”
Davidson: “But I’m expecting that mixed use will stimulate public transport.”
Going: “The government should have continued to support proper tram systems for the major conurbations of the UK.”
Lock: “It is peculiar that, in this country, we have to try and get public transport through the private sector for free. Why doesn’t the government see it as essential? This type of infrastructure is generally beyond the purse of one single developer. I’ve got my whole town extension with 10,000 houses and I can barely afford to run that to the town centre — and that is on the back of 25,000 people.”
Sullivan: “If you look at Europe’s successful public transport systems, it tells you that they have to be subsidised.”
Lord: “The ability to move around is a hallmark of advanced society. If the government is restraining free movement, it is opposing the progress of society.”
Davidson: “Vodafone looked at providing bikes to get around our properties in Newbury, but we backed off on the basis of maintenance, helmets and accident issues. But how many developers introduce car shares for occupiers?”
Going: “We run car shares on all schemes on the intranets, and there is a less than 10% take-up.”
Lord: “There are two choices: get people into work using public transport that is convenient, or live close to work. There is a big opportunity for business parks to turn themselves into mixed use by providing residential.”
Sullivan: “But the concept of activity being over a limited period of the day and dragging infrastructure to some point in the middle of nowhere is a complete anachronism.”
Beastall: “Ninety-five per cent of people on business parks want to drive in their own car. They don’t want to share cars because they want to escape quickly. The challenge is to create a more mixed-use environment. I find it quite depressing that you drive around business parks and all you see is cars. We need to encourage people to walk and use the facilities. That gives a campus feel.”
Can increasing demands for sustainability make commercial sense?
Lord: “Property is a commodity. As a developer, we put our products on the shelves and if a customer doesn’t come along and buy that product, then we provide something else. When occupiers increasingly request sustainable buildings, we will deliver.”
Beastall: “The British Council for Offices’ office occupiers’ survey showed two-thirds of occupiers would be willing to pay a premium for more environmentally sustainable buildings. I was staggered by how strongly they felt.”
Going: “We do a massive amount of cutting-edge work but, when it comes to the occupier, they don’t want chill beams. They want air-conditioning. Everyone thinks natural light is fantastic, then occupiers come in, and what’s the first thing they do? Put up blinds.”
Sullivan: “At the moment, driving improvements is seen very much as the tenants’ problem.”
Going: “Ever since we started as a developer, we’ve pushed hard for cutting-edge solutions. It is not a difficult thing up front – there is no real additional unit price. Trying to retrofit it is impossible.”
Beastall: “Do you really believe there is no cost premium to having an environmentally sustainable building?”
Going: “Not within the realms of appropriate sustainable measures. Of course, we could put in lots of measures that have cost implications but, in mass market spec, we can produce in excess of BCO standards for no extra cost.”
Sullivan: “The Greater London Authority expects a 10% renewables contribution. We’ve got a situation where you are looking at bore hole cooling for offices and heating for residential. There are synergies there and office occupiers have a commodity they could sell. My PFI partners say buying energy on the open market is a frightening process. I have a vision that owners could provide energy. OK, there aren’t many clients that have got their heads around that, but what a great way to future-proof the product. I’ve been on the committee bringing the new part L regulations [conservation of fuel and power] in, and it seems that the carbon burden associated with tenure and management is really going to shoot up the agenda.”
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1. David Lock planner Chairman of town planning and urban design consultant David Lock Associates, chairman of the Town & Country Planning Association and former chief planning adviser to the then Department of the Environment. He says: “Conventional business parks are dinosaurs. Dead dinosaurs. We need urban centres with public transport connections, that are well managed and conserve energy. There are models under our noses that are working.” 2. Billy Davidson occupier Head of property strategy at Vodafone. With around 60,000 employees, the company is tenant, landlord and owner-occupier over a variety of properties in more than 40 countries globally. He says: “Business parks are a series of cold, hard buildings. We want campuses, a mixed-use working/living environment that is convenient in terms of ease of use, transport and layout.” 3. Patrick Going developer Executive director of UK projects at Akeler since May 2001. Akeler is overseeing 15 urban regeneration and business park developments across the UK and continental Europe. Prior to this role, Going spent five years at Cushman & Wakefield Healey & Baker’s office agency He says: “I represent the dark side, the developer. The future is single ownership with critical mass and an appropriate blend of uses.” 4. Steve Lord developer Senior development manager at Slough Estates, with 16 years’ experience in business park developments, including some of Slough Estates’ largest UK projects, at Cambridge and Farnborough. The company has 204,500 sq ft of space under development. He says: “We are moving to a knowledge-based society. Business parks need to evolve to serve and meet quality-of-life issues.” 5. Richard Beastall architect Senior partner of TP Bennett. He has extensive experience in designing business parks, and recently researched the British Council for Offices’ report into mixed-use developments in urban areas. He says: “Business parks are incredibly hostile environments. Big HQ business park buildings were an ego trip. Now the costs are being questioned. We need a mixed environment that is sustainable and located at a transport hub.” 6. Lynne Sullivan environmentalist Director of sustainability at Broadway Malyan and a member of the government’s Sustainable Buildings Task Group. She says: “Energy buying on the futures market is becoming very frightening. Could developers become energy services providers? What a fantastic way to future-proof the business. We need flexibility over the lifecycle of a business park. Floorplate models should work for offices, residential and hotels.” |
