It’s spring. Time for buds to grow and flowers to bloom. At four key Leeds development sites, this spring is particularly welcome after years of frost. These budding schemes are feeling the heat of a flourishing local economy, but they are also enjoying the warming rays of investment from the private rented sector (PRS).
Institutionally backed PRS – an established asset class in London, and making headway in Manchester – could soon reach Leeds. And one of these four Leeds sites could be the first location.
Developers with PRS interests are known to be sniffing around the Royal Bank of Scotland’s Holbeck portfolio, as well as the prominent Yorkshire Post site. City One and Kirkstall Forge could also be targets.
Paul Fox, partner at Fox Lloyd Jones, is advising on the Yorkshire Post site. He says: “PRS just about works in Manchester, we’re told, and it’s time for it to travel along the M62 motorway. We’re all looking for the breakthrough site. The first couple of schemes to go ahead will probably soak up the demand because investors are very picky – and why shouldn’t they be? This will eliminate some sites. But a breakthrough site in Leeds is needed.”
Spring is a time of fresh starts. For Leeds’s four big development sites, it could also be the season of fruitful, and in some cases long-delayed, progress.
Kirkstall Forge
Who: Commercial Estates Group
What: 56 acres, acquired by CEG in 2003 for £8m.
When: In March 2015 CEG committed to a start on site and appointed contractor I&H Brown for infrastructure works, but speculative offices are not on the agenda.
What could be built: A 2007 consent allowed 1,400 homes and 180,000 sq ft of offices, along with modest retail and leisure; the current plan is for 1,000 homes and 300,000 sq ft of offices.
What you need to know: The £400m development will be supported by a new £16.9m railway station and access road to service the site by late 2015.
What the market says: Credibility problems haunt several spring schemes – Kirkstall Forge in particular, thanks to glacially slow progress.
Sanderson Weatherall’s Richard Dunn says: “The railway station will be the springboard,” and this is a widely shared view. Remedial work has been carried out on the site and CEG will also be investing more than £10m in affordable housing, education and transport improvements.
Paul Fox, partner at Fox Lloyd Jones and adviser to CEG, says: “The site has been on the back burner, but now infrastructure is committed. The station opens in November, and we’re looking at planning permission for the first 100,000 sq ft office element later this spring. This will be a city centre product but out-of-town. There’s no intention to build speculatively.”
City One
Who: Caddick Developments
What: 9.5 acres at Sweet Street, sold by RBS – receivers to Montpellier Estates.
When: Probably not soon.
What could be built: PRS and perhaps a hotel with other leisure. The consent is for 1m sq ft of offices, a 25-storey residential tower, a 230-bedroom hotel and a 100,000 sq ft casino.
What you need to know: A decade of grand plans but no development ended when Montpellier Estates self-destructed after losing a legal action against Leeds city council. Sold for £9.5m; generates about £700,000 a year in temporary parking income but continued parking consents in doubt.
What the market says: Ten serious bids resulted in a sensible price for a site that is still some way from the action, and has constraints (including a large electricity substation).
GVA director Matthew Tootell says: “A prominent site, I’d expect quite a bit of residential, fewer offices – an out-and-out mixed development, but it’s reliant on momentum.”
Henrie Westlake, partner at Knight Frank, who sold the site for RBS, says: “If the new owners are seen to be doing something, the city council is likely to be more generous in renewing the car parking consent. The existing planning consent is nonsense – too many offices. I’d expect this site to be PRS-led.”
Holbeck Village
Who: Royal Bank of Scotland, advised by Sanderson Weatherall and Gent Visick
What: 5.9 acres, divided into seven plots, between Globe Road and Water Lane at the Holbeck Urban Village.
When: Sale – in one lot, or several – early this summer.
What you need to know: Bids for the entire 5.9 acres are expected to exceed £5m; initial submissions closed on 31 March. The site fell into RBS hands when Holbeck Estates collapsed in 2009.
What could be built: Existing planning permissions, renewed by RBS in summer 2014, include an outline consent covering three plots for a mixed-use scheme of 246,000 sq ft and 400-plus flats. They have since worked up plans for a smaller mix of offices, retail and hotel (200,000 sq ft), 700 flats and a multi-storey car park.
What the market says: This could be good, and brokers want to see momentum. A quick sale – and a sale in one lot – will improve confidence on a site that missed the last boom.
Fox Lloyd Jones’s Paul Fox, says: “The hope is that a PRS developer grabs it as a whole. It would be a shame to see it fragmented because we need a first-class overall solution in Holbeck. We also need a quick sale and planning permission in six months.”
Richard Dunn, partner at Sanderson Weatherall, adds: “We expect some bids from the PRS sector. A sale in one lot would give the purchaser flexibility and the sale would be more straightforward, but we’ll keep an open mind.”
Former Yorkshire Post HQ
Who: YP Real Estate, advised by Fox Lloyd Jones and DTZ
What: 4.6-acre Wellington Street site changed hands in 2013 for about £2m.
When: Site cleared late last year, section 106 agreement signed late March 2015, marketing to occupiers begins this spring.
What could be built: In February planning permission was granted for a 540,000 sq ft office scheme with 200 flats. A second PRS block is possible, if demand is strong.
What you need to know: Gateway site and heavily fancied for PRS; it will challenge MEPC’s neighbouring 900,000 sq ft Wellington Place scheme in the office market; David Newett of Sterling Investments is behind the project, having bought the site in 2013.
What the market says: A fascinating prospect, say observers, who rate this gateway site highly. Unlike the other sites, the Post site has been a relatively quick burn.
“This is very developable, and the plans are seriously credible,” says Knight Frank’s Eamon Fox. “It’s going to give MEPC a run for its money, because the market dynamics are good. B1 supply is at an all-time low and the scale of the plan looks do-able.”
Paul Fox at Fox Lloyd Jones says: “The focus now moves from planning to something more market-facing. We’re looking at end-user requirements and already talking to development partners about a PRS block of 160,000 sq ft. Of the three office buildings, one of them may also be converted for PRS because the site ticks a lot of PRS boxes.”
Fox plays down the challenge to – or from – MEPC’s Wellington Place. “We’re different; we’ll piggyback on them, with the road frontage and prominence some occupiers want,” he says.
