Roger Shine has the kind of name that beams upbeat, positive vibes. And the Monégasque millionaire has certainly brought a ray of sunshine to Derby.
In February, his company Lowbridge (Derby) began work on the 32,000 sq ft Friar Gate Square office development. It is the first speculative office start in Derby city centre for at least 25 years. Completion of the scheme, at the junction of Agard Street and Ford Street, is due in January 2013.
The project is funded by about £3m from Derby city council, which is acting as banker, plus another £3m from Shine, and it is already attracting occupier interest. As much as half of the floorspace is the subject of serious talks with tenants, including some occupiers preparing to move back into the city centre from Derby’s “city centre in exile” at Pride Park.
This is an amazing turnaround for a city centre office market that has often seemed not so much on its knees, as six feet underground.
Shine – a chum of Monaco’s Prince Albert and the organiser of Monaco’s show-stopping entry in last year’s Chelsea Flower Show – has personal wealth, and that makes all the difference, says his right-hand man in the city, John Needleman of Friar Gate Square project manager Jensco Direct.
Needleman says: “You try to do a speculative development in Derby city centre and there is no chance of getting finance from a bank. Lowbridge was able to tap into regeneration funds from Derby city council, which has been magnificent, but he had to dip into his own pocket for a seven-figure sum, which is not something many people can do.
“We are offering floorplates of 6,000-7,000 sq ft, which is just right for Derby. It’s a real strength that it’s close to 30 years since the city centre last saw speculative development.”
Upbeat mood
The mood is so upbeat that serious talk about a 45,000 sq ft second phase has already begun (see below). Critical mutterings about a relatively high quoting rent – £18.50-£19 per sq ft, compared with £16 at Pride Park – are brushed aside.
Needleman adds: “It’s early days, and we only really started talking to occupiers once building work began, but we’ve had enquiries for the whole building, and others for just one or two floors.”
But however successful Lowbridge is, Pride Park is unlikely to see a serious exodus because its appeal is firmly entrenched, and the city council’s even-handed policy is likely to see it stay that way. Last December, the council backed an innovative property deal that saw call-centre operator Hero TSC sign up for 150,000 sq ft at the 300,000 sq ft former Egg headquarters at Pride Park, in a deal with Citigroup.
Hero has signed up for half the building, and the city council has taken the other half. In time, Hero could expand into the council’s half. Greg Jennings, the city council’s head of regeneration projects, says: “We de-risked the deal for Hero. The building was basically too big for them.”
The council is determined to pick winners, Jennings suggests. “Here and with the Lowbridge scheme, we want to help trigger something that is already fundamentally sound, something that is already on the cusp of reality.
“For too long, Derby city centre just hasn’t been on the East Midlands office circuit, and we want to create that market for professional occupiers. It’s a corny phrase, but it’s about getting suits on the streets.”
CBRE’s Ashley Hancox, joint agent at Friar Gate Square with Innes England, says: “The city council is hugely proactive and there aren’t that many developers who can offer a fundable office development anywhere in England. The key isn’t just the funding, it’s having a scheme of the right size – small enough – and Lowbridge has that, with the option to add a second phase.”
Of course, the challenge isn’t just signing tenants at Friar Gate Square – it’s signing tenants on long enough leases to create investment value. Given the on-off, up-down nature of the UK economy in 2012, that could be hard to secure.
But for now the sun is shining on Derby city centre – and it feels like the summer is going to be good.
Second helpings?
Lowbridge believes there is between 150,000 sq ft and 200,000 sq ft of untapped city centre demand in Derby. If it is right, then a 45,000 sq ft second phase at Friar Gate Square makes obvious sense.
Lowbridge is already talking up the prospects, and Derby city council is making encouraging noises. The local authority is understood to be prepared to roll its £3.5m contribution to phase one over into phase two, if phase one is fully let.
The Friar Gate Square scheme has been funded under the city council’s £10m Derby Regeneration Fund. Five office schemes are expected to benefit from the first tranche of funding, including Bolstertone’s 50,000 sq ft Central Square and Clowes Development’s modest St Mary’s Gate scheme.
The fund is administered by Worcester-based specialist Thomas Lister.
Parking levy won’t slow down property market
The Nottingham workplace parking levy rose to £288 per car at the beginning of this month. By April 2015, it will have accelerated to £381 per car.
No wonder Boots and the University of Nottingham – each understood to face bills of £1m – are among the employers planning to pass the cost on to their staff.
Yet Nottingham agents are agreed: as far as the office property market is concerned, the workplace parking levy is no big deal.
Savills director Ian Muxlow calculates that most city centre occupiers have between five and six spaces per company and will, like all businesses with fewer than 11 parking spaces, be exempt from the charge.
“Nottingham is very competitive on office rents, so even including the levy in occupational costs means we’re still more cost-effective than some other locations,” says Muxlow.
Tim Garratt at Innes England agrees, but admits: “The timing isn’t good.”
In the short term, the charge could be a boost for some fringe locations outside the charging zone. Beeston business park, a selection of Gedling locations, and junction 26 of the M1 motorway are among the weather-vane sites, says Garratt.
