Bruntwood is applying science to its office business, with the purchase of a huge site at Alderley Park the first indication of a big change to come.
Buying a 400-acre biomedical site scarcely counts as modest. Yet Bruntwood’s purchase of AstraZeneca’s site at Alderley Park is the first hint of a change of direction for the Oglesby family’s Manchester property empire.
That is because Bruntwood is on the way to becoming a pioneer science-property giant. In the process it is transforming the Bruntwood brand from recognisable if funky landlord into a new kind of enabler and networker.
Of course, Bruntwood has already come a long way from Mike Oglesby’s industrial break-up business of the 1970s and 1980s. Its affordable offices are now the backbone of Manchester’s city centre market – between a quarter and a third of all deals in the city are in Bruntwood space.
Yet Bruntwood has begun to build up a formidable science portfolio along the Oxford Road corridor. Not only does it have a controlling interest in Manchester Science Park, but it is completing Citylabs, the £24m biomedical centre of excellence in the former Manchester Eye Hospital. Due to open in June 2014, the 100,000 sq ft project is already 60% prelet.
Construction of a 60,000 sq ft building at the science park is due to begin this autumn. Called Innovation Commons, it will be the park’s first new building for a decade.
Separately, Bruntwood is about to start work on the £60m redevelopment of the 400,000 sq ft Manchester Business School.
Now, observers say, Bruntwood is ready to take its scientific portfolio to the next level – and the effect will be to transform the business. The purchase of Alderley Park is part of a grand strategy that could lead to a new kind of business and new, fast-growing income streams, it says. Performance at Manchester Science Park has proved that a new way of working could pay handsomely, Bruntwood-watchers say.
Manchester itself takes only a modest chunk of life sciences requirements (see graph), but Manchester Science Park seems to be growing. The park has 160 occupiers and in the past 12 months a fifth have taken additional floorspace. The retention rate is 80% – science companies don’t churn much – and the park is more than 90% occupied.
In other words, science businesses are reliable occupiers with an appetite for more floorspace and not much appetite for testing the (limited) market for alternative locations. No wonder Bruntwood is to expand Manchester Science Park from 221,000 sq ft to 750,000 sq ft. Architect BDP is working on a new masterplan that could take that to 1.1m sq ft over the next 10 years.
There is also the interesting question of how much rent science occupiers will pay – and the answer seems to be more than you might imagine, judging by results from Manchester Science Park.
Profit before tax at the science park company MSP soared by the equivalent of 200%, up from £176,000 for the nine months to 30 September 2012 to £713,000 in the year to 30 September 2013. Turnover almost doubled from £2.8m to £4.7m. The company says it is confident of more increases in 2014.
The prospect of adding Alderley Park to the portfolio must have been irresistible. AstraZeneca will leave the 1.5m sq ft complex in 2016, moving its operations to Cambridge.
Peter Skelton, head of office agency and development at WHR Property Consultants, has long been involved with Manchester Science Park. His father helped found it – and he has advised on development over the 30 years of the park’s life. Skelton says Bruntwood has spotted an opportunity in the under-explored market for science property.
He says: “The issue is the difficulty of pricing science workspace. Until now, it has generally been owner-occupiers like AstraZeneca, or public sector-controlled university incubator space, and occupiers are either unusually small, which makes pricing hard, or, like owner-occupiers, not in the market at all.
“Over the next five years, we will see workspace emerge as a new way of understanding user classes – and Bruntwood has the strength to create this market. It is now into a price discovery process, which Bruntwood hopes will be to its benefit. Looking at the results – the willingness of science occupiers to pay to be part of a cluster, plus the opportunity for Bruntwood to cross-sell additional services – and it looks potentially successful.”
Peter Gallagher, director, national offices, at Colliers International’s Manchester office, agrees. He sees Bruntwood’s move into the science sector as part of an evolution of its business.
“A decade ago Bruntwood decided it didn’t have tenants, it had customers. Now I think it has decided it doesn’t have offices, it has workspace – and that suits the expansion of its scientific and technological side,” he says.
“Buying a controlling interest in Manchester Science Park was probably decisive. Bruntwood found an almost instant endorsement of its way of thinking. And Bruntwood has never been afraid of change. It will bring its unique style to the science sector.”
Gallagher guesses that Bruntwood’s dominance of the Manchester office market may have helped to push it in new business directions. “A business reaches an optimum size and the problem of diminishing returns begins to kick in – and I guess in the office market Bruntwood may be seeing that,” he says.
Bruntwood chief executive and science park chairman Chris Oglesby insists the company is not backing away from its office business. Yet Rowena Burns, chief executive at Manchester Science Park and chief operating officer at Bruntwood, suggests the business is moving on.
Bruntwood has already abandoned the idea of tenants and prefers to talk about customers. Now, she says, it will move on to the next stage, having learned from the science park experience. “We are about being responsive to customers, and they demand more from their space and want to be involved in how it works,” she says. “They want flexibility and collaboration. We are now thinking less about offices, more about workspace, and we want the stuff that happens in workspace – not the buildings themselves – to be the hero. We are going to be enablers and connectors.
“In the future, workspace is going to be much less driven by the language of planning use classes, more by what occupiers want. One size will not fit all.”
In this vision the Bruntwood brand doesn’t call attention to itself. Instead it discretely opens doors, provides workspace and business facilities. You will know it not because it screams corporate logos, but because it is clever and it works. With this updated brand Bruntwood will complete its transition from landlord to business services provider.
Next month, the new masterplan for Alderley Park will be published. It will focus on attracting growing sectors such as personal medicine, life sciences and digital manufacturing. But it will also show how far Bruntwood has come on its own journey from traditional property business to something much more flexible.
The partner who vanished
The purchase of Alderley Park was very nearly another deal to the credit of the hyperactive Greater Manchester Property Venture Fund.
In early February, Bruntwood won the right to bid for the 400-acre site with backing from the fund. But by the time of the final deal in mid-March, Bruntwood had changed partners and acquired the site as majority partner in a joint venture with Cheshire East council and Manchester Science Park.
Speculation suggests it was Bruntwood that pushed, rather than GMPVF that jumped. Sources say the joint venture decided it could fund the development itself, and didn’t need a partner.
‘Repurposing’ at Alderley Park
A new masterplan for Alderley Park’s 1.5m sq ft estate will be published in April. Modest “repurposing” of buildings is likely – but there will be relatively little refurbishment. New build at some point in the future is all but a certainty, although it will “respect the integrity of the current park environment”.
