End result The Office of National Statistics has finally decided to move to Newport, but is it too late to restore confidence?
July 23 was a black day for Newport. That Monday, the story broke that the Office of National Statistics’high-profile move to Newport was on the skids. Leaks spread that the department was in crisis over the move, battling a full-scale revolt from senior officials.
Reports quickly surfaced that just 15% of its staff were prepared to make the move west, and a Treasury select committee urged the government to reconsider.
The news could not have come at a worse time. Many of the grand plans of Newport Unlimited, the city’s urban regeneration company, were starting to bear fruit. And developers were gearing up to deliver the first office space in the city for decades.
The Welsh Investment Strategic Partnership’s 48,000 sq ft Orb had started on site. It will go head-to-head with Modus’ £125m mixed-use City Spires scheme, which will deliver 99,000 sq ft onto the market in Q2, 2009. A crisis of confidence now would be very damaging.
Newport Unlimited’s chief executive, John Burrows, admits the headlines made for grim reading. He had been instrumental in persuading the department to push its boundaries and consider not just Bristol and Cardiff but Newport as well.
“We kept having to push out press releases, it was being discussed in the House of Lords, and I was concerned that the headlines would adversely affect us,” he says. Burrows eventually sought out the ear of the Governor of the Bank of England, Meryvn King. “He assured me that he was not opposed to the move to Newport as such, just that they’d lose key people,” says Burrows.
The ONS eventually decided to back Newport, but had the headlines already damaged the city’s reputation? Could Newport support 150,000 sq ft of new grade A space, or had the ambitious city pushed itself too far and too fast?
The first test will be City Spires. Local agents believe the mixed-use city-centre development is extremely brave. The 10-storey landmark building, with 80,000 sq ft of office space, offers little opportunity for Modus to test the market by building bit by bit. Rents of £15.50 per sq ft will add £3 per sq ft to the city’s average.
Andrew Crewther, development director for City Spires, is unrepentant. “It is quite bullish,” he admits. “We have the best part of two years to secure lettings, and we hope to have two for half the space secured by the end of this year.” Crewther is coy over the details, but describes them as insurance, financial and professional. One is a newcomer to the Newport market, the other a local occupier looking to consolidate its operations.
Many agents talk of this latent local demand as a beacon of hope. The Gold Tops area near the station is the home of professional services in Newport. Housed in old, converted stock, rents achieve £12.50 per sq ft. “There are quite a few companies making do in Newport. But they want to be in the city centre, and can’t find a facility,” says Robert Carew Chaston, chairman of local agent Hutchings & Thomas.
However, the Orb’s owners are not interested in such small fry. It has opted for a very different, more risky strategy. “We are going to be shopping for a FTSE250 occupier,” says Stuart Ramsey, regional head of agency at GVA Grimley. “Whether we fill our trolley remains to be seen.”
Even whispers of a requirement from the Prison Service have failed to pique its interest, and Ramsey says the government department is “not on our wish-list”.
Rental market
Its backers like to describe the Orb versus other competing space as the difference between a Ford Focus and a BMW. That analogy extends to the price tag. Rents at a hefty £16 per sq ft are substantially higher than the neighbouring Usk building, which signed Yell for a reported £14 per sq ft, plus a handful of incentives.
“Our remit is to stimulate the rental market beyond Cardiff,” states Giles Parker, development director at investment adviser Babcock & Brown, private partner on the WISP initiative.
Ramsey agrees. “Admittedly, this will move on the market by 10% but I don’t think rents are the significant point,” he says. “If you are moving from London, it is a quarter what you are paying in the City.” He adds: “The Welsh Assembly government is not like a private sector investor. It doesn’t need a return from day one. It can afford to wait and be less mercenary. It is not going to panic if there is not a stampede of occupiers in the first six months.” Indeed, the initiative believes Newport could take a second WISP building “down the line”.
Newport Unlimited’s Burrows will be hoping others can similarly hold their nerve. “We are trying to increase speculative office development in the city, but the problem is there is not enough land,” he says.
Burrows points to research by the ONS that found 1.5m people living within a 45-minute commute of Newport – more than than Bristol’s 1.2m and Cardiff’s 1.1m. In addition, Experian has recently ranked Newport the fifth best-performing city in the UK for economic growth, ahead of Bristol, Leeds and Birmingham.
“I want Newport to be like La Défense or Canary Wharf – a real concentration of offices,” he says.
The next opportunity for Newport is the railway station yard site. Former railway sidings are earmarked for development, and could provide several hundred thousand square feet of development. Four developers have expressed interest in the site, and the council aims to start work with the preferred company in the new year.
Burrows’ main concern is that the eventual scheme will be residential-led. He admits he would like to have bought the site and brought it to market as a large-scale office development, but most of his start-up money is already committed.
“Residential will continue to dominate because we can’t support building higher,” he says. “If other provisional cities cannot afford to build high-rise offices, then there is no way Newport can.”
Prison Service looks to expand premises
Whispers that the Prison Service could be about to launch an enquiry on expanding out of its premises on Celtic Springs Business Park, west of Newport, are buzzing around the Wales property market.
While the requirement may be good for local agents with space to shift, Celtic Springs Business Park owner AWG is viewing the possible relocation as an opportunity it cannot afford to miss.
Highly successful
The developer has decided to speculatively build 35,000 sq ft at building 3000, but is coy about the Prison Service’s expansion plans. “We understand that it has put more people into its building than it originally planned,” says Iain Logue, AWG’s operations director.
“The building is highly successful and efficient in terms of savings and, because of that, there is every possibility it will put further services there – but it is far from an active requirement.”
AWG’s building will be completed next February, leaving capacity for a further 300,000 sq ft on the park. Despite a buoyant market, which has seen rents on the park grow by £1 per sq ft in 18 months to reach £15.50, the developer says it has no plans to speculatively build any more space until 3000 lets.
However, Logue hints: “We are looking at the prelet market, and have one or two irons in the fire.”
