Scottish Enterprise’s latest programme is intended to fill a shortfall in space, but will it undermine the efforts of the private sector? By Adrian Morrison
Picture this. You are a developer with an obligation to Scottish Enterprise to build a speculative industrial scheme to fulfil a lender condition when – out of the blue – the market is flooded by a swathe of high-quality industrial units also built with government assistance.
This is the prospect facing certain developers in the west of Scotland since Scottish Enterprise announced its Advanced Procurement Programme, which will result in 37,170m2 (400,000 sq ft) of industrial space in Scotland’s central belt.
Many in the property sector feel that this is an unco-ordinated approach where public-sector-assisted schemes will complete against other assisted schemes.
Tender results imminent
Results of the tender process to build 14 units at 11 sites under the programme were expected last week. Seven of these sites are in Glasgow, Renfrewshire, Dunbartonshire and Ayrshire. Scottish Enterprise believes the final site will be completed by March 2002.
Although the portfolio is split into two separate lots, many in the property sector fear that one developer will win both bids.
The programme has elicited a variety of responses. Some see the benefit of having new, high-quality factories with capacity for expansion. Others, however, warn of an inevitable lull in speculative schemes as developers wait to see the results of the programme.
Scottish Enterprise intended the APP to address the shortfall it had identified in industrial schemes, but since the programme was announced some developers have held back from starting developments.
Knight Frank’s David Smith comments: “Some developers will shy away, which means at least a year before anything comes out of the ground. Phase one at Cambuslang will be okay. It’s what happens to phases after that which is in doubt.”
Prestwick-based Dawn Developments was due to build speculatively in East Kilbride, but has put its scheme on hold because of the APP’s launch.
Peter Thorne, development director at Dawn, believes the programme is potentially damaging. He says: “This will cut across private investment. While it is right for enterprise councils to supply selective support in special locations for specific reasons, this is inappropriate development.
“It will give those developers and landlords a stranglehold on the market, and depress future speculative development other than in very prime locations.”
However, Niall McGilp, director of competitive place at Scottish Enterprise, says: “The total floorspace involved is only a fraction of one year’s demand in the 10,000-50,000 sq ft market in Scotland, so there is ample scope for developers to work alongside us.”
It is widely believed that the preferred bidder – or potentially two bidders – will have an effective monopoly on industrial development in central Scotland.
Good-quality stock
However, Sinclair Browne of GVA Grimley maintains it is Scottish Enterprise that holds the cards, because it controls the locations in which developers can build.
He sees the provision of an adequate supply of good-quality stock as the most important factor in assessing the programme. “I don’t think it is necessarily a bad thing, so long as buildings get built,” reasons Browne.
Scottish Enterprise argues that the amount of floorspace involved is too small to talk realistically about monopolies. In addition, the two portfolios of property will still allow an element of competition, so long as separate developers are used.
Many are concerned that the public sector in Scotland is recanting on its promise that it will not provide property directly for the private sector.
The fine line between being a facilitator – the capacity in which Scottish Enterprise acts – and being a provider is being blurred, some claim.
But McGilp says: “It has always been SE’s aim to encourage the private sector to take the lead in advanced property provision, and we believe this programme gives the wider property industry a unique opportunity to share in the huge potential in this market.”
The programme’s supporters say that a national approach is required to attract inward investment and to prevent local enterprise councils competing against one another to the detriment of Scotland.
Julie Campbell of NAI Gooch Webster says: “The thinking behind the programme is that there has not previously been a national perspective taken by the local market.
“However, it is ludicrous to expect a developer to build all these schemes throughout the country without a high level of assistance being sought by Scottish Enterprise to cover the risk.”
There are concerns that rental growth will be stemmed by a swathe of stock coming on stream, which Scottish Enterprise will want to be let quickly.
However, some argue that the geographical spread of the stock will mean that schemes of less than 4,645m2 (50,000 sq ft) will not be affected. Outside occupiers seeking buildings larger than this are considered more likely to be footloose.
Scottish Enterprise Lanarkshire has a 10% stake in an 8,732m2 (94,000 sq ft) scheme at Eurocentral at Mossend, Lanarkshire. There is concern that it could be adversely affected by the 4,645m2 (50,000 sq ft) APP scheme planned at Starlaw Park in Livingston, Lothian.
Malcolm Pearson of Insignia Richard Ellis is relatively confident about Eurocentral’s prospects because it is in an enterprise zone. He acknowledges, however, that geographical constraints tend to disappear for larger units.
“There would have to be a huge amount of government assistance for Starlaw to compete with Eurocentral, but you do get overspill from Livingston to Eurocentral,” says Pearson.
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M74 extension |
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Plans are afoot for the “road that should have been” |
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The east side of Glasgow could become a prime distribution area by 2005 if plans to start building the £300m M74 extension go ahead. The Scottish parliament recently acknowledged the necessity of a fast link between Cambuslang and Kingston Bridge after years of denying priority status for the road, which would link to the M8. Even the usual environmental concerns seem to be assuaged by the scheme’s promise to redirect westbound traffic away from the city centre and the expected regeneration for the east side of the city, which has suffered industrial decline. Dominic Quigley of Ryden says: “This is not a case of more roads; it is a case of a road that should have been there and never was. The M8 is used by people going west of Glasgow but who don’t want to use the city centre.” Details are still to be confirmed over the exact route the extension should take and who should fund the M8 interchange. If the Scottish Executive decides that Glasgow city council should foot the bill, then budgetary concerns will come into play. Sinclair Browne of GVA Grimley says: “This extension is vital to the economy of West Scotland.” |
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Key industrial sites, graded by set criteria according to Douglas Patrick of King Sturge, Glasgow |
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The developments proposed for Cambuslang and Hamilton International have been given the highest grades, while those planned for Robroyston have the lowest |
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1 Phoenix Limwood |
2 Hillington |
3 Cardonald Park |
4 Robroyston |
5 Glasgow Business Park |
6 Tannochside |
7 Eurocentral |
8 Dunalistair |
9 Cambuslang |
10 Hamilton International |
11 Westfield Park |
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Location |
4 |
5 |
5 |
4 |
5 |
4 |
3 |
3 |
5 |
3 |
4 |
|
Access |
5 |
4 |
3 |
3 |
3 |
5 |
3 |
4 |
4 |
4 |
|
|
Activity |
1 |
5 |
2 |
0 |
3 |
2 |
3 |
3 |
4 |
5 |
3 |
|
Available product |
1 |
1 |
0 |
0 |
0 |
3 |
3 |
5 |
3 |
4 |
3 |
|
Standard of new building |
3 |
5 |
3 |
0 |
4 |
4 |
5 |
4 |
4 |
4 |
4 |
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Total – out of 25 |
14 |
20 |
13 |
7 |
15 |
16 |
19 |
18 |
20 |
20 |
18 |
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Notes from Douglas Patrick:
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Source: King Sturge |
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