Deals under 10,000 sq ft dominate take-up, yet developers are taking a punt and building larger buildings. Mark Simmons reports
The ray of office activity that is the Thames Valley Corridor is having a positive effect on Surrey’s western extremities. For a county that last year saw very modest take-up of anything other than small office suites the arrival of several speculative schemes around Staines is a welcome surprise.
Three developments, totalling more than 200,000 sq ft, are due to complete in the next year. First to make it to the finishing line will be Exton Estates’ and Rockspring’s £22m, two-building Flow scheme on the Causeway. Exton director James Mawson says that being ahead of the pack will be an advantage for the 60,000 sq ft it is building that will be ready this June. He says: “Once you have a finished building, occupiers can see what they are going to get and it is an easier decision.”
But snapping at Flow’s heels is Aberdeen Asset Management’s £25m, 57,000 sq ft Unit 5 on the Pine Trees estate on Chertsey Lane, due to complete later this year, followed early next year by LaSalle Investment Management’s and Bell Hammer’s 90,000 sq ft Strata building in Bridge Street.
Developers will be hoping that the shortage of grade-A space will lead to quick lettings, although Exton and Rockspring, which completed their speculatively built 106,000 sq ft Velocity scheme in Weybridge at the end of last year, narrowly missed out on a deal with Cameron International.
At the other end of Surrey, in Croydon, where major office development has been absent for two decades, there are also speculative stirrings. Two schemes will complete this year – Abstract Securities’ 100,000 sq ft Renaissance on Dingwall Road is due to finish in August, and around the same time, Carval Investors and Canmoor are due to finish their full-scale refurbishment of 183,000 sq ft at Interchange on Wellesley Road.
Both developers are conscious that existing rental levels in East Croydon are low – less than £20 per sq ft – but claim to be able to pitch their prices accordingly. “We are never going to sell on a dream,” admits Abstract development director Chris McPherson, “but if we have got the building finished, we have half a chance of capturing tenants.”
Those could be local corporates or businesses considering a move from central London. “The total occupation cost for new space in East Croydon will be around a quarter of that in Victoria, and that’s a big gap for 15 minutes on the train,” says Savills associate director Andrew Willcock (see graph).
Elsewhere, Lambert Smith Hampton’s Paul Dowson believes that lease events may inject some activity into the Guildford market. “There is some 500,000 sq ft in big prime buildings coming to lease ends by 2016,” he says. That has given Standard Life Investments and Bell Hammer the confidence to go ahead this summer with the speculative redevelopment of the 30,000 sq ft Beaufort House, Chertsey Street, due to complete in spring 2014.
Kent and Sussex – Waiting for the tide to turn
When the storm clouds of recession clear, developers are hoping to have office space available that will tempt tenants away from central London. At the end of this year, work will start on the mammoth redevelopment of 26 acres at Chatham Docks. Landowner Peel Group last year got the go-ahead for its outline plans for its £650m Chatham Waters scheme, which will include 1.9m sq ft of offices. But there will be none in the first phase, which, if detailed planning consent is granted this summer, should complete in 2015.
“We won’t get vacant possession of the remainder of the land until early 2015,” says Peel development director James Whittaker. “We can hopefully start on the commercial element then.” That means the earliest that offices will appear is 2017.
Further north, Land Securities and LaFarge have yet to announce a start date for their £2bn Ebbsfleet Valley project, where up to 4m sq ft of offices are planned.
No mega-schemes are planned in neighbouring Sussex, although Vail Williams partner Stephen Oliver believes that Nestlé’s recent move from Croydon to Crawley will stimulate the office market there. He says: “It is bound to have a knock-on effect. All sorts of suppliers and contractors will inevitably feed off that.”
That may be enough for Green Property to start work later this year on its 130,000 sq ft Nova scheme on Crawley’s Manor Royal estate.
Croydon – Living in a box?
A planning application just before Christmas last year for the conversion of the former Nestlé tower in central Croydon from offices to residential was not quite as unexpected as the Swiss food corporation’s decision a year ago to move from Croydon to Crawley. But it raises the question of whether the town’s traditional office locations may become the residential areas of tomorrow.
Legal & General Property, which now owns St George’s House (as the former Nestlé tower is known), hopes to create around 290 homes in the building, which currently houses 120,000 sq ft of offices.
If the scheme is granted consent this spring, it will not be the only office-to-residential swap in Croydon. Nearby, on Wellesley Road, Berkeley Homes’ Saffron Square development is already under construction. Around 740 homes are appearing on a site that formerly housed two office blocks totalling around 370,000 sq ft. And at St Anne House, Redefine International won planning consent last November to convert 100,000 sq ft of offices into a 144-bedroom Ibis hotel plus 46 flats.
With speculative office space now under way (see main text), landlords of redundant offices may be increasingly tempted to consider a change of use. Watch out for more of these kinds of planning applications in 2013.
