Can the North East’s recently established, occupier-focused enterprise zones bring the regeneration to the area thatthe government is hoping for? And what will the impact be on the local property industry? Mark Smulian reports
It’s a long journey from an economy dependent upon coal, steel and shipbuilding to one based on ?low-carbon technologies, wind ?power and advanced engineering.
North East England’s old economy ?has left an array of brownfield sites ?but, until recently, there has been ?little to put on them as interest from speculative developers was minimal.
To try to stimulate growth, in 2011 ?the government designated several enterprise zones in the A19 corridor,?from Sunderland to Blyth via Tyneside and at Teesside. These zones offer ?either reduced business rates or capital allowances to companies that locate there and, unlike their predecessors in the previous two decades, this generation of zones is aimed squarely at occupiers.
Each site offers a single benefit ?– not the blanket concessions to developers seen in the earlier zones.
The government is interested in attracting renewable energy and ?low-carbon manufacturing industries here with the hope that an eventual clustering effect in these fields and?their supply chains will spill over?into development in adjacent areas.
Nobody will object to speculative factories or offices, but these new zones are not setting out to attract them, and design-and-build at present holds sway.
Development is happening, but ?unlike the previous enterprise zone ?free-for-alls, the largest projects ?so far are only marginally linked to ?the proffered incentives (see box).
The local property industry can see something beneficial being created ?for the long term, but without as yet being very central to it.
Sanderson Weatherall partner Robert Patterson says the zones “just haven’t got the same kickers as the old zones. They are now more occupier-focused ?and not concerned with tax incentives ?for development. They have had a rather minimal effect on the market elsewhere in the region, but they may have a clustering effect in a recovering market”.
Ian Parker, a partner at GVA, says:?“It will be project-led, and I doubt there will be much speculative building. People will want a prelet, but if confidence grows, it may kick-off more as there ?is an acute shortage of large industrial buildings in the area.”
Kevan Carrick, a partner at JK Property Consultants, agrees: “It is ?not sucking in development that would have located elsewhere because the zones are very specialised and very carefully chosen to create clusters.
As to the lack of speculative building, Carrick says: “There will not be any because it’s all very specialised. Occupiers want buildings that are ?pretty much skins round their ?production processes.”
Storeys Edward Symmons partner Bill Lynn says: “The government has learnt from its past errors with these new zones ?and they’re addressed at occupiers who know where they want to go anyway.
“I think we will ultimately see clusters in the surrounding areas, but at the moment adjacent land values are not really rising.”
Stephen Catchpole, chief executive of the Tees Valley Unlimited local enterprise partnership, says he expects the area to eventually see “a mix of speculative building and design-and-build. The bigger firms will want their own buildings, but start-ups need general space.
“It won’t happen overnight, but you’ll start to see clustering of industries in and around the zones.”
So far the demand in these two zones has been for highly specialised accommodation. But if the clustering does come, it should encourage speculative building as the region’s economy begins to take off.
Swan Hunter
The former Swan Hunter shipyard at Wallsend falls into the North Bank of the Tyne section of the A19 enterprise zone, and is to be redeveloped by Kier Property as an advanced manufacturing centre.
Its plan for the 34-acre site is to ?provide up to 500,000 sq ft of developed space for the offshore, engineering ?and manufacturing industries.
Kier has secured £13.6m of funding from the European Regional Development Fund, the Homes and Communities Agency, and the Local Enterprise Partnership Growing Places Fund.
The site is five miles from Newcastle city centre and the mouth of the Tyne.
Associate director Mark Robinson says: “The development will be of interest to advanced manufacturing companies that specialise in off-shore activity due to the great location of the site and purpose-built high-spec units.”
He says enterprise zone status ?“is a sign of public sector commitment ?to its regeneration,” and that the ?site will enjoy business rate relief.
Robinson adds: “The fundamentals?of the site are very strong. It’s a prime location and the market is already responding positively.”
Infrastructure, not enterprise: Does the North East need the zones?
The Teesside enterprise zone’s largest occupier to date is Air Products, which ?is building at the Reclamation Pond ?site what it claims will be the world’s largest renewable energy plant, capable of providing electricity for ?up to 50,000 homes.
However, the zone’s incentives were not part of its choice of location, as an Air Products spokesman explains: “Tees Valley was chosen as an enterprise zone after Air Products took the decision to build our advanced gasification energy-from-waste facility in Billingham, so it was not a specific factor in our decision.”
Air Products chose Teesside because of its “available industrial-zoned land, good access to electrical infrastructure and excellent road links.”
Vantec is the major investor so far attracted to the A19 zone, having taken?a 44,000 sq ft site at Sunderland, adjacent to the Nissan car plant.
But again, it wasn’t the existence of the zone which determined this.
“The actual reason we chose the site was simply because it’s so close to our main customer – Nissan – not because of the benefits of the enterprise zone,” a spokeswoman says.
Jason Stowe is managing director ?of Wilton Developments, which owns the site Vantec will occupy as part of ?the Turbine Business Park, which has been created adjacent to Nissan’s site on land the carmaker had surplus.
“It’s the right location for people ?who are suppliers to the automotive industry, rather than attracting people in from any other location,” Stowe says.
“There is a potential for a clustering effect there, as Nissan is the largest ?car plant in the UK and it’s a huge advantage having a supply chain ?close by.”
Wilton has 20 acres left on the park with planning permission for offices and manufacturing sites of up to 80,000 sq ft. “The enterprise zone is good because it does give more marketing clout to the area, so it’s doing its job.”
