Leicester proved this year that not only can it talk the talk, but also walk the walk.
The talk started back when the UK was still in recession and the city council found it needed to move out of its 1970s-built offices in the city centre owing to structural defects. “There were whole areas cordoned off because they really weren’t fit for purpose,” says the council’s head of inward investment, Helen Donnellan. The crumbling blocks, which locals had dubbed Faulty Towers, were demolished earlier this year.
The council chose to move to a new city hall at Attenborough House on Charles Street, freeing up the 1.8 acres on the junction of New Walk, Welford Road and Belvoir Street for redevelopment. After a competitive tender process it chose local firm Ingleby – a joint venture between Sowden Group and William Davis – as preferred developer. A mixed-use scheme, including 50,000 sq ft of grade-A offices, flats, leisure uses, underground car parking and new public realm was drawn up.
So far, so ordinary. Then, in August this year, something rather unexpected happened: before the scheme had even been granted planning consent a single tenant agreed to take all of the office space. Although it had been expected that there would be strong occupier interest, owing to a lack of prime offices in the city centre, the experience of speculatively developed space in Derby (see box, p93) meant that a prelet was by no means guaranteed.
Shortly after financial services firm Mattioli Woods (see above) agreed to move to the development, now known as New Walk Centre, as an owner-occupier, councillors gave the scheme planning consent. Ingleby hopes to be on site by the end of this year and have most of the new buildings completed early in 2017.
One thing is for sure: the rapid progress of New Walk was no accident. Direction came from the top, in the form of elected mayor Sir Peter Soulsby. “The mayor’s approach was clear and strategic – to get jobs into the city centre. And having an elected mayor meant decisions were able to be made quickly,” says Donnellan.
But although Sir Peter Soulsby was undoubtedly influential, he did not pull off the redevelopment single-handed, other factors also came into play.
“The city invested in public realm, revised planning policies that were restrictive and took a more realistic approach to car parking,” explains the council’s head of development projects, Louise Seymour.
The latter move may have been one of the most crucial factors, particularly at a time when other cities in the region, such as Nottingham, are introducing road-charging mechanisms. “The harsh reality is that people want to drive cars. The council’s attitude goes back to making it easy – other places could learn from that,” says Innes England managing director Tim Garratt.
Whether New Walk will be a catalyst for further development in the city centre (see box) remains to be seen, although Sowden Group managing director Roy Coley is hopeful. “Other office buildings could well happen as a result, but we are not looking at anything else at the moment as we have our hands full with this.”
Lambert Smith Hampton director Jane Taylor believes that having a new anchor in the professional district is important. “New Walk has put us more firmly on the map with developers from London and elsewhere,” she says.
Just one part of the New Walk story remains vague. The council confirms it has spent £3.5m on demolition and site remediation works, but has yet to reveal how much it has sold the land for. While many local authorities have signed long leases for similar sites, Leicester has agreed to transfer the freehold and local sources suggest that the figure achieved will not even cover site clearance costs.
With Ingleby passing on the freehold of the offices to Mattioli Woods for £14.6m and the 54-flat residential block likely to have a gross sales value of £30m, city council tax payers will have to be the final judge of whether the successful regeneration of New Walk is something to hop, skip and jump about.
Derby vs Leicester
While Leicester saw a single tenant sign for the entire office element before construction had even started at New Walk, Derby’s experience of its speculative Friar Gate Square scheme has not been quite so happy.
Despite the city council and Lowbridge conducting an apparently textbook development – building a modest 33,000 sq ft first phase – the £20m building stood empty for two years before a 33-year lease with the University of Derby was agreed this summer.
Unsurprisingly, the second phase will not go ahead as offices, with the land instead sold to Jensco (Derby) for a 244-bed student housing scheme. So why did things not pan out in Derby as they did in Leicester?
First, point out Midlands agents, there was the matter of timing. Friar Gate was brought to market when the UK economy was still in recession. “It is important to note that the scheme came very close to securing a deal with a commercial occupier,” says Ashley Hancox, executive director in CBRE’s Birmingham office. Second, the two cities have significantly different heritages. “Derby has a history of manufacturing, whereas Leicester has a bigger professional services pull,” says Russell Rigby of Derby-based Rigby & Co.
And finally, many acknowledge that as hard-working as Marketing Derby has been, it does not have the same panache as Leicester’s elected mayor Sir Peter Soulsby. “No disrespect to either Nottingham or Derby, but Leicester has got its act together in this respect. Sir Peter really makes himself available and is very, very welcoming. That level of political buy-in gives companies the confidence to make a move,” says Tim Garratt, managing director of East Midlands specialist Innes England.
Occupier View: Mattioli Woods
Specialist pensions firm Mattioli Woods is returning to Leicester city centre after 10 years on the city fringe in Enderby. Founder and chief executive Ian Mattioli already knew Ingleby boss Roy Coley and had previously expressed his wish to relocate back to the centre. Initially around 300 staff will be based in the new office, which the firm is buying freehold, although the building has capacity to meet the firm’s growth plans and house up to 600.
Future Leicester offices
While the prelet of New Walk’s office element is a fillip for the city’s office market, it also raises the question of where future requirements will go, especially after insurer Hastings Direct last month signed for 60,000 sq ft of secondhand space in St Georges Central.
“Availability of easy-ish-to-develop land is limited and we really do need oven-ready development platforms,” says Jane Taylor, director at Lambert Smith Hampton.
Unlike colleagues in many other UK cities, she welcomes the conversion of poorer quality office stock to residential use, as it has tightened up the market, encouraging new enquiries and putting pressure on rents.
The next large development is likely to be the council-led Waterside, although residential will probably take precedence over offices there (see p96). Hind Property, which earlier this year bought the former Royal Mail sorting office at 21 Campbell Street, close to the railway station, is currently running feasibility studies on a redevelopment that could create around 100,000 sq ft of offices. “The challenge is getting rents to a level where they make the schemes viable,” says Taylor. At the moment that means around £19 per sq ft.
In the meantime, the traditional standby action of refurbishing space is tricky in Leicester as much of the space is occupied. One of the few buildings to have been spruced up is St John’s House on East Street, where two floors of the former RBS building have undergone a total refit. As a result, achievable rents are likely to leap from around £10 per sq ft to £13.50.
