Markets need a jolt out of their slumbers

Norwich has been pootling along for a while now, but agents say the city needs a shake up if it is to attract more investment and development. Nadia Elghamry reports Norwich is known for many things, including building a state-of-the-art hospital but forgetting to build an ambulance access road, or for the time the council decided to chop down all the horse chestnut trees because falling conkers posed a hazard. But it is also known for keeping the status quo. Turning a blind eye to the turmoil in the rest of the UK’s office market, the city is, as Andy Evans, partner at Brown & Co, puts it, “pootling along”. “The Norwich market is more stable and is not hugely affected by the downturn,” he says. “It does not have the highs but it also does not have the sharp downturns.” This is driven by the largely local market, says William Jones, partner at Bidwells business space team. He adds that Norwich has always been viewed as a closed shop. But high-profile departures by the likes of Nestlé and Barclays have given the city a wake-up call, and Norwich is beginning to shed its traditional image. “Local authorities are now aware that they have to market Norwich as a national and international destination,” says Simon Radford, chief executive of Atlantic Fund Management, which owns Broadland Business Park. Modern space The lack of modern space has kept rents low, explains Thomas Carr at Percy Howes Commercial. Developers are now taking comfort, he adds, from the high prices buildings are getting once they have been let for the first time. The lack of modern space and the market’s appetite for new buildings and good covenants has seen developers prepared to let new offices for as low as £11.50 per sq ft, looking to the sale of the building as the real profit. “Traditionally, these schemes would not have progressed beyond the drawing board unless commercial rents in the order of £14 could be relied upon,” says Carr. The lack of office space has been fuelled by high returns for residential schemes says Bidwells’ Jones, and now there are few opportunities to acquire new offices in the city centre. This bodes well for Norwich’s business parks. Shoemaker Startrite recently received planning permission for its 2.7-acre site on Broadland Business Park to the east of the city. A local distributor has taken the last plot on the industrial section of the development, but Broadland has been slow to attract companies to build offices in the park. This could be boosted by Norwich Union’s decision to build its new call centre at Broadland, ending speculation over whether the operation’s 750 jobs would stay in the city. Broadland’s management says it will now turn its attention to much needed support services for the park. At present the site has a Whitbread hotel/conference facility and a Ballantyne gym. Work on phase two will not start for another 10 years or so. Bertram Books, however, has still not taken residence in its newly-built distribution centre at the site. Mark Webster at Knight Frank, which acts for the park, says Bertram Books has never indicated it would not come to Broadland. Paul Knowles of Building Partnerships, which acts for Trowse business park in the south-east of the city, is also bullish about prospects for Norwich. “The Norwich office market is better than it has been for any time in the past decade,” he says. “There are three drivers forcing occupiers to look at new space – congestion and parking costs in the city, the expiry of leases taken on in the boom of the 1970s and the need for open plan space.” Despite the large supply of out-of-town space, James Allen of Roche does not think supply will outstrip demand. He believes the pressure of mounting traffic congestion and parking difficulties in the city centre will see more occupiers seeking out-of-town locations. Rents for good-quality space with parking in the city centre will see moderate growth of around 25p-50p per sq ft in the coming year, says Chesterton’s Sam Kingston. Inexpensive premises This will be driven, says Kingston, by office-based contract work, which is still attracted to Norwich for its location and relatively inexpensive premises. Rents will also be boosted by plans to dual the A11; the new train service between Norwich and Cambridge; and the promise of a thrice-daily ferry service from Yarmouth to Amsterdam and northern Europe. Problems in the office market have spilt over into the industrial market, with the lack of good-quality units being a major issue in Norfolk, says Bidwells’ Jones. “The industrial market is hardening up,” he says. “It will be interesting to see over the next six months what effect the downturn in the rest of the South East has on Norwich.” Norwich offices More offices have been developed speculatively Jun ’02 Dec ’02 Availability (‘000 sq ft) Grade A (new) 32.8 43 Good quality secondhand 131 97 Poor quality secondhand 118 102 Total floorspace available 282 242 Development pipeline (allocated) 43 acres 42 acres Speculative offices under construction 9.2 14.6 Yield (%) Prime offices 8 8 Demand (‘000 sq ft) Take-up (time period) 72.2 (6 mths) 195 (12 mths) Norwich office requirements(12 months to Dec 2002) There is high demand for small office units Requirements (sq ft) Number ‘000 sq ft 0-5,000 37 62.25 5,000-10,000 3 18.25 10,000-20,000 3 42 20,000-30,000 1 20 30,000-50,000 1 35 50,000-plus 1 60 Total 46 237.5 Source: Bidwells Norwich retail: Market awaits the Chapelfields scheme Norwich’s retail market is in limbo, awaiting the arrival of the mammoth Chapelfields retail scheme. Lend Lease’s seven-acre scheme on the old Nestl