Two hundred years after the Battle ofTrafalgar, Portsmouth is set to mark the occasion in style. With the historic dockyard home to Nelson’s flagship HMS Victory, the city will become the centre of attention.
Those streets have been transformed in recent years. Berkeley’s Gunwharf Quay shopping development is widely accepted as a great success, and demolition of the Tricorn last year renewed enthusiasm for Centros Miller’s Northern Quarter development.
The office market has, however, been relatively static, and the two deals signed in the past six months represent the biggest lettings in Portsmouth for more than a decade.
Oil and construction giant Aker Kvaerner has just signed a 10-year lease with no breaks for 36,000 sq ft at the recently refurbished 1 Portway, Port Solent. The deal, at £17 per sq ft, will see the company move out of Solent Business Park and back into the city centre.
Likewise, local marine electronics company Raymarine has signed a 10-year lease for 26,000 sq ft at Quay Point on North Harbour to house its UK headquarters.
“Put these deals in context, and you have the equivalent take-up of the past five years,” says Ross Moyler, associate partner at Vail Williams, agent on the Kvaerner deal. “We haven’t had a leasehold deal of this size for the past 10 years.”
The deals might be great news for local agents, but there is concern that they will not be there forever. “There’s a danger that the office market could grind to a halt if there isn’t enough foresight by planners,” adds Moyler. He says that the 15,000 sq ft in Peninsular House under offer to an unnamed local firm is the only place in Portsmouth with that amount of space.
Appetite for refurbishment
This sentiment is echoed across the city. Lack of stock is strangling growth. Low, stagnant rents which scraped £19 per sq ft last year have dulled developers’ appetite for refurbishment or new-build. And while the business incubator units nurture talent, as these mature they are forced to the out-of-town business parks.
Now agents believe that the South East England Development Agency itself ishampering efforts to revitalise areas, competing with developers and getting involved with schemes that are already viable (see box).
Recent murmurings by Portsmouth council have not been good. Its Portsmouth city local plan review 2001-11 stated that research by Bradford & Bingley had rated the city 99 out of 100 business locations.
The same study showed that, out of a total stock of 2.4m sq ft, “much of the office space remains vacant, as potential occupiers usually have precise requirements and there will therefore be a need for additional sites to provide sufficient choice”.
Says Peter Hall at Austin Adams: “A lot of the stock is fairly tired, and a lot has been converted to student accommodation.”
It is easy to see why. Residential land prices are nearly twice those of offices.
The final bombshell came more recently when Portsmouth council announced that the city’s office stock had dropped 40% between March and December last year.
Predictable effect
That has had a predictable effect on the city’s rental levels. Will Foster at Knight Frank says that, while city-centre grade A space was in the “early teens”, out of town reached £20 per sq ft. “I don’t see that moving by more than a few pounds,” he adds. “It is telling us that occupiers are looking outside the city as there isn’t the opportunity to get 40,000-50,000 sq ft in the heart.”
So will any developers fill the gap? Foster remains unconvinced. “There are one or two occupiers, but there needs to be 10 or 20 to provide any relative comfort for developers, and it is a long road ahead,” he says.
Retail, meanwhile, is expanding as Centros Miller moves forward with its 800,000 sq ft Northern Quarter retail development, which will replace the now flattened Tricorn centre.
John Marsh, development director at Centros Miller, hopes to have a planning application submitted this summer – slightly later than planned. He says, however, that the delay will not extend the date of completion, which is set for the last half of 2009.
John Lewis has signed up as the first anchor tenant, but Marsh remains coy about the second. “The letting tone will be high-quality fashion retail – Karen Millen, that sort of flavour.” Marsh says Portsmouth ranks in “the seventies” in the national retail ranking. “Following our scheme, it should move into the thirties.”
Debenhams appears to be off Centros Miller’s list, after signing for the city’s former Allders store. Both Northern Quarter anchors will be signed up by 2007, says Marsh.
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Southmoor Park, Havant: 18-acre, 174,870 sq ft business space under construction in three-phase development. Phase one – 79,660 sq ft office and industrial – has been developed with Priority Sites. Phase two remediation complete, with 5.7 acres sold to developers and owner-occupiers. Phase three has been acquired by Havant council for transport and a waste-recycling depot. Harbourgate Business Park, Portsmouth (formerly Johnson & Johnson phase one): 6.4 acres, four industrial/warehouse units on site. Asda Property Holdings acquired from SEEDA. Highbury College and Space Maker Self Storage have signed up space. Johnson & Johnson, phase two, Portsmouth:5 acres for office and employment use. Currently available. Harts Farm Way, Havant: 11.5 acres. Outline planning consent given for 172,200 sq ft of offices and industrial. 3-acre expansion site available. Frater Gate Business Park and Gosport Business Centre, Gosport: 11.6-acre former MOD site, sold to developers and owner-occupiers. A 29,000 sq ft business centre, comprising 65 units, opened in June last year. |
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The South East England Development Agency has more than 52 acres of land in five regeneration projects. But the local property industry is not impressed. “It has become involved with schemes such as Southmoor Park, Gosport Business Centre and the Johnson & Johnson site that are commercially viable, and could have been brought forward by private developers,” says one agent, who asked not to be named. While most agents agree, they are reticent to bite the hand that feeds them. However, Ian Power at Daniells Harrison is not. He has publicly locked horns with SEEDA before. “It has resolved on soft targets when it should be revitalising old estates and Fratton and Hillsea,” Power says. “Fratton should buzz with activity, but it needs finance.” Picking off SEEDA’s projects one by one, Power says: “Havant was successfully brought forward but SEEDA outmanoeuvred private developers. Harbourgate was also successful, but the deal took far too long. At phase two of the Johnson & Johnson site, SEEDA is contemplating offices, whereas the developer contemplated this on phase one but felt there was no confidence in the market.” Power says the Gosport Business Centre development, where SEEDA worked with project manager Basepoint, was an “abject failure that should not realistically have happened”. He adds: “SEEDA competed with six developers.” Feelings undoubtedly run high – but surely it is SEEDA’s job to facilitate development for the wider good, sometimes at odds with what private developers wish? “I wouldn’t blame SEEDA if it was enabling office development that needed to be brought forward, but why is it creating product when there isn’t sufficient demand?” asks Power. Power points to the Gosport Business Centre which, after 18 months, is 80% empty. Andrew Weston, Basepoint’s centre manager, admits that demand has been slow but says it has picked up recently. “The demand seems to be at present for smaller, high-quality office units,” he says, pointing to the printers, software developers, hairdressers and charities that have signed up. In SEEDA’s defence, Peter Cusdin, its development projects director, says: “The market welcomed our intervention at the Johnson & Johnson site. We were asked in by a private company that was relocating to the Far East.” He says the agency asked for private-sector involvement at Southmoor. “It was brownfield land that had to be cleared and remediated, but all those asked proposed to break it up. Sometimes the market isn’t able to take a view on the whole site. Southmoor had been with the private sector for a number of years, but it fell by the wayside.” Cusdin adds that the agency unlocked the site by organising funding for a £1.5m junction. “An individual developer couldn’t do that,” he says. In the case of Havant, Cusdin says a private-sector partner had been working on site but its option on the land expired. “That speaks for itself. The market had the opportunity, but we went in.” |
