From humble beginnings, South West-based developer, Rok Development, continues to branch out in the North a move which sees two Yorkshire men make a welcome return to their roots.
Just how welcome is evident when speaking to Stuart Longbottom, and Adam Hearld, northern area director and development surveyor, respectively, about Rok’s decision to open an office in Leeds. “I’m a Yorkshire man through and through,” says Longbottom, who joined Rok when it opened an office in Manchester in 2005. In August, he moved to set up the company’s Leed’s office at Moorfield Business Park.
Returning to his home territory, the confidence of familiarity rings through: “We might not know the market as well as we should, but the market knows us, and that is the important thing.”
Longbottom has big ideas for the Yorkshire market. Along with Hearld, who has spent the past six years in London, most recently covering the Leeds market for retail and leisure agency Hammond Phillips, he hopes to replicate the swelling development pipeline being built up by Rok’s Manchester office. Within the next two years, he hopes to bring, among other things, small freehold offices to the Leeds market.
Born out of the acquisition of Rockeagle by Rok in 2001, Rokeagle, as it was known then, had opened offices in Exeter, Crawley, Southampton and Bristol, before heading north. Since late 2005, the company has been known as Rok Development. Record interim results for the sixth successive year, which saw first half revenue reaching £301m, and pretax profit up 28% to £7.8m, helped support the opening of its sixth office.
Mixed-use schemes
Rok chose Manchester as its first point of entry to the North because it believed it was more open to newcomers than other northern cities. So it is ironic that the first scheme Rok Development undertook in the region was 20,000 sq ft of new-build offices and 22 flats in York Place, Leeds.
Since then, three more mixed-use opportunities have been secured, contributing to a development pipeline of £60m in the North West, with a £100m goal set for three years.
Longbottom hopes to replicate this in Yorkshire. And he believes the time is right to become a local in a locals market. He says the Leeds market is just behind Manchester’s in terms of numbers of occupier requirements. And he believes there has been a lack of outside influence in Leeds, where local developers with institutional funding reign supreme, leading to the construction of institutional-style buildings.
The lack of alternatives is particularly noticeable in the office market. “What Leeds seems to have missed is the high-quality, small office space in the core and more quirky products,” says Longbottom. “There is high demand for freehold office buildings. We want to alter the market a little bit to better suit occupier requirements.” To this end, the developer is in talks for a mixed-use scheme that will offer 1,200-5,000 sq ft office units in the city centre, with residential in a separate block.
Rok Development’s site purchases are internally funded, with development funding in 85% of cases generated by presales or prelets. It is seeking a 15-20% return.
Although the preference for sale or let will be driven by market demand, as a trader developer, Rok Development will only commit to building speculatively 15% of its national development programme at any time. To insulate against fluctuations in the market, it will concentrate on fast-track commercial schemes, with two to three years as its optimum time frame.
This is one of the reasons for the move to Yorkshire. Longbottom claims that developments in the South have been hampered by longer time frames. This is because of “the difficulty of getting planning in the South, including the Midlands”, as opposed to the North where, he says, “planning, generally speaking, is a lot easier to achieve”.
The move to the North was also driven by the expense of land from an ever-diminishing stock in the South. Longbottom says that development sites in the South are worth the most as residential a trend that is reversed in the North, where commercial schemes have now become more valuable.
Longbottom gives Bridge House on Wellington Street in Leeds city centre as an example of this. Originally given planning for majority residential, the site is now being marketed as commercial.
Demand for housing is lower in the North, where some local authorities have imposed moratoria on housing development an important factor for a developer such as Rok, which will only consider residential as part of a mixed-use scheme, and even then, only in partnership with a residential developer.
Rok aims to use the business model it adopted in Manchester to establish its office in Leeds. Four months will be spent in market research and planning, and a further two “embedding” the brand in the market, before it concentrates on schemes.
Longbottom claims that Rok is already on a number of shortlists, and excluding York Place which will be part-complete at the end of the year it will be 2008 before any schemes are finished.
Asked what problems the developer believes it will face when breaking into unfamiliar territory, the answer from Longbottom is an emphatic, if predictable, “none”, although he admits that “Leeds might be a tough nut to crack” and refers to the “Leeds mafia”.
Financial standing
Hearld and Longbottom believe their local knowledge and the name and reputation of the Rok Group carry some serious weight, and will help them to break into Leeds. Agents seem to agree. Richard Thornton, head of King Sturge’s Leeds office, does not anticipate that Rok will face difficulties. “The financial standing and size of a company such as Rok will put it in good stead.”
Having broken into Manchester, and now Leeds, Rok is now looking towards the West Midlands and Scotland, with Birmingham and Glasgow the next locations for expansion. Slowly but surely, the quiet southerner is spreading its branches and taking root across the country.
