When Priority Sites’ industrial development programme ends, the company will have invested £70m in the South Yorkshire area. The joint venture between English Partnerships and Royal Bank of Scotland targets areas in need of regeneration, developing speculatively where regular commercial developers would not normally go (see map, p108).
So how has the market responded?
It is readily accepted that parts of South Yorkshire are in dire need of regeneration following the collapse of traditional industries such as coal mining. Some areas qualify for objective one funding, and Priority Sites often uses this to bring forward its developments, which are primarily small industrial units up to 25,000 sq ft, some with high office content.
Demand for small freehold office and industrial space is strong in South Yorkshire, so most of the deals Priority Sites has done to date have been sales rather than lettings.
Graham Sadler, development director at Priority Sites, says that one of its aims is to raise rents and capital values to stimulate private sector development. He believes there is already evidence of this. “In the past, industrial values in South Yorkshire have been £40-50 per sq ft but, in phase 2 at Wharncliffe Business Park near Barnsley, we have 8,500 sq ft under offer at £60 per sq ft. For the industrial element at Robin Hood airport, we are now asking £67.50 per sq ft.”
However, he admits that even getting capital values to a level of £60-£70 per sq ft, which should make development financially viable for a mainstream developer, rising land values and building costs can still make it difficult to attract further inward investment.
Many in the market back what Priority Sites is doing. Roger Haworth at NAI Fuller Peiser says: “If it hadn’t been there, sites wouldn’t have been developed.”
Mike Baugh, director at DTZ, agrees: “The beauty of what Priority Sites provides is that it gives the flexibility for both leasehold and freehold, and usually it gives an economic option to an occupier because a lot of the deals put together have a grant funding element.”
However, perfect regeneration is rare. In some locations, the availability of grants has meant that Priority Sites has undercut the market. Baugh explains: “There are number of examples where we have been acting on behalf of a traditional developer and occupiers have come to us and said ‘we like your building but Priority Sites is offering funding’, which gave them a bit of head start.”
Sites nearer prime locations such as Shortwood (see map) have seen the biggest competition, he says, rather than more difficult locations – such as former colliery sites Dinnington and Wharncliffe – where development is essential to get regeneration off the ground.
Haworth has had a similar experience, losing a potential investor to a Priority Sites’ scheme.
However, these are only minor grumbles, and Haworth believes the overall benefits that Priority Sites brings to the area are worth it. “It does create a false market in some instances. It is not necessarily bad that Priority goes in cheaper and its product gets snapped up first. It is the occupiers who benefit.”
|
1. Barnsley Wharncliffe Business Park, Barnsley. Second phase comprises 11 units plus one bespoke office totalling more than 46,500 sq ft. Due for completion in November 2006. 8,500 sq ft of freehold space is under offer at £60 per sq ft 2. Barnsley Shortwood Business Park (pictured above). Second phase of 60,000 sq ft at the 10-acre site, following the completion of the first £4.5m phase, which comprises 55,000 sq ft. Units range from 4,000 sq ft to 10,000 sq ft 3. Rotherham Dinnington (former colliery, pictured above). Fourth phase to comprise 32,500 sq ft in eight units ranging from 3,500 sq ft to 5,000 sq ft. Due for completion in October 4. Doncaster Robin Hood airport (pictured, pXX). First phase to comprise 10 industrial units totalling 53,500 sq ft. The entire scheme will have 90,000 sq ft over a 6-acre site. Completion due in December. Asking £67.50 per sq ft for freehold, rents are around £4.75 per sq ft 5. Doncaster West Moor Park. Third phase to comprise 40,000 sq ft of industrial accommodation. Asking £70 per sq ft freehold |
