The first warship to be built in Portsmouth’s naval base for nearly 40 years was launched in June this year by Vosper Thornycroft. The £80m offshore patrol vessel, HMS Clyde, was hailed as the renaissance of shipbuilding at the base, and a return to the port’s former glory.
Then the guillotine fell. In September, the government ordered a review of navy infrastructure, and put the city’s naval base on its hit-list for closures. The results of the review should be made public next year. Portsmouth, along with Faslane and Devonport, are now going head-to-head with the government to avoid closure. Portsmouth is one of the Royal Navy’s largest bases, employing 17,000 people, and its value to the local economy is £200m.
The news comes as talk of Portsmouth’s renaissance has started to be heard. Construction starts are planned for Centros Miller’s 17-acre Northern Quarter development and Gunwharf Quays (see box opposite). Requirements have turned into deals, with two large lettings boosting H1 take-up figures by 165% on last year’s, to 284,900 sq ft.
One big deal is the sale of the former Autoliv factory to Scottish & Southern Energy for conversion to a 200,000 sq ft call centre a major letting in a market where the average take-up stands at 50,000 sq ft pa.
This has helped eat into supply, bringing it back in line with 2002’s figure. Clearly, the affect of cuts to the city’s Royal Naval docks during such a fragile recovery would be huge.
Mike Hancock, MP for Portsmouth South and the council’s executive member for planning, regeneration and economic development, says: “Portsmouth is heavily dependent on the docks, and the knock would be catastrophic, not just for Portsmouth but for the whole of south Hampshire.”
Yet agents, torn between a loyalty to their city’s naval heritage and the prospect of releasing land for development, seem uncertain whether closure is a good or bad thing.
Portsmouth has been slimming down its defence industry for some time. In 1985, defence was responsible for a third of industrial business, says Ian Power, director at local agent Daniells Harrison. Now, he says, it is closer to 10%.
“There are some smaller contractors which are here on the back of Vosper Thornycroft, but the defence economy has shrunk,” says Power. Pointing to a recent 4,000 sq ft letting to a defence firm at Fareham, he says: “That’s the first defence deal that I’ve dealt with in two years.”
As a result, he says: “If the Royal Naval dockyards were scaled down, it would be terrible, but we won’t be jumping out of the window.”
He, like others in the property industry, see opportunities ahead. Without the presence of the Royal Navy, the harbour could be turned into a commercial port, bringing in new occupiers with new requirements. It would also make available skilled labourers firms looking to relocate to Portsmouth have complained of a lack of skilled staff.
Yet Hancock believes the two aspirations do not run counter to one another. “The government is desperate to save money,” he says, adding that one proposition put forward is to keep the Royal Naval base but increase business interest in the dockyard. He says that commercial stock could go up by a third in the area by the release of adjoining development land.
Anything that helps push stock onto a starved market would be a good thing, say agents. Ross Moyler, associate partner at Vail Williams, says: “Southampton is still the regional centre, and we are not going to get Portsmouth to regional centre status, because we don’t have the supply. In fact, it doesn’t really have a city-centre market because there are no buildings. Is the market bad because we don’t have any space? It’s a tough question.”
But the success of lettings at Gunwharf Quays, implies a stronger market at the city fringe. Offices at Land Securities’ scheme achieved rents of £18.25 per sq ft above £13 per sq ft in the city centre and more than a £1 more than those achieved out-of-town. “People will pay for the shops, the restaurants, the nice view at the quays. City-centre retail is poor, and you won’t get anything for your money in the city centre except an office,” says Moyler.
There has been a string of lettings at Enterprise House in the city centre. The 60,000 sq ft building is now nearly fully let for the first time since Friends Provident moved out some 10 years ago. In addition, city-centre vacancy rates are at the lowest level for a decade.
Rental growth adds to the uncertainty in the market. Moyler believes that, despite lease expiries coming up at Gunwharf Quays, Portsmouth is unlikely to see any further hikes.
The out-of-town market is in a similar situation. At Solent business park, for example, buildings have never been occupied since they were built two years ago. Power says a lack of public transport has been a problem. “Landlords are holding their nerve on rents and, as a result, we will go through a period of stagnation.”
Moyler, agent on Solent business park, admits that some buildings have not let because requirements have been for secondhand space. “There are one or two vacant buildings, but there is not an oversupply,” he says.
And, despite having 250,000 sq ft empty, the park has a further 250,000 sq ft in the pipeline.
In addition, 275,000 sq ft of refurbished space is due to be released on Lakeside business park. Moyler, agent on the scheme, says it will be pitched at £17 per sq ft.
The uncertainty is echoed by developers. Durngate Property Group and Shepherd Development’s plans to redevelop the former site of healthcare product company Johnson & Johnson a gateway site on junction 12 of the M27 into 125,000 sq ft of offices have gone quiet.
Uncertainty
The situation still has plenty of time to play itself out. Even if the dockyards were closed tomorrow, redevelopment would be a long, slow process.
Peter Hall at CB Richard Ellis explains that before any land is released to the private sector, it has to be offered to other defence activities, and then to other government departments.
“It’s a long-winded process and that will be a major inhibitor to land release,” he says.
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A CPO enquiry date for Centros Miller’s Northern Quarter has been set for the 27 February next year. Gunwharf Quays, Land Securities’ £200m mixed-use scheme on the waterfront at Portsmouth Harbour, is nearing completion on its 100,000 sq ft East Side Plaza.
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Zone A retail rents at Cowes have set highs at £35 per sq ft. Historically these were £15 per sq ft. Cowes high street is now “full”. While multiples demand larger units, small local firms and specialists have filled Speculative industrial development is letting well, and land designated for B1 use is now causing a log-jam |
