Reading goes up in the world

Construction of a shopping and leisure centre will change the face of Reading, but its office market is not being left behind. By Adam Tinworth The skyline of central Reading is changing with amazing rapidity. The construction of Hammerson’s huge new shopping and leisure centre by the canal is bringing new life to Reading’s mediocre retail offer. “The Oracle will increase Reading’s floorspace by a third,” claims Hugh Radford of CB Hillier Parker, one of Hammerson’s agents on the scheme. It will not only cater for shopaholics. At night, the canalside area will be a central focus of leisure in Reading, with numerous bars and a 10-screen multiplex lining the banks. While such a scheme will undoubtedly act as a magnet and encourage new retail activity near it, there is a risk that it could hit the town’s existing pitches. “Only about 40% of The Oracle’s occupiers are coming from the town centre,” says Radford. “That’s by number of units. It’s less if you consider floorspace. Scheme profile: The Oracle Developer Hammerson Architect Haskoll & Co Size 65,000m2 Tenants 90% let. Large occupiers include House of Fraser, Debenhams, HMV, Warner Village, Waterstones, Boots and H&M Hennes Agents Hartnell Taylor Cook, Lunson Mitchenall, Hillier Parker Status First stage due for completion in September. Remainder of scheme to be complete by summer 2000 “Demand is strong enough to ensure that the main pitches won’t be badly hit – and we’ve adopted a policy of having only one bookseller and a couple of sports shops, for example. Demand from other retailers in the same markets will soak up the space.” Not everyone shares his confidence. “Friar Street will suffer. In fact, it already is suffering,” says James Marsh of Lambert Smith Hampton. “However, interest from A3 operators may help it to recover.” Still, like most agents, Marsh is in favour of the scheme. “Demand is very strong from retailers,” he says. “I don’t think anybody knows what the impact of the Oracle will be. It’s got to be positive, though.” Reading activity Rents are rising for refurbished space Offices Industrial 1997 take-up 59,578m2 44,072m2 1998 take-up 83,481m2 65,481m2 1997 rents £269 per m2 £70 per m2 1998 rents £293 per m2 £81 per m2 NB Office statistics have a lower limit of 465m2. Industrial statistics have a lower limit of 929m2 Source: Vail Williams Oracle spin-off predicted At least one Reading agent feels that the Oracle will be a benefit to the in-town office market. “There’s bound to be a spin-off,” says Simon Fryer of Fryer, Gilbert & Jepps: “It could be anything from occupiers in the centre looking for regional offices to the window-cleaner.” However, the town centre is not in need of a boost. “For the first time in years as much was let in town as out of town,” says James Cushing of Vail Williams. “It’s usually been 60:40 in out-of-town’s favour.” As a result, the stock of new buildings developed in the last peak of the property cycle has let. “There’s virtually no new stock in the town centre now,” says Keith Wise of Campbell Gordon. Nor will there be any more this year. The new builds, of which there are several committed and another possible (see table, p100), will start coming on to the market next year. There is little concern that Reading could find itself with an overhang of space once more. “It won’t happen. There are only a few buildings coming forward,” says Fryer. While there is a good range of stock available out of town, agents do not feel this will benefit from the tight conditions in Reading. “The town centre and out of town are two different markets, appealing to different occupiers,” says Cushing. “That’s become very apparent in the last year,” agrees his colleague James Bennett. Reading office market take-up and supply (m2) The Oracle retail development should lead to more office demand Source: Strutt &Parker Paddington rail link Seagate Technologies, which took Aquis House, specified the town centre because of its excellent rail link to Paddington. “They have a number of key staff in Ealing,” explains Ed Smith of Strutt & Parker. So, how will demand be satisfied? “The secondhand market is becoming extremely strong,” says Christopher Reeve of Lambert Smith Hampton. He estimates that rents for refurbished space could reach £194-£204 per m2 (£18-£19 per sq ft), compared with £237 per m2 (£22 per sq ft) for brand-new space. Demand out of town remains just as strong. “Demand is still IT-led,” says Smith. “However, there is a mixture of other occupiers looking.” Developers are confident enough that multiple speculative buildings are under way. “Building speculatively is the only real answer in the Thames Valley,” says Mark Glatman of Akeler, which is developing 36,696m2 (395,000 sq ft) at junction 2 of the M4. “Potential occupiers will almost certainly be from the IT or telecommunications sectors, and their businesses expand rapidly. They need space at short notice and we need to make sure we have the appropriate high-quality space available.” There are three main sources of existing buildings: Winnersh Triangle; Arlington Business Park; and 200 Berkshire Place, which has just been completed. However, these schemes are for the short term: no new space will follow the existing buildings at Winnersh Triangle for some years; Berkshire Place is a one-off site; and Arlington has only a couple of plots left to develop. With Thames Valley Park, long the focus of out-of-town development, done and dusted, all eyes are turning to the next out-of-town opportunity: the 73ha (180 acre) Green Park. Three buildings are under construction on the site. Prudential is building 100 Longwater Avenue, which it intends to let in sections on a flexible basis. “It will act as a seedbed for companies who may take larger buildings later on,” says Keith Wise of Campbell Gordon. Argent, with nothing left to do at Thames Valley Park, has bought a plot of land from Prudential and is putting up two buildings. The Pru’s flexible approach to its first building is just one example of a new approach to leasing being seen all across the area. “Flexibility in leasing is important,” says Bruce Usher of Slough Estates, which owns Winnersh Triangle. “It needs to be able to accommodate companies’ growth.” Slough addresses this by allowing occupiers to be released from their leases if they take new space from it. “You have to meet somewhere in the middle, between our and the occupier’s needs.” Arlington, in particular, is offering a “total workspace package” at its buildings. Offered by the Arlington Business Services arm of its operation, it is a menu of flexible leases and building support services that it sees as a step up from service offices. There are some flies in the business park ointment. Transport worries are at the forefront of most developers’ minds. The government’s traffic reduction proposals and the rapidly growing congestion around Reading have focused their minds quickly. For example, Arlington Business Park and Winnersh Triangle already have stations just off their sites, which the developers are playing up, while a feasibility study is being done on constructing one near Green Park. Consent with parking valued Still, existing planning consents with good parking will be invaluable. “Occupiers looking out of town tend to be car-led,” says Simon Perkins of Arlington. Worries about Reading council’s attitude to cars are dismissed. “We’re not in the Reading council boundary,” says Perkins. The other problem is staff costs overheating in the IT sector, which Oracle cited as one of its reasons for expanding outside the M4 corridor. “It’s a concern for large companies like Oracle,” says Wise, “but other firms are still attracted by the highly skilled workforce.” The industrial market is by far the quietest in Reading. “There’s a lack of stock,” says Keith Wise of Campbell Gordon. This is beginning to be addressed on the Basingstoke Road where two redevelopments are under way. “The quick access to the motorway and the decrease in traffic on the Basingstoke Road are the main factors,” says Simon Fryer of Fryer Gilbert & Jepps. James Cushing of Vail Williams points out that many distribution companies, particularly those with fixed contracts, are extremely price-sensitive. “Many of the older industrial buildings refurbish well and are ideal for this market,” he says. Greater Reading office supply (over 929m2) There are no fears of oversupply Building Size (m2) Quoting rent (£ per m2) Grade Parking Location Timing New buildings Building 270, Winnersh Triangle 1,112 269 New 52 Out of town Immediate Building 260, Winnersh Triangle 1,615 269 New 72 Out of town Immediate Part 1220 Parkview, Arlington Business Park 1,394 269 New 148 Out of town 50% let 11-13 High Street, Theale 1,431 280 New 55 Out of town Immediate Berkshire Place, Winnersh Triangle 6,254 NQ U/c 308 Out of town March Total area of new buildings 11,805 Possible sites and buildings Orbital House, Castle Hill 929 NQ Site 11 Edge of town Possibly residential Cadogan House, Rose Kiln Lane 1,003 NQ U/c 40 Edge of town Future Station Road, Theale 1,858 NQ Site tbc Edge of town Future Kings Wharf, Kings Road 2,285 NQ Site 17 Town centre Laing buying 199-203 Kings Road 2,323 NQ Site 1:347 Out of town Future 29 Queens Road 2,787 NQ Site 65 Town centre Residential 1240 Parkview, Arlington Business Park 2,958 269 U/c 150 Out of town Autumn 1999 Turnhams Court, Pincents Lane 3,272 NQ Site 147 Out of town Future Commerce Park, Brunel Road 3,716 NQ Site 1:500 Out of town Under offer on prelet Suttons Business Park 3,716 NQ Site TBC Out of town Future Tudor Road 3,809 NQ Site 43 Out of town Site sold December to Commercial Union 200 Brook Drive, GreenPark 5,110 NQ Site 1:270 Out of town Autumn 1999 47-57 Queens Road 5,642 NQ Site 78 Town centre Bought by City Loft 250 Brook Drive, GreenPark 6,224 NQ Site 1:270 Out of town Autumn 1999 Great Brighams Mead, Vastern Road 7,845 NQ Site 185 Out of town On site March 100 Longwater Avenue, GreenPark 7,711 NQ U/c 1:270 Out of town Autumn 1999 1300 Queensgate, Arlington Business Park 9,104 NQ Site 1:200 Out of town Future Land at Arlington Business Park 9,755 NQ Site tbc Out of town Future. No planning consent Lakeside 13,563 NQ Site 540 Out of town Future Forbury Square, The Forbury 15,581 NQ Site 146 Town centre Future Little Lea Park, Basingstoke Road 36,696 NQ Site tbc Out of town Future GreenPark 185,800 NQ Site 1:270 Out of town Future Total Sites Area 331,685 Notes: Accommodation available only in suites of up to 2,787m2. U/c:Under construction. B: Modern, non-air-conditioned offices. NQ: Not quoting a rent. A: Modern, air-conditioned offices. C: Other offices Source: Campbell Gordon