While the Inland Revenue’s relocation to Nottingham is still the most important influence on the city’s property values, underlying cracks in the market are beginning to appear, as Lauren Mills discovers.
Without the Inland Revenue’s relocation to Nottingham, the city would be struggling to rid itself of a glut of substandard, secondhand offices which, in this market, would be virtually unlettable.
The Inland Revenue is occupying more than 160,000 sq ft of such space, pending completion of its 400,000-sq ft headquarters. But, as most of the space is occupied on short-term leases, Nottingham faces only a temporary reprieve from the backlog.
Most of the expiries are due in about three years’ time and local agents hope that this will be long enough for the market to improve.
In the meantime, the Inland Revenue’s arrival remains the talk of the town. Yet, aside from this, occupational demand is thin onthe ground – a problem further exacerbated by English Heritage’s decision to abandon its plans to move from London to Nottingham.
While this decision had its political motivations, the fact that rents in the South East have plummeted has hampered Nottingham’s potential growth.
The indigenous market is not that strong, despite Nottingham being the regional base for many large companies.
This has resulted in a lack of institutional interest and, consequently, a shortage of quality office developments. “The going rate for good-quality stock is about £12.50 per sq ft,” says Nick Ebbs of Innes England. “This is insufficient to provide funds with the return they require.”
But Ebbs is confident that the market could sustain new schemes, even in the current economic climate. “State-of-the-art, quality accommodation, in the right location, could get £15 per sq ft. We need someone bold to provide the product.”
Until confidence picks up, potential occupiers have little from which to choose. In town, the Belgrave Centre on Talbot Street probably offers the best space.
Pickering Developments has the 80,000-sq ft project under construction, with 28,000 sq ft prelet to Nottingham Trent University for its law department.
Letting agent John Harlow, of Harlow Thomson Morecroft, reports that the university has taken a standard lease, with no significant incentives, at close to the asking terms of £11 per sq ft.
A number of ambitious schemes are in the pipeline. Boots Properties is finalising its proposals to redevelop its site at Island Street.
“We needed to review the scheme as a result of the property market, but it will still be a major mixed development to include a world trade centre,” said a Boots’ spokesman.
At the Lace Market, a number of schemes have consent and about 90,000 sq ft of offices with nearly 100,000 sq ft of industrial, retail and leisure is envisaged.
Local agents speculate that it is unlikely to go ahead without City Grant funding and the project is currently on hold.
Other schemes include the 100,000-sq ft Hollowstone, proposed by local developer Colin Elliott, who is awaiting a prelet, and Bendigo Properties’ Landmark, which will provide about 250,000 sq ft next to the station. This is also on hold.
Noel Roper of Connell Wilson reports that Sol Construction has consent for 43,000 sq ft of offices, to be known as Regent Court, at Derby Road. The agent is looking for a prelet of at least part before work starts on site.
Nigel Mills of Nattrass Giles believes that there has been a noticeable shift out of town, perhaps as a result of the shortage of space in the centre.
John Proctor, of Fisher Hargreaves Proctor, thinks that the migration has been caused by Nottingham’s fragmented centre. “This is why Castlebridge Office Village is so successful,” he says.
This development, by Wilson Bowden Properties, is located at Castle Marina, on the western fringe of the city centre and close to Wesleyan Assurance Society’s Castle Quay.
The 43,000-sq ft first phase of Castlebridge was built speculatively and is fully let to the likes of Abbey National, Hill Samuel and Friends’ Provident. Rents are about £12.50 per sq ft. The 50,000-sq ft second phase will be constructed building by building.
Castle Quay, which totals 50,000 sq ft, has only 5,300 sq ft remaining and joint agents Innes England and Rowlands Short are quoting £12 per sq ft. Tenants already there include Boots and Lombard Nottingham Central.
A competing scheme, Riverside, comprising a mix of retail, office and industrial space on the former Wilford power station site, is being developed by Wilson Bowden and Powergen.
Toys “R” Us opened a 45,000-sq ft unit there last autumn and B&Q will occupy 100,000 sq ft, including a garden centre, by the spring. Other occupiers will include East Midlands Electricity, Norweb and Carpetland. Rents exceeding £9 per sq ft have been achieved.
A total of 7 acres have been devoted to offices at Riverside, but none will be constructed speculatively. While local agents tend to accept that this is a very good site for retail and industrial, some have expressed concern that it is not so suitable for out-of-town offices as there are no shops nearby and it is not right on the motorway.
Ebbs, joint letting agent with Erdman Lewis, points out: “A park-and-ride scheme will operate immediately opposite. The beauty of this for Riverside is that there will be a regular shuttle to the city centre and lots of parking.”
More edge-of-town offices are planned at West Point Business Park, close to junction 25 of the M1. Proctor, who is letting the scheme, reports that, so far, one site has been sold for an 8,000-sq ft regional HQ.
At Clarendon Park, Sherwood Rise, the 8,000-sq ft first phase is fully let at rents of about £11 per sq ft to tenants including Black Horse Financial Services and British Fuels.
Agent Nattrass Giles says that the 12,000-sq ft second phase is under way speculatively. The quoting rent is £11 per sq ft. A further 20,000 sq ft is planned for phase three.
Although several schemes are established and emerging out of town, local agents are convinced that Nottingham needs a full-scale business park.
Ebbs suggests that it should be located on the west side of Nottingham to also serve Derby, north Leicester and Loughborough. But, currently, there is nothing planned and the council says that there is a lack of available land.
The proposal for a business park on 35 acres on the former Ruddington ordnance storage and disposal depot, on the A60 to the south of Nottingham, probably comes closest.
Two buildings, at the entrance to the site, have already been completed – 60,000 sq ft for Nippon Seiko and 30,000 sq ft for the Home Office telecommunications centre.
Nattrass Giles is seeking jointventure partners on behalf of Nottingham County Council and the MOD for the remainder.
“Ruddington provides a site with a super environment, but it is a bit isolated from the city centre and the motorway,” says Ebbs. Proposals for a 230-acre business park, Sherwood Park, at junction 27 of the M1 is another option. Kodak has already moved part of its UK manufacturing operation there and agent Brian Cooper is optimistic that other corporate users will follow suit.
However, some local agents remain unconvinced of the site’s potential. One claims: “It is not an office location. While it has relatively good access, it is really more of an industrial location.”
Local firm Birch Developments has recently been chosen by British Coal as its development partner for 44 acres at Babington colliery on the northern outskirts of the city.
Paul Hanel, Birch development director, says that plans are being finalised for up to 500,000 sq ft of business space.
“The local authority is keen to process the application quickly and we expect to start site preparation in the spring or summer.”
Hanel believes that the site is unrivalled in terms of accessibility, being only 400 yds from junction 26 of the M1 and fronting the A610 link into the city centre. And, while speculative development is unlikely, it has not been ruled out.
Retail
City-centre retailing continues to attract traders and shoppers alike, despite the regional centre at Meadowhall and Fosse Park near Leicester which encroach on Nottingham’s catchment area.
Ebbs considers that this competition has had no impact on Nottingham and research by the Retail Group, on behalf of the city council, found that just over 3% of Meadowhall’s shoppers travel from Nottingham postcodes.
“Nottingham’s retail pitch is still robust, but the catchment area has been eaten away at the edges,” says Ebbs.
The city’s two shopping centres, Victoria and Broadmarsh, anchor each end of the retail pitch, although local agents tend to think of the latter as the inferior centre.
But Toby Hall of Erdman Lewis, managing and letting agent of Broadmarsh, explains: “It is more of a family-orientated centre, anchored by Co-Op, BhS and Boots.” He believes that a £9m refurbishment of the interior, completed in 1988, has added to the centre’s appeal.
Current zone A rents are running at £80 to £85 per sq ft, a discount from the peak of £95, and the centre is 96% let. The main void is Sainsbury’s former 30,000-sq ft unit which is being marketed for assignment.
At the Victoria Centre, rents range between £130 and £150 zone A and few units are empty.
However, Proctor, joint agent with Lunson Mitchenall, expects opportunities to arise this year as a result of lease renewals and the creation of new units within the centre.
Elsewhere in the city, the prime location of Clumber Street is looking rather tired, while Exchange Arcade is fully let and trading well.
“We have experienced very few problems with tenants there,” says Jonathan Goble of Debenham Tewson & Chinnocks, which advises Exchange Arcade landlord Wyndham Investments.
Tenants include Rodier, Jaeger and Ted Baker. “It is a very upmarket mall and has transformed that part of Nottingham,” says Goble. Zone A rents are about £60.
Opposite is Flying Horse Walk, Friends’ Provident’s scheme which links Poultry and St Peters Gate. Although initially slow to let, it is now picking up and tenants include Alexon, Berkertex Brides and Mondi.
Roper believes that Nottingham’s retail market is nearing saturation point, although David Hargreaves of Fisher Hargreaves Proctor claims that the city “is doing very well”.
He says that his firm knows of about 20 national inquiries for space in the city and several deals have been completed in recent months.
The RAC has moved into 31-33 Wheeler Gate at £63 zone A and Zoo has taken 2-4 Albert Street at £107 zone A. Fisher Hargreaves Proctor and Hillier Parker were joint letting agents.
Just before Christmas, Virgin Games and Sally Travel moved into units at 4-5 Long Row, paying £95 zone A.
But several retailers have recently rationalised, including Currys, which has vacated its unit in Listergate, and Dolcis, which has decided not to renew its lease in the Victoria centre.
Although the city is experiencing difficult times, it is faring as well as competing centres in the region.
