A manufacturing deal recently took place in Redcar, near Middlesbrough, which locals claim will reignite the Teesside economy.
Thai firm Sahaviriya Steel Industries agreed to buy the Teesside Cast Products plant last August and finally took control of the mothballed former Corus steel works last month.
The move, which could revive 800 jobs, came after years of doubt – and finally despair – about the future of the massive plant, which has dominated the area’s economy since the Victorian era.
According to many in the region, relighting the blast furnaces provides a symbolic backdrop to a surge in the region’s manufacturing sector.
Japanese car parts giant Nifco has also raised hopes for Teesside’s industrial scene. In March, it began construction of an £8.5m plant at Eaglescliffe in Stockton-on-Tees. Nifco’s deal with Helios Properties sees the firm – which supplies Nissan, Toyota and Honda – take a 14-acre site.
The 130,000 sq ft factory is expected to be completed by November, and the plant – which represents an expansion of Nifco’s existing operations in the area – will be on-stream by early 2012.
In addition, a deal just outside Teesside is expected to create spin-off opportunities for the local market. In March, the government awarded a £4.5bn contract to Hitachi and its partner John Laing to build high-speed trains.
The decision means that 500 permanent jobs will be created at Hitachi’s proposed 400,000 sq ft European assembly and manufacturing plant at Amazon Park, Newton Aycliffe, in nearby County Durham. It is hoped that as many as 9,000 more jobs will be created around the region – with Teesside expected to get its fair share – as part of the supply chain.
The first round of funding from the government’s Regional Growth Fund has also boosted Teesside’s manufacturing sector. More than £26m of funding includes assistance for Nifco as well as £6.7m towards the construction of a new plant at Lotte Chemical UK’s Wilton site.
The upsurge in the UK’s manufacturing sector feels very real in Teesside. Helios Properties development manager Matt Johnson says: “Our deal with Nifco at Eaglescliffe, along with the Corus and Hitachi decisions, demonstrates the trend for manufacturing. It can only be a good thing for us, and for the regional economy.”
He adds: “We’ve plenty of enquiries.”
Although Helios is unwilling to discuss it, the firm is involved in what might prove to be a prime example of the strength of Teesside’s industrial sector. The developer is understood to be nursing a soon-to-be-confirmed 800,000 sq ft office and warehouse deal at Wynyard Park in Stockton. The new occupier is thought to be an engineering/petrochemicals company.
Outgoing regional development agency One North East is determined to make the most of this upswing in the area’s industrial sector. Speaking about the SSI deal, a spokesman says: “The supply chain into the plant will create many new business opportunities for local firms. The local economy will benefit massively from the income generated at the plant, with local shops and services feeling the upturn as people have more disposable income.”
David Jackson, a partner at Sanderson Weatherall’s Teesside office, says: “When Corus announced that it was to close around 18 months ago, it had a big impact on Redcar, Middlesbrough and Stockton.
“We saw a big tail-off in enquiries and confidence, and we have seen a recovery in confidence since and uplift across all sectors following the SSI deal.”
Simon Hill, industrial partner at King Sturge in Newcastle, also believes that the Teesside market stands to gain from the manufacturing sector’s upswing. “Nobody should forget that there are major manufacturing employers around Teesside, particularly in the chemicals industry,” he says. “Manufacturing is improving faster than other sectors of the economy and we expect to see more signings.”
It is early days for Teesside’s resurgence, but landlords argue that the boost to the local economy will have a knock-on effect for a huge range of schemes.
As well as the potential for increased office and industrial demand, agents say that a key litmus test for the region will be the state of the retail sector as employment levels and confidence increase.
British Land’s Teesside Shopping Park in Stockton is likely to be among the beneficiaries, say agents.
British Land asset manager Steven Rickard says: “Bringing people back into employment is sure to push up retail spending. Corus closing the steelworks was not good news, but the imminent reopening is.”
Rickard says that the park, anchored by Marks & Spencer and Next, weathered the recession well, with no big changes in trading. But he hopes that additional income in the local economy could encourage Cleveland folk to spend just a little more.
Very soon, the furnaces will be roaring again in Redcar. There will be new trains in Newton Aycliffe and car parts at Eaglescliffe.
The hope now is that an increased demand for space in the region’s business and industrial parks will not be not far behind.
Mood lifts in Middlesbrough
A sudden rush of office deals and some encouraging high street retail assignments have lifted the mood in Middlesbrough.
According to David Jackson, a partner at Sanderson Weatherall’s Middlesbrough office, the supply of grade-A office space in the city is now down from around 80,000 sq ft last year to 60,000 sq ft, and will be let within 18 months, if not sooner.
“There have been no lettings at some locations for three years, then suddenly a rush in the past three months,” says Jackson, reflecting on deals that include 12,000 sq ft let to outsourcing company Steria, which signed up for a sublet at Terrace Hill’s Teesdale business park and 26,000 sq ft to service centre Firstsource at Middlesbrough’s Fountain Court.
But rents remain subdued in Middlesbrough, at around £14 per sq ft, down from around £17.50 per sq ft at the top of the market.
Zone A retail rents remain around £120-£140 per sq ft, which few observers believe is sustainable.
The biggest movers are the deep discounters. Poundland recently expanded from 2,300 sq ft to 11,000 sq ft at Aviva’s Captain Cook Square. The rent for the ex-Ethel Austin unit was around £200,000 pa. The 15,000 sq ft former Woolworths store in the Hill Street shopping centre is under offer to Poundworld.
Attention will now turn to BioRegional Quintain, which last summer won planning permission for the next phase of its £200m RiversideOne development at Greater Middlehaven, Middlesbrough.
The scheme will include more than 200,000 sq ft of offices and leisure, and 25,000 sq ft of retail.
Contenders await Enterprise zone decision
Speculation is gathering as to where the Tees Valley Enterprise Zone – which the government announced in the recent Budget – will be located.
The Tees Valley Unlimited local enterprise partnership is charged with making the decision, but likely contenders include the Ironmasters site in Middlesbrough, Hartlepool Docks and locations in Redcar, Darlington and Stockton-on-Tees.
In Middlesbrough, mayor Ray Mallon and Middlesbrough FC chairman Steve Gibson are promoting land around the Boho One scheme at Middlehaven and the Ironmasters site near Riverside Park.
Also tipped is the Northshore development in Stockton. In March, Muse Developments subsidiary The Northshore Development Partnership announced that it was beginning construction on the £300m scheme, which will eventually deliver more than 1.8m sq ft of offices, leisure and retail accommodation, plus housing.
Agents also suggest that Central Park in Darlington, a One North East site on which Commercial Estates Group is the preferred developer, might be in with a chance.
David Jackson, partner at Sanderson Weatherall, says: “I’d like to see EZ status awarded to a site that has already been invested in and needs a leg up, rather than a new site that would not have worked at the best of times.”
The £300m Northshore development in Stockton-on-Tees has been tipped for Enterprise Zone status
