We live in a world where the rise of the tech sector is almost overpowering. Amid the surge of TMT occupiers flooding global cities’ occupier markets, it is easy to see how the more traditional creative industries could be overlooked. But property developers and investors should beware, because such an oversight could prove more costly than they might expect.
The creative sector contributes £71.4bn to Britain’s economy, or 5.2% of GDP, and is responsible for one in 12 jobs in the UK, according the Department for Culture, Media and Sport. The art, film, dance, music, fashion and crafts industries are not only major contributors to Britain’s economy, but make up an increasingly important occupier market. And, despite severe budget cuts, the UK’s creative world is adapting fast. So where are the most lucrative deals to be found? And which segments of our British cultural and artistic make-up look set to become the most lucrative creative occupiers
of the future?
Artistic resilience
The traditional creative industries proved themselves to be remarkably resilient post-2008. The sector had to come to terms with a dramatic loss of funding. Local authority financing for the arts was slashed by 19% between 2010 and 2013 and corporate donations fell by 30% in the five years to 2013, according to lobby group National Campaign for the Arts.
Casualties were inevitable, but headline figures suggest that creative Britain is adapting well, demonstrating its ability to be commercially successful despite the squeeze on funding. The value of service exports by the creative industries grew by 16.1% to £15.5bn between 2009 and 2011 – compared with 11.5% growth in total UK service exports in the same period.
Big-name British creative companies that have been particularly successful include Pinewood Studios, which tripled its pretax profit from £1.8m to £5.4m in the last financial year. Pinewood Studios, where many of the James Bond films were shot, had to turn several film productions away in 2013 because of high demand and a lack of studio space. UK-based fashion house Burberry turned a record profit of £461m in the last financial year, up 8% on the previous year.
The growth of Britain’s creative economy represents a major opportunity for the property world. But this is a sector where requirements for space can be highly specific in terms of location, fit-out and building specification. To benefit from the opportunities the creative sector represents, property professionals will need to work hard to get under the skin of this highly diverse occupier market to understand what their clients want from their buildings. Let’s look at three of the major industries.
Art
The global fine art market has all but recovered from the recession, with sales of art and antiques growing by 8% to €47.4bn (£38bn) in 2013 – just below their pre-crisis peak of €48bn in 2007. And London’s art dealers are taking an increasing share of the spoils.
“Historically, New York has been the fine art capital of the world, but London has started to challenge its dominance in the past five years,” says David Rosen, senior partner at niche West End agency Pilcher Hershman.
This shift, he explains, is partly down to London’s ascendency as a safe haven for global wealth after the financial crisis. Fine art is one sector of the global economy that has come through unscathed. If anything, it has become stronger as high net worth individuals and family offices increasingly invest in art as a steady means of wealth preservation in turbulent times.
“Aside from prime commercial property, fine art is the only serious wealth preservation play now. It’s recession-proof,” Rosen says.
New York-based dealerships have made a concerted assault on the London market over the past five years to try to take advantage of the high concentration of wealthy collectors in based in the city.
David Zwirner, a high-profile New York gallery, signed a 15-year lease in January 2012 for 10,000 sq ft at 24 Grafton Street, W1. It was followed by the Skarstedt Gallery, a Swedish-owned gallery based in Manhattan, which set up shop London in June 2012, taking 2,500 sq ft at 23 Old Bond Street, W1. It marked its UK debut with an exhibition of paintings by Andy Warhol.
Location is the prime consideration for international art dealers, Rosen says. It is essential for galleries in this bracket to have a base in Mayfair, or at least prime Soho.
“Money is not an object for the top galleries, which will pay the same rate as a hedge fund for space in Mayfair – around £100 per sq ft,” he says. “British and European galleries tend to be a bit more flexible, and are prepared to take space in Fitzrovia, where rents range from £65 to £75 per sq ft.”
Rosen has acted as agent to a number of high-profile art dealers, including New York-based Marian Goodman, dubbed by Forbes “the grande dame of art dealers”. Last year Rosen helped Goodman find 12,000 sq ft of gallery space on a lease of circa 15 years at 20 Golden Square, W1. Goodman is understood to be paying £80 per sq ft, the going rate for prime West End office space at the time the deal was signed.
Location aside, top gallery occupiers insist on a minimum floor-to-ceiling height of four metres, a column-free interior and as much natural light as possible, says Anna Farnes, project director at Grosvenor.
Farnes has been at the helm of a major repositioning of the former Savills headquarters at 20 Grosvenor Hill, W1, which will be home to New York-based art powerhouse Gagosian Gallery on a 20-year lease from January next year. The gallery already occupies a small premises on Davies Street in Mayfair, which is “more like a retail unit”, according to Farnes. Its new gallery will cover 24,000 sq ft of specially reconfigured space designed by architect TateHindle.
As far as Grosvenor is concerned, an art gallery such as the Gagosian is a highly desirable tenant since it has the ability to shape the entire character of an area.
“We want to create a ‘gallery quarter’ at our Grosvenor Hill development,” Farnes says. “The Gagosian will be pivotal in creating interest in the area, and pulling pedestrians from Grosvenor Street and on to Mount Street, where a lot of our occupiers are fashion designers and luxury boutiques.”
Occupiers at Grosvenor Hill include jewellery designer Solange Azagury-Partridge, who characterises her creations as “wearable art”, and Serbian-born bespoke fashion designer Roksanda Ilincic, who opened her first flagship store in Mount Street in June.
Pop-up revolution?
The Cynthia Corbett Gallery, an established contemporary art specialist, has run an annual pop-up exhibition focusing on emerging artists in Cork Street, Mayfair, every summer since 2004, but while W1 may be the heartland of the fine art world, a few galleries have departed from the traditional West End bricks-and-mortar space running pop-up exhibitions around London, and in cities such as Brighton and Edinburgh.
The London Pop-up Gallery and the Loughran Gallery operate entirely in temporary spaces.
Juliet Loughran, who founded the Loughran Gallery in 2013, has run six exhibitions by artists including Tracey Emin, Damien Hirst and Marc Quinn at a range of locations in the capital, including Boxpark in Shoreditch and The Crate Gallery in Notting Hill. It also maintains a permanent gallery in Lancashire.
“I decided to do pop-ups because I don’t like art galleries. They can be so cold and snobby. I wanted to bring art to a different audience and to make it accessible,” she says.
Loughran is always on the lookout for venues in London, and says landlords will often approach her with an offer of temporary space. “It gives the building some publicity if it’s been vacant for a while, so the pop-up model can benefit the owner too,” says Loughran.
As the pop-up trend gathers pace, could it eventually challenge the dominance of West End galleries?
David Rosen is sceptical: “It won’t have an impact on the world of Mayfair dealerships – they are an entirely separate market. Also, there have only been about 12 serious pop-up exhibitions so far in London.”
Dance
The UK’s dance industry has had mixed fortunes in terms of government support since the financial crisis, and the divide between winners and losers has been stark. The Northern Ballet, the North’s leading dance establishment, had 25% shaved off its 2012-13 budget, while Hofesh Shechter, a contemporary dance company, received a 73.5% boost in funding for the same period.
Nevertheless, Britain’s dance community is behind a number of highly ambitious and complex requirements.
The English National Ballet and English National Ballet School are on the hunt for a new headquarters, to comprise 60,000 sq ft of studio and office space in London.
Caroline Thomson, executive director of the ENB, is no stranger to dramatic property moves – she was chief operating officer of the BBC until 2012, and oversaw the £200m move of some 3,000 staff to MediaCity in Salford.
Cultural organisations do not necessarily need to be in an area where there is an existing critical mass of creative activity if their brand is strong enough, Thomson says.
Creative community
“We’d like the ENB’s new HQ to be somewhere there is an existing, vibrant, creative community. However, it’s not a priority, and we’ve been very open-minded in our search so far,” she says. “The former Olympic Park and Woolwich have both been on our list, and we’re hoping to make a decision about a new location in London early next year.”
The ENB currently occupies 38 Jay Mews, SW7, next to the Royal College of Art. Although the locale is “creative”, the building is not up to the changing demands of a modern dance company. Thomson says: “The physical environment should reflect the culture of an organisation. What I want to achieve with the new space is a sense of openness. Our current building is on five storeys and has a lot of corridors and small offices. There is nothing like closed doors in an arts organisation for making people think that there is a conspiracy going on.
“My priority is to have greater integration between the dancers and administrative staff, and more open-plan space. We are also looking into having a glass-fronted dance studio that is visible from the street – in that way the building itself would help to open up the world of ballet to the public.”
The British Ballet Organisation, one of the world’s leading dance training centres, operates from a small premises in Hammersmith, W6. Moving inwards is a priority and the BBO has appointed specialist agent BDG Sparkes Porter to find up to 10,000 sq ft in central London by the end of the year.
The new building should be an “iconic” one that will draw the interest of passers-by, says David Earl, co-founder of BDG Sparkes Porter.
However, many of the most suitable buildings are earmarked for conversion to residential.
News of the two organisations’ moves follows from the Rambert Dance Company’s move into a new £19.6m purpose-built headquarters on the South Bank, SE1, last year, which was funded by a mixture of lottery funding and private donations – but no government backing.
Film
The most important factor for the UK’s £1bn film production industry as it chooses a location is that it must host a “critical mass of creative activity”, says Chris Sutton, lead director in JLL’s Cardiff office. Sutton was responsible for selling a 113,000 sq ft shed in Wentlooge, near Newport, on behalf of Standard Life to the Welsh government – which subsequently let the building to Pinewood Studios.
The studio is in an enterprise zone and also benefits from the cluster of film and TV-related industries that have developed in nearby Cardiff thanks to the BBC’s presence.
“The BBC outsources a lot of drama production in and near Cardiff. This attracts film company requirements to the area,” Sutton says.
Typically, film studios looking for space will prioritise cost. Sutton says: “Occupiers are not necessarily looking for a high standard of fit-out, as they are prepared to take a long lease and customise it themselves. But what they do want is scale at a competitive cost.
“I’ve seen a number of deals where sheds are rented for as little as £1 per sq ft. Often they are quite dour – but the magic happens inside.”
And action…
Appreciating the diverse requirements of creative tenants will become increasingly important to the property world, not just because of the size of the market, but also because they have a powerful ability to
create interest not just in buildings but in whole areas.
Creative Britain: What’s happening where
Cardiff The Welsh capital is home to a well-established cluster of film and TV-related businesses. The BBC has 175,000 sq ft of studio space at Roath Lock, where it produces popular shows including Dr Who and Casualty. The studio is part of a wider development, Gloworks, which is backed by the Welsh government and has the potential for up to 2m sq ft of office and studio space.
Bristol The BBC has just marked its 80th year at Whiteladies Road in Bristol, where the bulk of the channel’s nature programmes are produced. Wallace and Gromit, produced at the city’s Aardman Studios, is perhaps Bristol’s best-known creative export.
Liverpool Liverpool’s creative and tech industries employ over 48,000 people. The city is also gaining a reputation as a European hub for video game development.
Brighton Brighton is rapidly establishing itself as a centre for film, TV and digital media. Major tenants include Disney’s Club Penguin games website, which selected the seaside town over London for its first European office. The city hosts the Brighton Digital Festival , a month-long celebration of digital arts and culture, each September. Last year the event drew more than 41,000 visitors.
Manchester Not only does Manchester boast the BBC’s new Salford studios, but the city also has a strong reputation in music, film and digital media. The Sharp Project, a £16.5m, 200,000 sq ft development providing flexible office and studio space, opened in 2011, with the city council, Tiger Aspect Productions, Objective Productions and Lime Studios among its tenants.
How to work with creative cliques
Creative tenants can be some of the most rewarding clients to wo rk with, but tend to have a number of quirks that property types should bear in mind in order to cement a good working relationship, says David Brogan, co-founder of niche agency BDG Sparkes Porter.
Brogan is no stranger to working with the artistic set, and counts the British Ballet Organisation and a range of fashion houses among his clients.
“There are some creative tenants who have a lot less experience of the commercial process for procuring space than say, a hedge fund. Finding a property can be something of an educational process for them, so you have to be prepared to take them through every step very carefully,” he says “However, they tend to have a great sense of intuition about buildings. They can just walk into a space and just know immediately whether or not it is going to work for them.”
Dance, fashion and other creative tenants approach finding a building “with more of a sense of fun” than conventional corporate tenants, Brogan explains – and they prefer to work with an agent that can reflect this.
Creative issue special
• Briefing: graffiti gains value for property
• Simon Allford: Creative City – home to imagination
• David Rosen: London creatives seek authenticity
• Peter Bill: colours make the brand
• Terence Conran: a designer for life
• The Royal Academy of Arts: the art of expansion
• South West Focus: creative comforts
