Watford zap

In a generally fired-up market, Watford, St Albans and Rickmansworth are charging ahead. Lisa Pilkington reports on the market across Hertfordshire

Increasing rents on the back of a lack of stock and rising demand mean that speculative development is all the rage in Hertfordshire. Watford, St Albans and Rickmansworth remain the focal points for office development in the county, while Hemel Hempstead, Hatfield and Welwyn Garden City are picking up.

Testimony is paid to Watford’s buoyant market by Clarendon Road, where the constant hum of traffic is drowned out by the relentless noise of building works. Here, glossy developments are replacing old buildings. Along Watford’s “development highway” are dotted three schemes at roughly the same stage of construction.

It is believed that Regus is close to signing a deal for Green Property’s 2,756m² (29,655 sq ft) 54 Clarendon Road. At 51, Guardian Properties is developing its 3,825m² (41,178 sq ft) Radius office scheme. Meanwhile at 46, Norwich Union is believed to be considering taking space on a floor of Hunting Gate and Equitable Life’s 3,745m² (40,320 sq ft) Centinal scheme.

But despite this amount of new space coming on to the market in the same place at around the same time, there is still demand for further development.

BBC Pension Trust has detailed consent for a 5,574m² (60,000 sq ft) scheme at 60 Clarendon Road. Knight Frank’s Guy Calvert says: “This is the largest speculative development under construction on Clarendon Road.” Calvert believes that the lower level of rents in Watford compared with the western M25 towns will attract more major occupiers.

He says: “A discount of £65-£86 per m² (£6-£8 per sq ft) in rents on a 5,574m² (60,000 sq ft) building is an awful lot of money off the rent roll.” BBC Pension Trust is looking for a single occupier for the scheme.

Meanwhile, Lambert Smith Hampton’s Chris Smiddy says: “The Total Oil deal last year was the catalyst for more development. There’s still a lot of developable land in Watford, another six potential schemes could come on stream – but only if prelets can be found for them.”

And Jones Lang LaSalle’s Jonathan Wallis says supply and take-up figures can justify another speculative office scheme on Clarendon Road within the next 12 months. “If the three schemes get signed up, there’s room for more development,” he says.

“Any scheme built with subdivision in mind would work – but to think you can get one tenant for a large scheme now is very optimistic.”

One developer that remains optimistic of getting tenants is Terrace Hill, which is shortly to submit an application for 8,082m² (87,000 sq ft) on the Labour Club site, at 64 Clarendon Road. Smiddy believes rents of £247 per m² (£23 per sq ft) for new space are achievable after the Total Oil deal on Clarendon Road last year set a benchmark of £231 per m² (£21.50 per sq ft).

Rickmansworth

The Rickmansworth market – forever in the shadow of Watford – looks set to get a well-needed boost from Welbeck Land’s 7,896m² (85,000 sq ft) Zammat scheme at Maple Cross, which will have an end value of £30m.

Welbeck Land’s Joel Hawkins enthuses: “We’re doing this because there’s cracking demand. We’ve had two close shaves on letting the building. Computer firm 4Front was looking to take the whole building, but it couldn’t wait for it to be built because it was expanding too quickly. Fuji Film was looking to take two-thirds of the scheme and relocate from London, but that fell through, too.”

Hawkins says the developer is encouraged by local demand from the north-western quadrant of the M25. Because, owing to lack of supply, there have not been any major lettings in the town during the past three years, local agents believe this scheme will be successful.

Meanwhile, other schemes are taking place. According to Smiddy, Beeson Investments is considering a possible 8,825m² (95,000 sq ft) speculative scheme at Witney Place, on Denham Way, Maple Cross. He says: “A prelet is being sought, but they are on the point of deciding whether to speculate.”

However, a blow to the office market has been the loss of Penn Place – Estates & General’s 10,219m² (110,000 sq ft) office development site in Rickmansworth – to residential developer Barratt Homes. Barratt paid £6.25m for the site, which originally had consent for office use.

The demand for residential space in the town is now so strong that commercial developers and residential developers are battling over the same sites, with office developers losing out.

Mike Brasier, of Brasier Harris says: “The pressure for residential space is so strong, it’s incredible. The Barratt bid breaks back to £6.42 per ha (£2.6m per acre) – any other use would find it difficult to compete.”

Hemel Hempstead

“Hemel has always lagged behind Watford and St Albans as an office location, and the worry is that this gap is set to widen,” laments Jones Lang LaSalle’s Wallis. “Unlike its counterparts, there are no developments planned for the town in the foreseeable future.”

Again, the perennial problems of steady demand and lack of stock have resulted in higher rents. Rents are at last showing signs of reaching levels where speculative development becomes possible. Although way below their 1980s peak, new space could achieve between £161 and £177 per m² (£15-£16.50 per sq ft), while smaller secondary space achieves £96-£139 per m² (£9-£13 per sq ft).

As with Rickmansworth and St Albans, Hemel Hempstead has seen no speculative development for some time, but there are schemes in the development pipeline (see table, p109).

Breakspear Park, on Breakspear Way, was the setting for Hemel Hempstead’s most significant recent deal when Hewitt Associates took 8,361m² (90,000 sq ft). Jones Lang LaSalle’s Wallis says this has been the largest single letting in the area recently. Hewitt is paying £199 per m² (£18.50 per sq ft).

According to LSH, available stock at the beginning of 1999 stood at 18,580m² (200,000 sq ft), representing less than 12 months’ supply. More than 21,367m² (230,000 sq ft) was taken up in 1998.

Demand is usually at the smaller end of the scale – between 278m² and 557m² (3,000 and 6,000 sq ft) and comes mainly from indigenous companies.

Lambert Smith Hampton’s Christopher Parkes says: “Occupiers seeking new good-quality existing accommodation of less than 464m² (5,000 sq ft) are likely to remain disappointed, and may have to resort to sharing larger buildings. Hemel’s market could provide an ideal opening for a mid-range serviced office provider.”

St Albans

After years of limited speculative development, schemes in the pipeline are set to breathe life into St Albans’ office market.

The city suffers from an acute lack of office space – only 3,437m² (37,000 sq ft) is available, according to Jones Lang LaSalle. Stimpson’s Jim Townsend, laments: “With Thameslink’s access to London, you would anticipate that St Albans would have a much bigger market.”

But increased rents and stock shortage have kickstarted several speculative schemes. The most significant of these is the 9,754m² (105,000 sq ft) proposed development by KGB Kyle Stewart at the Thomas Mercer/BT site, on Griffiths Way.

The developer has purchased the site to develop four buildings to be built in phases. According to Wallis: “The timing of the phases is critical because St Albans couldn’t take 9,754m² (105,000 sq ft) coming on stream at once as well as the other schemes planned – there would be over-supply.” Completion is due in 2001.

Meanwhile, Castlemore Securities has plans for the former Godfrey Davis site on London Road, where it is awaiting detailed consent for a 4,206m² (45,274 sq ft) scheme. Wallis says: “We’re expecting to achieve rents in excess of £20 per sq ft and we’re due to start on site this year.” Lambert Smith Hampton is joint agent with JLL.

The ripple effect continues, and Anglo Lamron is developing Alagar, a 2,044m² (22,000 sq ft) scheme on Beaconsfield Road, near the station, which should be the first scheme to complete in the city.

According to LSH, quoting rents on new space are likely to be around £215 per m² (£20 per sq ft), while secondhand rents are around £172 per m² (£16 per sq ft).

Hatfield

The A1(M) lags significantly behind the M1 in occupiers’ minds, and few will consider both locations. Demand in Hatfield is weaker than in M1 towns, and limited development has taken place.

Therefore good news for the town has arrived with a prelet on Gryphon Development’s 975m² (10,500 sq ft) speculative scheme, opposite the station on Great North Road, to BDO Stoy Hayward.

Chartered accountancy firm BDO has taken a 20-year lease at an annual rent of £170,500, which breaks back to £172 per m² (£16 per sq ft).

Welwyn Garden City

Welwyn Garden City is seeing a resurgence. Rents in the town have traditionally been lower than in South Hertfordshire, but have now grown enough to encourage speculative development.

Welbeck Land hopes to fill a gap in the local market by providing a large scheme catering for tenants with requirements ranging from 743m² to 1,951m² (8,000 sq ft to 21,000 sq ft), on Shire Park in Welwyn Garden City.

The developer proposes a 5,574m² (60,000 sq ft) speculative scheme, on ICI’s 1.8ha (4.4 acre) site – Vision, on Shire Park.

The £13m scheme is one of several office village developments that the firm is hoping to commence in the next 12 months within the M25 area.Welbeck’s Joel Hawkins would not confirm the whereabouts of the other sites.

At Shire Park 3, Threadneedle Property Fund managers is looking for prelets. The 1.9ha (4.7 acre) site has outline planning consent for a 6,038m² (65,000 sq ft) scheme.

Gooch Webster’s Scott Rutherford says: “This part of the M25 isn’t the south-west quarter – while that’ll dissuade some potential occupiers, it’ll act as a big draw for others.” Jones Lang LaSalle is joint letting agent.

Hertfordshire county council key employment sites
A number of major sites will provide opportunities for future expansion away from existing town centres
Scheme	Size	Developer/owner	Status
Hatfield Aerodrome	46.5ha of employment uses, of which: 23ha for B1a/b; 8.1ha for B1c/B2; 11.3ha for B8; 4.1ha sui generis	Arlington Securities	A draft masterplan has been prepared for the site and is to be considered by Welwyn & Hatfield council in November. An outline planning application, based on the masterplan, is anticipated around the same time. The employment element is one component of the site, the other principal uses proposed are: housing 44.5ha; district centre 9.7ha; university 12.1ha
Leavesden Aerodrome, Watford	4.1ha of B1 use. Major expansion planned	MEPC	n/a
Spencers Park, Hemel Hempstead	Approx 28ha of employment use, of which about 15ha is for B1	CNT/Crown Estates	Local Plan allocation
Centennial Park, Elstree	27ha development for a mix of B1, B2 and B8	Slough Estates	Phase one complete, phase two under way