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Agenda Lambert Smith Hampton

Issue Three / Q1 2009

Eric Pickles MP discusses the taxes threatening UK businesses

Lambert Smith Hampton reports on the Trinity House lighthouse portfolio

The changing face of retail

Woolworths: victims of the credit crunch, or simply weak retailing?

Inside this edition:

» Evolution of the modern workplace » Cash flows and woes: the changing face of rent collections » Modern Glasgow: flourishing in a new era

www.lsh.co.uk


Agenda / Issue Three / Q1 2009 / Introduction

Well…what can I say about the past 12 months without sounding like a cliché! It has been a truly turbulent year for the commercial property industry and the wider global economy. In 2008 we saw the collapse of international

At Lambert Smith Hampton (LSH) we are

banking legacies, the nationalisation of UK

sceptical about Chancellor Darling’s pre

banks and widespread job losses as the

budget report claim that the empty buildings

financial crisis spread beyond the square mile

‘tax holiday’ will affect 70 percent of vacant

and property.

buildings. Meanwhile, port operators will be gravely disappointed that the Government

There have been many lessons learnt, from

has refused to scrap its retrospective business

the corporate boardroom to the corridors of

rates tax claim, which threatens the future

Whitehall and it will be interesting to see how

of many of their businesses. See our indepth

political intervention will impact the markets

report on this issue of Agenda for more on

in 2009, which is already shaping up to be a

this sensitive matter.

difficult year. Substantial fiscal loosening and the Government’s commitment to a Keynesian economic model will undoubtedly help the commercial property market in 2009; so too will Gordon Brown’s latest pledge to create 100,000 jobs through public investment. However, treasury policy specific to commercial property has not gone far enough to date.

2 / Lambert Smith Hampton

For most of this year, I expect the commercial property market to be under pressure, but I have no doubt we will all continue to manage our businesses responsibly through this downturn.

Occupational markets will tighten further but on the positive side some activity will return to the investment markets as the Bank of England’s continued interest rate cuts combine with a further softening of investment yields. This will begin to make property look attractive – always assuming that the banks begin to lend again! I do hope you enjoy reading our third issue of LSH’s client magazine, Agenda, my first as the firm’s new Chief Executive. While 2009 will indeed be challenging for us all I am excited about my new role and the year ahead. LSH has a unique national platform, a strong team of people working for the firm and most importantly a great client list. I look forward to the opportunity of meeting many of you in the coming months. In the meantime, please do not hesitate to contact us if you have any queries or comments regarding our business and the services that we provide.

Philip Lewis FRICS Chief Executive


Agenda / Issue Three / Q1 2009 / Contents

Contents 02

Chief Executive, Philip Lewis reflects upon the economic climate and how commercial property has been affected

04

Eric Pickles MP speaks out In-depth commentary on tax and rating issues

05

The Pre-Budget Report’s impact upon commercial property

06

National research and market commentary from the last quarter Highlighting transactional activity, sustainability, occupier markets and deflation

08

Woolworths: the credit crunch claims another victim

10

Research round-up Market spotlights on Manchester, Birmingham, Leeds, Northampton and Rugby, and the North East

12

Going the extra mile LSH takes to the skies and seas to report on the Trinity House lighthouse portfolio

14

Evolution of the modern workplace How workplaces have adapted to technological, economic and social trends

16

Cash flows and woes The changing face of rent collections

Lambert Smith Hampton Agenda Magazine Issue Three / Q1 2009

18

City spotlight: Glasgow The reinvention of Glasgow into an economic and social hub

Editor Sandy Townsend

20

CAA legislation looms Driving cost savings and efficiency in the public sector

21

History repeats itself 236 years of LSH

22

Sport2Business Making the transition into business from sports

Art/Production Director Nathan Turner Content Contributors Sandy Townsend, Elizabeth Bartlett, Shirley Feeney, Louise Crush, Tom Everington, Alan Christie, Martin Treacy, Charles Partridge, Richard Wackett, Julian Welch, Eric Pickles MP

Lambert Smith Hampton / 3


Agenda / Issue Three / Q1 2009 / Business Rates

Businesses face an uncertain future Eric Pickles MP on the taxes threatening UK businesses

T

here is now little doubt that Britain

55 British ports, forcing up the tax bills of

increase the pressure on local authorities to

faces a long and difficult recession.

struggling firms, undermining the economy

levy a supplementary rate to raise the ever

Economic slowdown, a falling housing

and damaging British competitiveness. Local

widening shortfall in their finances.

market and increasing job losses mean an

firms are receiving massive backdated tax bills

uncertain future. A key plank to lessening

following changes to the way that ports are

There is a case for ensuring the businesses

the impact and bringing the economy out

valued for business rates, from 2005.

make a contribution to new infrastructure, such as for the Crossrail scheme, but a

of decline as quickly as possible is helping business, and particularly small business to

The Government has claimed that it has no

supplementary business rate must not be

survive.

idea what the additional tax that will be raised

used as a stealth tax. Any rate must involve a

as a result, but has admitted that the changes

democratic mechanism for local firms to back

Yet at such a crucial time, the Government

mean a £19 million net increase in rateable

or oppose the increase. The Government’s

has chosen to hit business with a whole raft

values. This is estimated to be equivalent to

proposals risk higher taxation without proper

of new taxes, and the pips are beginning

an £8 million a year increase on tax bills, and

representation.

to squeak. To begin with, firms face higher

taking into account the backdating, represents

business rates bills due to the cutting back of

a £33 million tax hit on British ports.

Whitehall must not be allowed to use such schemes to raise tax by stealth, by passing

business rate relief, coinciding with premises being vacated as a result of the downturn,

There is now a real fear that many shipping

costs that would otherwise have been funded

leaving commercial landlords and businesses

companies may switch their business to

centrally onto local taxpayers. The rate should

alike with a substantially increased and

Zeebrugge or Rotterdam, finishing journeys by

only be used to pay for specific and clearly-

unwelcome bill to meet.

road or rail, and bypass British ports completely.

identified projects, such as new infrastructure,

Property experts and industry have slammed

Finally, the 2005 rates revaluation saw a

Brown’s empty rates move as “nothing

number of stealth changes to hike business

We need our businesses to be able to compete

more than a bare-faced cash grab”. These

rates, via transitional relief to cushion large

in a tougher and more aggressive global

higher taxes will discourage regeneration,

rises no longer being subsidised by Central

market than we have seen in a generation.

since developers risk increased costs if new

Government and via the introduction of a

Gordon Brown’s taxation must not be allowed

buildings are unintentionally empty in the

higher business rate multiplier for medium

to be the handbrake on recovery.

current property market, particularly as the

and large firms. The rates revaluation in 2010

cuts in relief have not been offset by any

will further increase bills for many firms and

Eric Pickles MP is Shadow Secretary

reduction in business rates.

supplementary business rates will be on top

of State for Communities and Local

of the new Community Infrastructure Levy on

Government.

for a fixed period.

If that is not bad enough, the Government

new development. Ministers decision to cut

has blundered into a £33 million tax hike on

the complex LABGI grant incentive will only

4 / Lambert Smith Hampton


Agenda / Issue Three / Q1 2009 / Business Rates

Richard Wackett, LSH Rating, commented on Chancellor Darling’s Pre-Budget Report. Although the empty property rates (EPR) relief announced in Darling’s

There is now a real fear that many shipping companies may switch their business to Zeebrugge or Rotterdam, finishing journeys by road or rail, and bypass British ports Eric Pickles MP Shadow Secretary of State for Communities and Local Government

Pre-Budget Report appeared to be helpful to landlords in the smaller secondary sector it does not address the issues of regeneration or encourage developers of major schemes.

It’s a case of too little too late. The EPR exemptions don’t come into effect until next April. At LSH we are sceptical about the accuracy of Darling’s claim that this would see 70 percent of buildings exempt is correct. A rateable value of less than £15,000 will account for only a small workshop unit or tiny provincial office. The change in the Government’s EPR policy shows recognition that there is a problem for small scale commercial investors and indicates that the empty rate legislation can be incrementally altered. Port-side industry will still struggle The Government’s announcement to allow councils to spread rates payment will relax the pressure on businesses affected by the revaluation. Dock users and warehouse operators at 56 ports across England and Wales, already struggling with the slowdown in global shipping, were dealt a death blow with the retrospective tax claim of up to £1million and feared bankruptcy many harbour-side industrial businesses. Despite the ease in pressure, there is great disappointment. More relief was expected by port operators which are struggling to find amounts demanded retrospectively. “The VOA has made the tax grab with no consultation – it is a stealth tax at a time when warehouse operators and docks users are facing the toughest economic outlook since the depression.” Richard Wackett, Rating E: rwackett@lsh.co.uk T: +44 (0)113 245 9393 LSH supports the British Property Federation’s petition to reinstate EPR relief to vacant commercial buildings http://petitions.number10.gov.uk/emptythreat/ Lambert Smith Hampton / 5


Agenda / Issue Three / Q1 2009 / National Research

Green UK fades as economy hits the red but it’s just a temporary blip

There has been much news coverage recently highlighting how sustainability issues are dropping down the corporate agenda as the recession deepens, however, according to a recent Lambert Smith Hampton survey, the stall is just a temporary blip.

pressure on business operations eases.”

Derek said: “In this rapidly changing world,

Just over 67 percent of the survey’s

occupiers are focusing on how their buildings

respondents believed that the current

can contribute to productivity. A recent RICS

economic and financial climate will lead to

report claimed that an increase of just 1

companies postponing taking a sustainable

percent in employee productivity could nearly

building in the short term. However, a

offset a company’s entire annual energy bill.

significant proportion said it was very likely that they would take a sustainable building

“Sustainable buildings are viewed as a key

when they next moved.

way of enhancing productivity performance and therefore ultimately, a commercial

Other findings include:

building that is not sustainable is likely to be

35 percent would pay up to 5 percent

less attractive to tenants and less profitable for

Matters research report maintains that

more in rent in order to occupy a

its developer as a result.”

sustainability issues are still extremely

sustainable building, while a further

L

SH’s inaugural Corporate Real Estate

important to businesses and remain firmly

35 percent would pay up to 15

For further information, please contact:

embedded within the long term agenda of

percent more.

Tony Fisher, Office Agency

Sustainable buildings, providing better

E: tfisher@lsh.co.uk

working environments, were considered

T: +44 (0)20 7198 2250

senior executives.

The report examines how businesses are

important by survey respondents.

responding to the current economic climate

71 percent rated environmental

Derek Jones, Corporate Services

and the new challenges they are facing.

improvements such as air quality,

E: djones@lsh.co.uk

lighting and noise reduction as improving

T: +44 (0)20 7198 2360

productivity.

Survey respondents stated that large

For occupiers, the most important

Martin Treacy, Building Consultancy

sustainable buildings boost productivity. As a

factor in a sustainable/BREEAM

E: mtreacy@lsh.co.uk

result 70 percent of those surveyed said they

excellent rated building was considered

T: +44 (0)20 7198 2140

would pay up to a 15 percent rental premium

to be energy efficiency and impact on

corporate occupiers still recognise that

for that benefit when they next move offices. However, any such moves are now being planned for the medium term.

local environment.

Robin Mitchell, Lease Advisory

81 percent of respondents thought

E: rmitchell@lsh.co.uk

environmental policy and CSR was

T: +44 (0)20 7198 2180

still important or very important to Derek Jones, LSH Corporate Services, said:

their organisation.

being put on hold while businesses navigate

According to the research, occupier fit outs

the deteriorating economy. But concern

can have an impact on the efficiency of the

for the environment is not forgotten and

overall building, and managers and owners

sustainability will return to the fore once

therefore need to work closely with tenants to

economic conditions improve and the vice-like

help deliver sustainable fit outs.

6 / Lambert Smith Hampton

Visit www.lsh.co.uk to access our latest market research.

“It is clear that the sustainability agenda is


Agenda / Issue Three / Q1 2009 / National Research

Recession inevitable Deflation looms for 2009 The Government’s Pre Budget Report (PBR) and its promise of a £3 billion fiscal stimulus to the UK economy is to be welcomed. However, as Sandy Townsend reports, a round-up of LSH’s quarterly national research demonstrates that the PBR’s rescue measures face stark opposition from the deteriorating economic conditions.

T

he question for the UK economy is not if it will enter recession but how deep and for how long it will last, states LSH’s

Economic and Property Market Bulletin. According to the report, deflation will be a key concern for 2009 as the economy

Third year lucky for seven year itch LSH’s Weather Map: Prospects for Property report reveals that although the next two years will undoubtedly be stormy, the outlook is improving for 2011.

to remain subdued but the beginnings of

A

impact on property portfolios in the industrial

ccording to the report, the property market and broader economy will surpass the depths of decline

experienced in the 1970s recession by 4.4 percent in 2009/2010. But, analysis of the past 40 years highlights that both are cyclical, maintaining a seven year bell curve. Growth will return in 2011 but at more incremental levels than previous downturns. LSH predicts that markets will recover to long term growth averages by 2013. Headline rents at present are holding or just slipping across all three major sectors but incentives, such as rent free periods, are moving out considerably. Lack of demand from the financial sector has hit the office sector hard, with suffering set to continue in the short term before returning to growth in 2011. Ezra Nahome, LSH Head of Capital Markets, predicts a fall in office rents of 14 percent in 2009 and 8 percent in 2010 before starting to recover in 2011.

improvement in 2010, coupled with lower interest rates mean that the retail sector will be the first to see an upturn. Empty property rates continue to negatively sector, coinciding badly with falling demand and increased operating costs. Despite this, prime headline rents have largely remained steady. However, there is increasing evidence that rental values are beginning to soften in some locations. For further information on specific sectors, please contact: Ezra Nahome, Investment E: enahome@lsh.co.uk T: +44 (0)20 7198 2222 Tony Fisher, Office Agency E: tfisher@lsh.co.uk

attempts to stave off a profound recession, after it contracted by 0.5 percent in the third quarter of 2008. Ezra Nahome, LSH Head of Capital Markets, said: “The change in the UK economic outlook since August has significantly deteriorated post Lehmans, and despite Government intervention to the banking sector and the lowering of interest rates, there is still a lack of credit in the market. 2009 will inevitably see a significant rise in business failures.” The Consumer Price Index is expected to fall to as low as 1 percent in 2010, significantly undershooting the Bank of England’s target rate of 2 percent. In commercial property all three sectors, office, industrial and retail were under pressure, experiencing falls in rental values and a shift out in investment yields. The property market has now entered a second phase of repricing driven by the weaker outlook for the occupier market and economy. Visit www.lsh.co.uk to access the latest market research from LSH.

T: +44 (0)20 7198 2250 Steve Williams, Industrial Agency E: sawilliams@lsh.co.uk T: +44 (0)20 7198 2000 Julian Welch, Retail Agency E: jwelch@lsh.co.uk T: +44 (0)1733 895 002

The retail market’s outlook remains dependent on consumer confidence and response to interest rate cuts. In the short term we can expect consumer spending Lambert Smith Hampton / 7


Agenda / Issue Three / Q1 2009 / Retail

Julian Welch, LSH Retail, considers whether the demise of one of the high street’s most established household names is really a result of the credit crunch or whether it was a foregone conclusion.

Woolworths: victims of the credit crunch, or simply weak retailing?

W

ell there you have it. Woolworths, one of the nations most recognisable and

established brands has finally hit the buffers. Ninety-nine years after opening its first store in 1909, the company with a chain of 815 stores and 30,000 employees could struggle on no more. Bearing the weight of more than £325 million of debt, having had its trade credit insurance withdrawn and being forced to pay cash for its stock took its toll. The great British public who fondly remember the ‘Pick and Mix’ counter, the happy staff and the good value are calling it a ‘crying shame’, but in reality, is this actually the case? In an increasingly competitive market, it can be argued that Woolworths simply lost touch. Its brand identity weakened in comparison to new entrants to the market with better store designs, more appealing

8 / Lambert Smith Hampton


Agenda / Issue Three / Q1 2009 / Retail

retailing environments, and more enticing

altogether once its trade credit insurance was

with Iceland. There will therefore be a very

product lines. Following disposal of the

withdrawn, the consequences were inevitable.

large number of stores sitting empty for the foreseeable future.

Woolworths brand by Kingfisher in 2001, Woolworths tried many new initiatives,

It is clear that consumers are taking flight

looking at large store formats with Big W,

to value. Value retailers are reporting strong

Woolworths has traditionally been a footfall

small store formats with Woolworths Local,

sales growth: Primark up 18 percent for

generator for the high street. It is, or perhaps

re-vamping signage, even trying the comedy

the 16 weeks to 3 January; Aldi reportedly

was, seen as an ‘anchor’ tenant, one whose

route with a fluffy sheep and sheepdog in TV

up circa 20 percent on the previous year;

presence signified prime or edge of prime

adverts that were almost trying to be akin to

Poundland reporting 24.3 percent growth

locations on suburban and urban parades.

the famous PG Tips ‘monkey’ but never quite

in like-for-like sales for the 5 weeks to 4

The usual configuration of its stores, with

getting there.

January and Peacocks up 22 percent for the

wide and imposing frontages, will mean that

same period.

there may well be significant gaps appearing on high streets across the country.

So is Woolworths a victim of the credit crunch? Well, undoubtedly the current economic crisis has not helped matters, but it can be argued that the chain’s failure would have occurred even in the absence of a faltering economy. The retailing arm has been loss making for several years, the company was propped up by 2Entertain,its joint venture DVD business with the BBC, and EUK, its DVD distribution business. These two subsidiaries may well be sold off separately as part of the fallout.

The fact that Woolworths was operating on a business model that relied upon a very tight cashflow margin simply spelled disaster. As soon as the availability of credit tightened, and in Woolworths’ case disappeared

Consumers, quite simply, are tightening their belts and looking for value for money. Big ticket retailers are suffering most, with DSGi reporting a significant loss of £29.8 million (compared with a profit of £52.4 million for the same period last year), and a further 10 percent fall in sales during the three months to January. MFI has sunk into administration and closed 26 stores with immediate effect. SCS and Land of Leather are entering administration and Homebase is showing a reduction of 10.2 percent in likefor-like sales for the 18 weeks to 3 January. So what will the fallout be and how will it affect the high street? All Woolworths’ stores are now closed, with (at the time of writing)

The lack of this footfall generator is likely to have a marked effect on surrounding retailers, directly affecting their business. Due to the size of many of the stores, they will be difficult to split up into smaller units. Landlords of Woolworths stores will be frantically searching for options to redevelop sites in the face of a very tough property market with little demand. Was Woolworths a victim of the credit crunch? Possibly. Victim of a failing business model and weakening brand? Almost certainly. For further information, please contact: Julian Welch, Retail E: jwelch@lsh.co.uk T: +44 (0)1733 895 002

only 51 being saved under a package deal Lambert Smith Hampton / 9


Agenda / Issue Three / Q1 2009 / National Research Round-up

Manchester

T

he Manchester office market remained resilient to the economic downturn throughout 2008. The completion and

delivery of a number of high quality schemes saw take up of Grade A office space in Manchester city centre rise to over 40 percent of all transactions taking place in the first three quarters of the year, compared with 23 percent in 2007. The South Manchester market saw improved levels of activity compared to 2007, with smaller transactions driving activity. In the next 12 months Manchester will see a number of new schemes coming onto the market, including MCR Property’s 9 Portland Street, United Utilities’ Linley House and Magnus Property’s 19 Spring Gardens. Prime rents for Grade A space currently stand at £28.50 per sq ft and predictions for 2009 remain the same, albeit there is likely to be strong competition for lettings and occupiers will be in an enviable position to secure favorable terms. For further information, please contact: Peter Skelton, Head of Manchester E: pskelton@lsh.co.uk T: +44 (0)161 228 6411

Research round-up LSH’s national research reports provide analysis of the commercial property industry across our national network of 28 offices.

Birmingham

T

Visit www.lsh.co.uk to access our latest market research.

otal office take-up in Birmingham

Birmingham city centre has a vacancy rate of

city centre has remained reasonably

8 percent, 40 percent of which is classified

constant in recent years, averaging circa

as Grade A space available for immediate

600,000 sq ft per annum. Despite widespread

occupation. Transactions involving Grade A

economic challenges, 2007 proved more

space accounted for 46 percent of take-up

fruitful with around 660,000 sq ft and 2008

to October 2008 (compared to 32 percent in

proved exceptional with 831,290 sq ft take-up

2007). Prime rental levels moved to £33 per

January to September.

sq ft, the highest this year.

Record take-up figures were driven by the

For further information, please contact:

supply of high quality product, largely lacking

Terry Corns, Head of Birmingham

from the market in recent years. Colmore

E: tcorns@lsh.co.uk

Plaza brought 310,000 sq ft to the market,

T: +44 (0)121 236 2066

with new Grade A buildings, One Snowhill, 45 Church Street and 11 Brindley Place, bringing a further 354,296 sq ft in early 2009.

10 / Lambert Smith Hampton


Agenda / Issue Three / Q1 2009 / National Research Round-up

North East

T

otal office take-up in Newcastle city centre remained strong the first nine months of 2008, with 420,901 sq ft of

transactions, including the largest pre-let in the city’s history when Newcastle University Business School agreed to take 110,000 sq ft at Downing Plaza.

Glasgow

Coopers Studio both quoting £24 per sq ft.

T

500,000 sq ft, the slowdown in demand due

high-quality space just as the economy begins

While these headline rental levels are likely

to the decline in the business and financial

to recover.

to remain, an increase in flexible terms and

services sectors.

Prime rental levels are in the region of £22 to £24 per sq ft with Wellbar Central and

ake-up in Glasgow city centre during

The current economic difficulties are likely

2008 is likely to be 300,000 sq ft,

to inhibit further speculative development,

compared to a ten-year average of

resulting in a return to an undersupply of

incentives is expected as landlords become more deal focused.

A new prime rental high of £28.50 per sq ft Market activity has been limited to a

was achieved during the year, with £30 per sq

large degree by a lack of Grade A supply.

ft likely to be reached during 2009.

Industrial take-up in the North East has fallen

Meanwhile, speculative schemes scheduled

below previous figures, with reduced levels

to reach the market during 2009 are likely to

For further information, please contact:

of enquiries and transactions. Total supply

be well received given pent-up demand for

David Smith, Head of Scotland

currently stands at 14.1 million sq ft, of which

Grade A accommodation.

E: dsmith@lsh.co.uk

23 percent is new or refurbished. Prime

T: +44 (0)141 226 6777

industrial rents are in the region of £5.00 to £5.50 with Team Valley attracting the highest rents for Grade A industrial space at £6.00 per sq ft.

Leeds

For further information, please contact:

T

Darron Barker, Head of Newcastle

otal office take-up in Leeds city centre

E: dbarker@lsh.co.uk

for 2008 fell below the level achieved in

T: +44 (0)191 261 1300

2007, with 333,755 sq ft of transac-

tions recorded during the first three quarters of the year.

Northamptonshire and Rugby

N

orthampton was identified as one of

Meanwhile, lack of funding in capital markets

the best office locations in the UK by

and the contentious empty business rates

LSH research in 2008, due to its low

liability led to less speculative industrial

labour costs and the availability of good-

development, driving down land values.

quality space at competitive prices. For further information, please contact: In 2007, the Northampton office market

Ian Leather, Head of Northampton

witnessed strong activity, although demand

E: ileather@lsh.co.uk

slowed towards the end of the year. Take-up

T: +44 (0)1604 662550

was 200,970 sq ft but the majority of demand was for space of sub 10,000 sq ft. Take-up in 2008 is expected to be down on the previous 12 months, partly as a result of reduced demand, but also reduced levels of stock.

While total take-up in 2008 lower than the 592,639 sq ft transacted during 2007, the deficit will not be substantial. Larger transactions to date include the 37,000 sq ft let to Irwin Mitchell and 22,900 sq ft to Skipton Building Society. Although, the majority of deals concluded have been within the sub 5,000 sq ft market. Due to its inability to accommodate larger buildings, developers and, subsequently, occupiers are now favoring the south and west of Leeds city station over the traditional office core where the majority of new office buildings have been built, joining the likes of ASDA, Eversheds and Grant Thornton. For further information, please contact: Richard Wackett, Head of Leeds E: rwackett@lsh.co.uk T: +44 (0)113 245 9393

Lambert Smith Hampton / 11


Agenda / Issue Three / Q1 2009 / Trinity House

All in a

day’s work

A day in the life of an LSH Building Surveyor

Every once in a while an opportunity presents itself to cast your fears aside and rise to the challenge. Rarely does this happen between the hours of nine to five. However, LSH’s building surveyors recently had the daunting task of conducting valuation and condition surveys on 15 lighthouses along the choppy English coastline for Trinity House.

12 / Lambert Smith Hampton


Agenda / Issue Three / Q1 2009 / Trinity House

T

he last three months have seen LSH

“However, the fear really set in when I was

Trinity House is the official Lighthouse

building surveyors being transported

standing in my flight suit about to board

Authority for England and Wales. It is

by speedboat and helicopter, through

the helicopter that was to transport us to

responsible for the provision and maintenance

stormy seas and precarious conditions

Eddystone which is built on a very small rock

of navigational aids such as lighthouses, light

to inspect various lighthouses along the

11km out to sea. We were set down on an

vessels, buoys and maritime radio/satellite

coastline including The Needles, Hurst

unbelievably small helipad on the top of the

communication systems.

Point and Anvil Point. Tom Everington, LSH

lighthouse in a fairly stiff breeze with the waves

Building Consultancy, on his return from

crashing onto the rocks below – a metre off

Trinity House has three main functions:

surveying Eddystone Lighthouse, famous for

target either side and we would have been in

its appearance on BBC’s television adverts,

serious trouble!

“When LSH was awarded the Trinity House contract, I knew it would be an exciting opportunity to survey buildings that are highly unusual and demonstrate our skill and professionalism no matter where the building is located.

and Wales •

Providing aids to navigation

“The lighthouses were incredible; I was amazed at the detail that had gone into their planning and design. Everything is built with a curve to match the inside of the circular tower.

Serving as a charitable organisation

Even the cupboard doors are curved. They

Paul Lidgley, Valuation

joked: “Nothing’s impossible – we can survey anything anywhere.”

The care of all lighthouses in England

are generally in beautiful condition bearing in mind the harsh conditions which they

for mariners Trinity House maintains 71 lighthouses ranging from isolated rock towers like the Eddystone to mainland towers like Southwold lighthouse. For more information, please contact: Kevin Argent, Building Consultancy E: kargent@lsh.co.uk T: +44 (0)207 198 2138

E: plidgley@lsh.co.uk T: +44 (0)207 198 2183

operate”, said Tom.

Pictured: The Needles is a row of chalk formations rising off the Isle of Wight. The lighthouse has stood at the western end of the formation since 1859. Lambert Smith Hampton / 13


Agenda / Issue Three / Q1 2009 / Evolution of the Modern Workplace

Evolution of the modern workplace

The Government raises the bar With Chancellor Darling’s recent plans to increase public sector efficiency with the aim of saving over £30 billion, Martin Treacy, LSH Building Consultancy, looks at how the Government has responded by reviewing its efficiency, sustainability and workplace culture.

I

n recent years substantial pressure has

In addition to this, LSH’s Corporate Real

The Government has set strict guidelines

been put on the Government to review

Estate Matters research report highlights

and targets for its various departments and

the way in which it makes effective use

that the credit crunch has made cost-cutting

agencies to adhere to. They will be asked

of its workplaces. ‘The Lyons Review of

and better use of resources, both capital

to evaluate and report on their specific

Public Sector Relocation (March 2004)’,

and human, critical. Accommodation can

contribution to these targets, including

commissioned by The Chancellor of the

arguably be an obvious choice as it is the

assessing planned construction activity and

Exchequer and written by Sir Michael Lyons,

second highest cost to the business after

how suppliers are addressing sustainability.

examined the possibility of departments

staff. Furthermore, it represents a cost that is

With the likes of BREEAM, the most

relocating 20,000 civil service jobs from

identifiable and measurable. For a significant

commonly used means of reviewing the

London. This review, along with Sir Peter

proportion of companies property has

environmental performance of buildings, and

Gershon’s review of public sector efficiency,

traditionally been an operational rather than

has had a dramatic affect on property

a strategic issue. However, there is increasing

management strategies for Government

evidence that property is moving up the

departments and how they can effectively use

business agenda and becoming a strategic

both existing and future workspace.

resource issue, as pressures for delivering strategic objectives, improving output and

Hindered partly by the difficultly to reconfigure

reducing costs intensify.

its existing historic buildings, the Government initially reacted slower than the private sector

Creating sustainable workplaces

to trends which were encouraging openness,

Creating sustainable workplaces is high on

a less rigid hierarchy and a more flexible use

the Government’s Sustainable Development

of space in their workplaces. The relocation

Strategy agenda with key focuses on

of departments into the regions has opened

minimising waste and energy consumption

up opportunities to occupy more modern

and promoting renewable energy processes.

workplaces and a shift of responsibility to

The climate change bill, launched by the

individual departments to address their

Government in 2007, set a two stage target

workplaces has accelerated the pace of

to reduce the total UK’s carbon emissions,

change.

the first target of 20 per cent reduction by 2010, and then a second target of 60 per cent by 2050 which will incorporate the building fabric, finishes and furnishings as well as structural, mechanical and electrical issues.

14 / Lambert Smith Hampton


Agenda / Issue One / City Spotlight

Agenda / Issue Three / Q1 2009 / Evolution of the Modern Workplace

Part L of the building regulations demanding

Energy Performance Certificates which came

motivate staff into working harder and more

greater improvements in energy efficiency,

into effect in April are providing invaluable

effectively and attract a high calibre workforce

developers must now build to the highest

guidance to occupiers and developers seeking

in the future.

levels in order to achieve the ever looming

sustainable and energy efficient buildings. A team effort

carbon-zero building targets. Arezou Said, LSH Research, said: “Industry

In today’s Government, values such as

has warmed up to the sustainable building

openness and accountability, and issues

agenda, not because of an urge to save the

encompassing accessibility and corporate

planet but because it has begun to see the

social responsibility, are all top of its agenda.

benefits that these properties offer higher-

As part of the drive to achieve these values,

quality spaces and lower operating expenses.”

the Government will not only be assessing its own working practices but those of its

Creating flexible working environments

suppliers. Developers need to realise that they

As the Government reassesses its workplaces,

too need to get in line with these core values

it is seeking increased openness and

and work together with the Government to

communication, breaking down departmental

achieve its targets.

barriers and encouraging a more flexible working environment. Advances in technology

The establishment of the UK Green Building

have transformed the way the Government

Council has gone a long way towards

works, from the advent of the internet,

improving the sustainability of the built

to state of the art electronic data storage

environment, by transforming the way it is

replacing physical archiving and paperwork.

planned, designed, constructed, maintained

The impact is ultimately a more effective use

and operated.

of workspace. Government departments are annually Governments have begun to merge many of

reviewing their spend on construction and

their central services such as accounts, human

building assets to deliver improved efficiency

resources and procurement. A successful

and value for money. Developers and

example of this was carried out in 2006 by

construction firms need to offer ways to

Her Majesty’s Prison Service in Newport, South

help achieve these targets when designing

Wales, which combined offices and staff in

new workspaces or making effective use of

the region to improve efficiency and delivery

existing workspaces.

of services. As the above demonstrates, the Government is Creating the right image

the new catalyst for change. Now developers,

Government departments are realising that

property professionals, designers and the

the exterior of their buildings, seen as dull

construction industry must work with the

and unfriendly in the past, have reflected a

Government to roll out the same ethos and

negative image on the services they provide to

approach across the public and private sector.

the public. Ultimately a workplace which looks right, is in the best location, is sustainable and

For further information, please contact:

offers a better working environment is going

Martin Treacy, Building Consultancy

to encourage improved productivity and a

E: mtreacy@lsh.co.uk

more innovative and progressive service. It

T: +44 (0)20 7198 2000

also provides an environment more likely to

Lambert Smith Hampton / 15


Agenda / Issue Three / Q1 2009 / Cash Flows and Woes

Slowing tenant cash flows spell tricky times ahead for landlords and owners

Landlords faced with tenants defaulting on rental payments are obviously keen to retain their tenant to guarantee a steady flow of income as opposed to having an empty property and a liability for empty property rates. Chancellor Darling’s Pre Budget Report outlined extended relief on empty rates for

In this challenging economic climate,

commercial properties with the rateable

extracting timely rent payments on behalf

value of £15,000 or under will do very little

of clients is increasingly important. Figures

to ease the pressure for the majority of

collected by Lambert Smith Hampton (LSH)

landlords and owners should their tenants

suggest that, despite worst fears, tenants are

vacate their properties.

still managing to meet their rental obligations within an acceptable time limit to their landlords. This does not appear to be constrained to any particular industry and LSH is managing successful rent collections right across the industrial, retail, and office sector. What does the future hold? Unfortunately, due to an increasing number of businesses heading into administration or receivership, it is predicted that the worst is yet to come. LSH’s Corporate Real Estate Matters research report highlights that businesses are putting accommodation second only to staff as measurable cost and therefore a key area in which significant cost savings can be made. Shorter leases have increased in popularity and 25 percent of companies surveyed intended to consolidate their operations by relocating into one building. As the current economic uncertainty deepens, it is feared that many tenants may not have the financial means to pay their rent, and the ones who do, may become scared of letting go of their cash, especially in large quarterly amounts. Non-payment of rent is increasingly hitting the headlines and the repercussions associated with delays in receiving payments are potentially disastrous. More and more tenants are finding paying monthly is a more manageable option. LSH is reporting an increase in the number of tenants contacting us to see if their landlord will accept the next quarter payment on a monthly basis, with this continuing right through 2009.

16 / Lambert Smith Hampton

A tenant asking to pay rent monthly is an indication that they are anticipating financial difficulties, and therefore, the landlord has no guarantee that rent for the full quarter will be collected. Alan Christie, LSH Property Management, said: “In times of economic hardship, many tenants will seek to delay rental payments for as long as possible, believing that the money is better in their account earning interest than in our client’s. “Until we have a better idea of what is in store over the next 12 months for the economy and business markets, we will continue to adjust and adapt to an ever changing landlord and tenant market.” For further information, please contact: Alan Christie, Property Management E: achristie@lsh.co.uk T: +44 (0)115 950 1414


Agenda / Issue Three / Q1 2009 / Cash Flows and Woes

&

woes

Cash ows

In times of economic hardship, many tenants may seek to delay rental payments for as long as possible, believing that the money is better in their account earning interest than in their landlord’s. Alan Christie Property Management Lambert Smith Hampton

Lambert Smith Hampton / 17


Agenda / Issue Three / Q1 2009 / City Spotlight

Glasgow, once known as the Second City of the Empire, was made famous across the world for its shipbuilding, and at the height of its powers was a flourishing trading centre between the Caribbean, Europe and the Far East. This brought wealth and an international outlook and the city owes much of its architectural heritage to this time. The decline in these industries brought a grim reputation but today it is a city transformed by new modern industries and a growing, confident population.

Modern Glasgow Flourishing in a new era

G

lasgow is attractive to domestic and inward investors alike and its diversified economy makes it well

placed to weather the ongoing economic storm. Financial services giants such as JP Morgan, Morgan Stanley, Barclays and BNP Paribas have invested in the city, and a boom in the creative industries has been exemplified in the creation of the Digital Media Quarter in what is believed to be among Europe’s most sophisticated broadcasting facilities. Alongside the glass and steel of new office blocks, there is an equal focus on residential, commercial, leisure and educational facilities bringing new life and a new buzz to the city. These credentials will be enhanced even further following the recent announcement of plans by Jumeirah, the Dubai-based luxury

David Smith, Head of Glasgow office, said:

hotel group, to operate a new five-star super

“Lambert Smith Hampton’s 25 year presence

deluxe hotel in the city.

in Glasgow reflects the city’s reinvention. A

A major highlight of Glasgow for visitors and locals alike is the outstanding quality of its retail offerings. Led by Buchanan Street, Glasgow is ranked an amazing second behind London’s West End in the annual retail vitality index, regularly attracting new openings by international retailers. Cementing its growing reputation as a first class destination for visitors; the city was recently named as one of the top 10 cities in the world by Lonely Planet, a leading travel guide, which described it as ‘a fun, stylish city’. There is much still to be achieved, and

Investment in the city is continuing with the successful bid for the Commonwealth Games in 2014, sparking further infrastructure improvements. David Smith Head of Glasgow Lambert Smith Hampton

investment in Glasgow is continuing with

bedrock of consultancy services including valuation, building consultancy and property management, has expanded into full transactional services, including investment, development and office agency. This breadth of expertise has allowed the company to expand its presence and provide best advice in all market conditions. “Glasgow and LSH’s biggest asset is undoubtedly its people who have a naturally positive outlook and brashness that, along with their football teams, make them recognisable the world over. The city and LSH remains confident in its future.” For further information, please contact:

the successful bid for the Commonwealth

David Smith, Head of Glasgow

Games in 2014, sparking further

Visit www.lsh.co.uk to access the latest

E: dsmith@lsh.co.uk

infrastructure improvements.

LSH Glasgow market report.

T: +44 (0)141 226 6777

18 / Lambert Smith Hampton


Agenda / Issue Three / Q1 2009 / City Spotlight

Glasgow: the facts Glasgow is Scotland’s largest urban economy, generating over £13 billion Gross Value Added each year. One of the UK’s fastest growing cities: over the past decade the number of jobs has grown to more than 400,000: an increase of more than 60,000. Almost 2.2 million people live within a 45-minute drive of the city centre, thanks to the high-quality nature of the road network. The result is that Glasgow has an extensive employment catchment area, more highly skilled than many of those in Britain’s other key cities. Census evidence now suggests that the population of Glasgow is more highly qualified than Great Britain’s population as a whole. The repositioning of Glasgow has been widely attributed to the competitive advantages it holds in terms of the availability of high-quality, available staff, particularly in the 20-29 year-old category, and its high percentage of graduate residents.

Pictured: Looking to the roof in Glasgow’s Botanic Gardens, known internationally for its impressive glass houses and extensive tropical and temperate plant collections from around the world. Lambert Smith Hampton / 19


Agenda / Issue Three / Q1 2009 / Public Sector

Times are changing With the Government’s continued drive to improve efficiency, enhance service delivery and achieve cost savings within the public sector, April 2009 heralds the introduction of a new performance assessment for local government and its strategic partners.

T

he Comprehensive Area Assessment

and 63 percent of our survey group believed

potential rationalisation, consolidation and

(CAA) will replace the Comprehensive

that property could provide significant

lease management as well as unlocking latent

Perfomance Assessment (CPA) from

opportunity in helping them meet their

value from property declared unfit for purpose

strategic objectives.

and surplus to requirements.

fire, health and care services deliver better

CAA should also lead to and facilitate more

As a national provider of property advisory

outcomes in improving the quality of life for

sharing of accommodation (both back-office

services to the public and private sectors

local communities.

and public-facing) with local partners, third

LSH has a proven capability in helping clients

party organisations and even the private

achieve their strategic objectives.

April 2009 and will focus on how well councils and local partners such as police,

LSH recently conducted a survey of councils

sector. This may extend to the increased

across the UK to enquire how councils

utilisation of accommodation through the

LSH will be hosting a series of seminars over

perceive the CAA and whether they believed

day and evenings for a variety of uses. There

the coming months to discuss the survey’s

property and strategic asset management

will also be a greater need for flexibility in

findings and work with organisations to

could play a key role in helping them achieve

workspace design and working practices.

successfully address the requirements of CAA.

Undoubtedly, meeting the requirements

To find out more about the survey please

of CAA will require a revised approach to

contact, please contact :

Encouragingly, the survey highlighted that

property asset management to ensure that

Ian Howarth, National Business

the way property is perceived within local

the use of public sector assets are maximised

E: ihowarth@lsh.co.uk

government is changing. Its profile is rising

to enhance service performance through

T: +44 (0)207 198 2050

a good assessment. The overwhelming answer was ‘yes’!

20 / Lambert Smith Hampton


Agenda / Issue Three / Q1 2009 / LSH: The History

History repeats. We’re planning on it! As Lambert Smith Hampton (LSH) enters its 236th year, surveying’s fifth oldest firm looks back on its long history to draw on lessons learnt as it commences 2009 facing a deep recession, the likes not seen for 80 years.

F

LSH has since weathered many economic and

After completing a management buy-out

political storms. The firm has grown through

from then owners WS Atkins in June 2007,

a history of mergers and acquisitions. Its

LSH is planning on history repeating itself;

constituent parts have been known under

responsibly managing existing operational

many different guises, including; Herring

costs to support cash flow in order to deliver

Baker Harris, Connell Wilson, Lambert Smith

investment in key growth areas of its national

& Partners, Anthony Brown Stewart and

service lines.

Hampton & Sons. Ironically, when looking through the rear view

ounded in 1773 by Robert Herring in

mirror, LSH experienced its largest periods of

its earliest incarnation, LSH posted its

growth through M&A during the 1970s and

first sale on 1 April that year, which

1990s recessions. The firm’s business model

was published in the London Daily Advertiser.

of consultancy strength, domestic focus and

By 1852, the firm was describing itself

geographical spread bode well in times of

as auctioneers, estate agents, surveyors,

economic difficulty, when the transactional

upholsterers and decorators.

markets dipped.

With a business spanning four centuries of operation, 2009 will still no doubt hold its challenges but LSH has a wealth of experience and success to draw on and emerge stronger and more client focused than ever before. MBE Honours Congratulations to long term LSH employee, Charles Partridge, on the honour of receiving an MBE in the 2009 New Year Honours List for service to the surveying industry. Charles, LSH Rating, has worked for the firm for over 40 years – a sixth of its history! Reflecting on his time at the firm, Charles commented: “Little did I realise when I walked through the front door of 23 St James Square to join Herring Daw & Manners on 1 September 1970 that nearly 40 years later it would have evolved from a business with 60 staff in three offices to one employing nearly 1,000 people in 28 offices across the UK and Ireland. “The calculator had not made its presence felt in surveyors’ offices, we would not see a computer for another 10 years and I was warned that brown shoes were only worn by West End surveyors on a Saturday!” How times have changed. Pictured: VE Day 1945. The site of Herring Son & Daw’s City office, ‘vacated’ during an air raid in 1941.

Lambert Smith Hampton / 21


Agenda / Issue Three / Q1 2009 / Sport2Business

Bringing the winning drive to business The extraordinary success of Team GB in the Beijing Olympics transformed the nation’s expectations for the British athletes lined up for London 2012. The sacrifice our sporting heroes make is great, considering their relatively short careers and the lurking demon of injury which could finish a career at any time.

Marion explained: “Participating in a

T

which suit different people. On the job training

he growing concern of ‘what’s next?’ is an issue very close to the heart of Guy Gregory, LSH Commercial Director, who

played top level rugby for London Wasps for

competitive sport and pursuing a career takes a bit of juggling; I would often have an early morning outing on the River Thames at 6.30am, off the water by 8.00am and into Oxford Street by 9.30am, at least three or four days a week.” James Brierley is the ex-Captain of the GB Junior Athletics Team and now a successful senior surveyor at LSH. He said: “I think unlike being a doctor or a lawyer, there are a multitude of jobs within the property industry and the day-to-day variance makes the job interesting and fulfilling. It is an exciting industry which respects and encourages

many years.

athletes and welcomes individual success.”

Guy said: “There are advantages of making the

LSH is currently working with Sport2Business,

transition from sport to business if you consider what makes a great athlete. Determination, self-drive, goal orientation, team leadership; none of these would look out of place on the CV of a prospective employee.” Marion Murphy, LSH National Business, has been involved in rowing both as a cox for men’s crews and a competitive rower since school. 22 / Lambert Smith Hampton

Determination, self-drive, goal orientation, team leadership; none of these would look out of place on the CV of a prospective employee. Guy Gregory

which is a career management company for

Commercial Director Lambert Smith Hampton

elite competitors. It provides a recruitment

can often bring with them good networks

channel helping retiring athletes address their

of contacts from their professional playing

future welfare concerns.

days, including team mates, opponents and sponsors.”

Property and surveying are attractive areas for sports people in particular as they focus

For further information, please contact:

on team work and goal setting. Guy said:

Guy Gregory, Commercial Director

“Relationship building is incredibly important

E: ggregory@lsh.co.uk

in the property industry, and sports people

T: +44 (0)20 7198 2198


Agenda / Issue Three / Q1 2009 / Feature Property

250 Capability Green , Luton - One of the country’s premier business park locations For viewing and further information, please contact: Paul Jessop E: pjessop@lsh.co.uk T: +44 (0)1582 450444

Lambert Smith Hampton / 23


Our National Office Network Birmingham Tel: +44 (0)121 236 2066

Maidenhead Tel: +44 (0)1628 676001

Reading Tel: +44 (0)118 959 8855

Bristol Tel: +44 (0)117 926 6666

Manchester Tel: +44 (0)161 228 6411

St Albans Tel: +44 (0)1727 834234

Cambridge Tel: +44 (0)1223 276336

Milton Keynes Tel: +44 (0)1908 604630

Sheffield Tel: +44 (0)114 275 3752

Cardiff Tel: +44 (0)29 2049 0499

Newcastle upon Tyne Tel: +44 (0)191 261 1300

Southampton Tel: +44 (0)23 8033 0041

Chelmsford Tel: +44 (0)1245 215521

Northampton Tel: +44 (0)1604 662550

Swansea Tel: +44 (0)1792 702800

Dublin Tel: +353 (0)1 676 0331 www.lsh.ie

Northampton Building Consultancy Tel: +44 (0)1604 664366

Edinburgh Tel: +44 (0)131 226 0333

Nottingham Tel: +44 (0)115 950 1414

Fareham Tel: +44 (0)1489 579579

Oxford Tel: +44 (0)1865 200244

Glasgow Tel: +44 (0)141 226 6777

Peterborough Tel: +44 (0)1733 563921

Guildford Tel: +44 (0)1483 538181 Leeds Tel: +44 (0)113 245 9393 Leicester Tel: +44 (0)116 255 2694 London Tel: +44 (0)20 7198 2000 Luton Tel: +44 (0)1582 450444

XX%

National Property Advisers of the Year 2008

www.lsh.co.uk


Lambert Smith Hampton Agenda - Issue Three