WHAT ARE THE BIG OPPORTUNITIES FOR COMMERCIAL REAL ESTATE ACROSS THE REGION?

Property experts o er a snapshot perspective from their area

Keeping pace with Oxfordshire’s fast-moving knowledge economy

David Williams

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Despite Covid-19, the challenge for Oxfordshire’s commercial real estate is simply to keep pace with the county’s fast-moving knowledge economy. Bidwells’ market data reveals that office and lab take-up during 2020 was 36 per cent ahead of 2019 and remarkably 12 per cent above the 10-year average trend level, with prime rent up by 40 per cent over the past three years.

With Oxford University Innovation reporting that more than £1 billion of inward investment was raised during 2020 by companies emerging from the university, it’s easy to see the driver behind the demand for commercial real estate from the science and tech sector.

The past five years have seen a gear change in the creation and scale up of these companies, and projections for the next five years are even more exciting.

Oxford has been in the international spotlight thanks to the Oxford/ AstraZeneca vaccine, and yet again in January when chemical giant INEOS announced a £100 million donation for antimicrobial research.

The immediate demand for high-tech lab space is being served by re-purposing existing office and industrial stock, which has soaked up supply and triggered rental growth. There still remains a significant shortfall in lab space around Oxford as well as offices and labs in the city centre. This supply/demand imbalance has resulted in significant capital and rental growth for those fortunate asset owners around Oxford, and a lack of stock for those investors looking to enter the market.

The great news for Oxfordshire is that development is happening – at scale. The biggest opportunities exist for the new science and technology developments delivered in the next three to five years; Harwell Campus; Oxford Business Park; Oxford Science Park, Oxford Technology Park, Milton Park, Catalyst Bicester, Oxford North, Westcott Venture Park, Begbroke Science Park and others will all add millions of square feet.

Moreover, the stable of national research facilities notably at Harwell, Culham, Westcott Venture Park and Oxford’s Headington quarter are all driving innovation and scientific endeavour through the triple helix of academic, business and public sector interaction.

These have world-class research and business clusters across life sciences and healthtec, AI/data, energy and fusion, space, engineering and environmental sciences.

Oxford’s real game changer will come with a new urban innovation district in the West End regeneration, with the hugely successful Jam Factory building development marking the start in 2020.

There’s more to life than a long commute

Philip Campbell

Commercial Director at Milton Park near Abingdon, Owned by MEPC.

I have been lucky enough to live and work in Oxfordshire for 25 years. It’s a diverse county of many strengths culturally, historically, economically, academically, scientifically and geographically.

I often think about people I know who are fortunate enough to live in Oxfordshire but travel daily to London, and how in the last year they may have realised there’s more to life than a long commute.

The University of Oxford has retained its first-place position in the World University Rankings for the last five years and the Oxford/AstraZeneca vaccine has certainly put Oxford and Oxfordshire in the limelight globally.

If we are looking for chinks of light from this pandemic, these amazing achievements give Oxfordshire a platform we didn’t have before.

And in my view, the eye-watering economic and social impacts of the pandemic can only serve to reinforce the need for greater investment in healthcare and research. With its newly elevated global status, Oxfordshire is well placed to capitalise on this.

We are sure that Oxford’s global elevation will help our commercial real estate peers, and Milton Park achieve its 2040 Vision, our masterplan to sustainably grow from 9,000 employees to 20,000, alongside investment in travel initiatives to reduce reliance on the car as a mode of transport.

It’s not just about the global platform though. At the other of end of the scale, I believe we will see a shift to more people wanting to work locally. We are seeing a growing number of enquiries for satellite space outside the big cities – for those that want connectivity – physical face-to-face interaction and green open space.

People are looking for a separate workplace outside their home, a place that offers flexibility and accessibility by car, cycle and public transport from home and the big cities. quality commercial estates for office, warehouse or industrial space. The most prevalent of developments is at Gloucestershire Airport in Staverton –a new 5.9-hectare business park will provide 30,000 sq metres of commercial and industrial floor space.

As we ‘think global and work local’, watch this space for an exciting project coming forward at Milton Park in 2021.

Despite the impact of Covid-19, Gloucestershire remains an innovative location actively adapting to new demands.

With retail in town and city centres closing as e-commerce grows, this space is ripe for redevelopment, and investors are buying into opportunities to reinvigorate redundant upper floors into apartments for young professionals. Bruton Knowles is currently marketing multiple city centre-based properties with the opportunity to be redeveloped into flats.

But no-one wants Gloucester to become a dormitory, so the city council is investing in the redevelopment of King’s Walk, King’s Quarter, the Railway Station and the High Street Heritage

Action Zone in Westgate to provide modern, high spec office, retail and leisure facilities as a juxtaposition to Cheltenham’s Regency grandeur.

Bruton Knowles is working with Reef Group to market offices which form part of The Forum, to be made up of new homes, co-working and office space, leisure, retail, food and beverage.

Across the county we have seen an increase in speculative industrial development, with businesses looking for good quality industrial units to take advantage of the opportunities presented by Brexit and the Covid pandemic. Growth in this sector has been stymied by the historic shortage of industrial space across the region.

Examples include commercial development land at Junction 12 of the M5, providing much-needed development opportunities on this key growth corridor, along with Kingsditch Trade Park in Cheltenham, offering

Cheltenham’s planned cyber park development is set to transform the town, and even more so following the selection of a development partner which will be announced soon.

Alongside this is the £1 million investment into the Innovation Centre at Gloucestershire College’s Cheltenham campus.

Gloucestershire is pioneering the trend towards green technology, with one example being its shift to becoming a circular economy, opening doors to innovative, practical solutions to build or repurpose real estate to become more sustainable.

This trend continues into office space, as areas become condensed for hybrid use. Many businesses are downsizing, looking for spaces they can use collaboratively. The focus is on high quality space that reflects a company’s culture and ethics. Rather than use expensive space for administration purposes, companies seek spaces which will promote creativity and innovation.

Bristol’s historic shortage of o ce and logistic space has cushioned the Covid-19 blow

Simon Price Partner at Alder King

The industrial and logistics market recorded an annual take-up of more than 6.3 million sq ft in the South West last year – the highest figure since 2016. This was driven by continuing demand from e-commerce, government investment in infrastructure and last mile logistics.

Bristol’s industrial and office market are competing with the residential development market for sites. The city needs to safeguard more employment land.

At the start of the pandemic, some office occupiers’ knee-jerk reaction was that they didn’t need offices, but we have absolutely seen a change in that view. Offices play an important role in a business community and the majority of office workers want to return, albeit more flexibly. While it is likely that businesses will require 10-20 per cent less space, landlords may need to invest in higher spec buildings to attract quality tenants, such as enhanced ventilation/ air conditioning and wider wellness elements of office occupation.

Total take-up of office space across Bristol in 2020 was 764,000 sq ft, compared to 939,000 sq ft in 2019. In the city centre itself, take up in 2020 was 506,000 sq ft, compared to 693,000 sq ft the previous year, so last year’s performance was better than expected, and we saw a rebound in the last quarter of last year. Against a backdrop of a shortage of office supply in the city, there is pent-up demand.

On the high street, the issue is how to repurpose redundant retail. We are also seeing interest in converting out of town retail into residential and have seen a number of mixed-use proposals.

The future is likely to be a mix of residential, co-working, healthcare and community services in former retail dominated high streets. Businesses want the civic amenities and public transport access which high streets offer. There has also been a big uplift in enquiries from training and healthrelated businesses, all of these create activity in previously purely retail spaces.

The other big retail trend is the growth in importance of independents, but much more co-operation will be needed between retailer and landlord if these smaller businesses are going to fill the void. We are seeing more turnover deals being done, but it will take time.

While the overall situation remains unsettled, we feel optimistic for a sustained bounce-back in most sectors of the market beginning in the second quarter of 2021.

Government backs Swindon’s bus boulevard scheme to transform Fleming Way

Swindon has been awarded £25 million from the government’s Future High Streets fund, to help pave the way for a new bus interchange and gateway into the town centre.

The proposed Bus Boulevard scheme will see Fleming Way transformed to include a new public open space on the north side with a green central spine to increase biodiversity.

The scheme will also feature muchimproved pedestrian and cycle routes and the removal of the current Fleming Way underpass creating an attractive route from the train station into the town centre, encouraging further investment in the area.

Work on the Bus Boulevard scheme is expected to start next winter. Over the next 12 months, a temporary bus station will be created within the Kimmerfields site and the multi-storey car park off Fleming Way will be demolished as part of the wider overall plans.

Central London occupiers “hub and spoke” strategy drives demand in Thames Valley Guy Parkes

Partner, Vail Williams

There is a trend towards a “hub and spoke” strategy whereby larger companies in central London are retaining a smaller office base in the city and opening regional satellite offices in places like the Thames Valley, attracted by the amenities on offer here, as well as the transport connectivity and financial benefits.

This will boost demand in the Thames Valley – particularly for high

Rise of pandemic-driven online retailing boosts Midlands real estate activity

Ben Truslove

Joint managing director of Warwickshire and Worcestershire surveyors and valuers John Truslove

During 2020 and into 2021, the majority of this region’s activity has been in the industrial sector.

We are even seeing speculative developments, with EDR Developments acquiring a site at 35 Enfield Industrial Estate for further industrial units to build on the company’s disposal in 2020 of Royal Enfield Industrial Estate.

quality space. However the availability of new, high-quality office space remains constrained, which is stimulating prime rental growth in places like Reading, Bracknell and Slough.

Bracknell in particular is experiencing an office revival, owing to the town’s reputation as the UK’s Silicon Valley, with a talent pool to match and a dominant ITC sector, one of the few to experience growth during the pandemic.

Reading also has this attraction with Pexip, a video conferencing rival to Zoom taking 15,000 sq ft at Thames Valley Park, Reading.

Although rents have risen in Maidenhead, the town has an oversupply of office space. Grade A stock is holding up so far, but Grade B space rental values are declining.

We have also seen an increase in demand for serviced office space as a stop gap option for some occupiers.

There is a lack of new build logistics warehouse units coming to market across the Thames Valley which are larger than 100,000 sq ft, but demand is there. This represents an opportunity for those willing to invest in a speculative scheme here.

In terms of retail, a more rapid transition to e-tailing will reduce the physical presence and size of stores on the high street and we are looking at repurposing these surplus assets. Some are suitable for residential conversion or health and leisure use, and the larger department stores a combination of offices, and in some cases last mile sorting and distribution depots.

John

The driver for much of the activity is the huge increase in online business brought on by the Covid-19 pandemic and successive lockdowns.

Online logistics is the fastest growing services sector. The Worcestershire and Warwickshire area, with its excellent national motorway connections, is ideal for retailers and manufacturers who need fast access to their markets. We are seeing phenomenal demand for any presentable industrial unit that comes on the market.

In other sectors I am less optimistic. While I’m firmly behind the Shop Local campaign, the High Street is feeling more like a lost cause, unless you have a really good business proposition and offer a product, service or specialism in very strong demand.

For day-to-day needs, while we will shop locally for something to do on our daily walk, grocery shopping is easy to do from the sofa, thanks to the massive growth in online deliveries which is the driving factor.

In the office sector we are still seeing good demand and the beginning of a trickle away from the cities. We have already done a number of lettings to office occupiers leaving Birmingham, but I would not categorise it as a tidal wave.

When furlough ends, and leases gradually start to run out, I think we could see a seismic shift in office space requirements in inner cities, but for this area, I believe this is still some way down the line.