Derby could be 'flooded with grade B offices'
Derby's pressurised property sector may "be flooded with grade B" sites following the revamping of the city’s council offices, experts from Innes England have told Insider.
In a presentation of the agency's report on the state of the East Midlands property market, director Nick Hosking yesterday said the £34m project could mean the city council consolidating 2,000 staff from offices across Derby into the revamped Council House, "which will flood the market with lots of grade-B space".
Hosking later told Insider that the move, planned for late November 2012, could bring some 150,000 sq ft of grade-B space onto the market, two-thirds of it in three buildings at Heritage Gate.
He added: "We need good grade-A space in Derby. A lot of this grade-B stuff is 1970s' vintage, with no aircon or suspended ceilings. All it really has going for it is a lot of parking spaces.
"However, having said that, it may be of some good to Derby: there's a dire lack of any space in the city centre, and bringing a lot onto the market may retain and even bring back some of the footloose-and-fancy-free businesses that have been forced instead to look at offices in Nottingham."
The presentation, to an audience of business leaders at the Quad arts centre, revealed that during 2011 Derby suffered one its worst office markets for years, with total take-up at just 199,000 sq ft, compared with 227,000 in 2008. Last year's total would have been even lower, 131,000, had it not been for the 68,000 sq ft letting to Hero TSC in the dying days of 2011.
Take-up and confidence in city's office market took a serious dive during the middle of 2011 with a wave of closure and redundancy announcements from employers like Bombardier, the Valuation Office and Royal Mail.
Innes England's report noted that, although the availability of office space in Derby – which has a dire shortage of good offices - had risen during 2011 to 592,000 sq ft, most of that was poor quality. Indeed, poor quality space now accounted for 60 per cent of Derby's empty offices.
The problem was that massive Pride Park project had been such a success that there had been no new office development in the city core for two decades, even though almost every office building in the city core was now full.
"It's been a Catch-22 situation," added Hosking. "Developers need tenants to sign up before building something out of the ground, while banks aren't prepared to lend until an occupant is signed up."
Construction started late last year on Friar Gate Square, the first grade A development in central Derby, for two decades. Hosking said the success of the project, supported with £10m funding from the city council, in attracting a major local occupant, would be a test as to whether other developers would be ready to follow suit.
