Out-of-town developments do well in a downturn because the space they offer comes cheaper than city centre sites. David Thame reports.
Bosses at Gloucester’s All Fleet Services had a simple choice. Would they go for sparkly new offices – or larger, old and cheaper ones? They chose the latter. All Fleet, which has signed up for British Telecom’s former offices at the Olympus Park Business Centre in Quedgeley, Gloucester, is typical of today’s business park tenants.
That’s because recessions are good for business parks.
The benefits
With cheaper rents than town and city centres, cheaper parking and a wider choice, occupiers have plenty of reasons to choose to go out of town. And there are social reasons, too. During the boom years managing directors want to be as conspicuous as possible – close to the banks, close to big clients and close to the best restaurants.
But in the recession they realise they will be spending a lot less time lunching and begin to appreciate the benefits of a lower-profile existence. The appeal of city centre locations tends to drop and the business parks they once scorned for being isolated and too quiet seem like havens of peace and security.
All Fleet, which is moving from Ampney House at Green Farm Business Park, Quedgely, looked at four properties. Managing director Dave Scobie says: “We visited three modern business parks and one older one – the sizes ranged between 7,500 sq ft and 15,000 sq ft. We chose an older location based on price and layout. It was the right size to fit our growth plan to expand up to 150 operators in the next three years.”
All Fleet, which specialises in contract cars, is taking 7,520 sq ft at Olympus Park Business Centre on a passing rental of £83,281 a year. The sub-lease runs until December 2012. Ben O’Connor at GVA Grimley represented the head tenant, British Telecommunications. He says: “This was a late 1980s building but just across the road from their current location, which All Fleet. So it was ideal and we offered a very competitive deal. The difficulty is that the gravitational pull of the Gloucester Business Park is so great that it is hard work to let properties elsewhere. Gloucester Business Park soaks up so much demand in the town.”
In the All Fleet deal, Keningtons represented the landlord, The House Ltd, and John Ryde Commercial represented All Fleet Services. Developers at work on new business park space hope occupiers like All Fleet won’t be scarce.
New developments
Shepherd Development’s has just completed building work on the first phase of a speculative office park development at Emersons Green, off the A4174, adjacent to the M4 motorway eight miles to the north east of Bristol city centre.
Harlequin Business Park will eventually total 136,000 sq ft, but the first phase is 54,177 sq ft in three buildings, each of which could be let whole or floor- by-floor. While joint agents DTZ and King Sturge are quoting rents of £22.50 per sq ft, Shepherd makes it clear it is prepared to be flexible.
Nick Child, director at Shepherd, says: “The decision to build was taken some time ago in a different climate. Fortunately, things aren’t as bad in the South West’s out-of-town office market as they are elsewhere in the UK.” Child is aware that all landlords need to be flexible on their pricing: “The quoting rent is just that – a quoting rent. We know not many deals have been done and we’re here to talk. There isn’t a huge oversupply of office space and enquiries seem to be rising.”
The good news is that business parks make more sense for cash-strapped occupiers. But the social reasons for choosing business parks are also high in his clients’ minds. “During recessions business leaders aren’t spending so much time mixing with people in town,” he adds: “They are concentrating on getting down to business rather than getting down to lunch. And in that context a move to an out-of-town business park makes sense.”
If Child is right, talks with at least one potential occupier – an 11,000 sq ft deal is said to be in prospect – could end happily. Developers that aren’t already committed to speculative development are naturally more cautious about the appeal of out-of-town business parks in a recession.
Earlier this year, Midlands developer St Modwen acquired a 22-acre site in Clevedon. The site will, one day, be transformed into a 330,000 sq ft business park. Located off Kenn Road, within two miles of junction 20 of the M5, the park will provide a mix of 100,000 sq ft of offices and 230,000 sq ft of industrial space.
St Modwen’s plan is to begin work on infrastructure at some point in 2010 while looking out for design-and-build opportunities. Philip Morton, director with DTZ in Bristol, says: “Now is the time for business park landlords. Occupiers are looking for the best possible value, and business parks offer new highly-specified space at a considerable discount on the city centre alternatives.
“During the recession of the early 1990s we witnessed many occupiers migrating from the city centre to the Bristol business parks, and if history is any guide this will happen again. The result could be that the out-of-town market bounces back much more quickly than the city centre market.”
Morton calculates that 150,000 sq ft of newly-built out-of-town office space is available on business parks around Bristol. But with take-up this year likely to reach 125,000 sq ft, he speculates that it will not be long before developers like St Modwen decide to launch speculative developments.
Business parks have always appealed to some occupiers – but with recession still biting, their appeal is now wider than ever.
A full version of this article appeared in the November 2009 edition of South West Business Insider. To subscribe, visit our online Shop .
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