The workplace revolution hasn’t been kind to business parks: isolated, lacking shops, restaurants and big city amenities, out-of-town office locations have suffered. Until now. David Thame reports on the return to fashion of the campus office.
Nothing dates more quickly than the future. No part of the property business has suffered more grievously from this piece of wisdom than the business park. Inspired by the low-rise campus style office parks of Southern California, the business park made its first tentative appearances in the UK in the 1980s. Two-storey pavilions dotted among trees and car parking were – everyone agreed – the absolutely guaranteed future of office space. At a time when city centres were dirty danger zones, most office occupiers could not wait to escape – and who would disagree?
Pioneers like the Birmingham Business Park (opened in 1988) and Bristol’s Aztec West (opened in 1989) prospered in the hectic ups-and-downs of the 1990s. They felt modern, clean, streamlined – just what was needed in the age of the desktop PC and the fax machine. Their motorway-friendly locations ensured a steady flow of companies who valued their cars.
Business parks entered the new millennium as a regular and respected feature of a diversified office scene.
And then it all went wrong. Since the 2008 crash, business parks have suffered badly, with rents tumbling and new development ceasing. Suddenly what mattered was not car parking, but amenities. The very things that made business parks appealing – distance from the town centre and their amenities – were suddenly a huge disadvantage. The story of the last 10 years has been how to put this right.
Rob Pearson, Head of Office Agency at Savills in London, is closely involved with the massive Thames Valley business park market, stretching from Oxford Properties’ Chiswick Business Park out to distant Reading.
Rob explains: ‘Business parks are catching up on amenities. Places like Chiswick have pioneered a new approach about bringing tenants together, creating a community into which tenants want to plug their HR departments – because recruiting and retaining staff is what it’s all about.’
Chiswick has its #enjoywork programme, whilst Reading’s Green Park has also moved rapidly towards more amenity – and Thames Valley parks with amenity are able to nudge rents up to match town-centre rents in the mid-to-late £30 per sq ft.
The difficulty is that much business park floorspace – built in the 1980s and 1990s – is now nearing the end of its expected commercial lifespan. With rents now bobbing up, refurbishment has begun to seem like an appealing option to many landlords who hope fresher-looking buildings will help retain tenants and differentiate their product from that of local rivals.
Yorkshire’s business park market – whose ‘big hitters’ include the likes of White Rose and Thorpe Park – shows the extent of the turnaround.
Ross Firth, Associate in Cushman & Wakefield’s Office Agency team in Leeds, says the business park scene has recovered sharply after 10 years of decline.
‘It’s been a fantastic quarter for the out of town market,’ he says of the spring quarter 2018, for which data has just been published. ‘We saw take up figures of c.167,000 sq ft. This is some 22,000 sq ft more than the c.145,000 sq ft city-centre take-up in Leeds, and means half-year out-of-town take-up is around 250,000 sq ft. If you add deals now in solicitors hands out of town, take up should well surpass the 10 year average of 307,539 sq ft at year end.’
Extra amenities – White Rose, near Junction 1 of the M621 motorway, will soon have its own railway station – have added to the momentum. Rents there are £20.50 per sq ft. Thorpe Park, close to Junction 46 of the M1 motorway, is getting a 323,000 sq ft retail and leisure scheme and it too will get a railway halt.
Eamon Fox, Partner at Knight Frank in Leeds, is watching with interest.
‘Demand has grown notably in the last year. Take-up for business parks is back to pre-recession levels, he says. ‘Business parks like White Rose and Thorpe Park, which have embraced connectivity, will do well.’
Business parks are catching up on amenities. Places like Chiswick have pioneered a new approach…
Refurbishment is now in prospect at both parks. ‘You’d have laughed at that idea two or three years ago,’ Eamon confides.
Rents are – just about – sufficient to justify developer activity. ‘Existing stock is rented at £18-19 per sq ft, but for new build you need it to be £22-23 per sq ft. I think occupiers realise they will have to stomach raises in rents, but they will if they think the new floorspace can deliver the experience and the efficiency they want – whether that is zen rooms or yoga studios or whatever – because their main focus is not on the rent, but on recruiting and retaining staff.’
The mood is similar around Birmingham’s major business parks, says GVA director Adrian Griffith. Demand from the auto sector, professionals and the gaming industry have helped eat away at the supply and push rents up from lows of £10-12 per sq ft, up to more respectable £18-19.50 per sq ft. At the same time, the rent-free periods on offer to tenants have shrunk from 24 months to just six. Memories of the 30-40% slide in rents during the last decade are now – thankfully, in the opinion of landlords – beginning to fade.
‘Vacancy levels are improving, which is helping to push up rents. We’re now seeing vacancy rates on business parks of about 8% – that compares with 25% in 2012.’ Adrian reveals.
The result is refurbishment at the Birmingham Business Park and a rash of new building at IM Properties’ Blythe Valley site in Solihull.
‘The kind of refurbishment we’re seeing isn’t just ‘tarting up’ the reception area – this is taking the building back and starting again. And that has started to drive rents. We’re looking at £25 per sq ft at Blythe Valley,’ says Adrian, who predicts ‘serious’ refurbishment is going to be the rule in the better West Midlands business parks.
‘We’ve got about 100,000 sq ft of refurbishment in the pipeline in the M42 corridor. With business parks still renting at a discount to Birmingham city centre – £34 per sq ft in prime city-centre space, knock £10 per sq ft off for the business parks – the gap is narrowing but the business parks remain appealingly good value.
‘We’ve recently had several occupiers take a look at both city-centre and out-of-town for requirements in the 10-30,000 sq ft bracket,’ Adrian concludes.