London Development in Focus

We know that the London commercial development market is struggling in the current economic climate.  The perception of scarcity in significant development opportunity, particularly for office & mixed use, has skewed the marketplace.  Difficult for most, but for those funds that are holding big cash reserves opportunity knocks.

Sovereign wealth funds, private equity firms and UK REITs are lining up to pick off those opportunities that come along, in readiness for a hoped for upturn in demand once completed.  The opportunities to acquire significant development sites are, however, scarce. Battersea Power Station was hanging around derelict and in abeyance for years, before becoming the subject of a tussle between half a dozen companies, all after the rights to spend billions redeveloping the landmark site.  The Malaysian consortium led by SP Setia & Sime Darby will commence the £8 billion scheme next year.

The Qatari state has invested over £20 billion in London in recent years, confirming the confidence they have professed in the London market.  Of note is Qatar’s 95% ownership of the Shard, London’s newest, tallest and brightest tower.  Amongst future schemes Qatar will participate in the redevelopment of  most of the Royal Dutch Shell Plc complex near Waterloo station in a venture with Canary Wharf Group.  The Qatari Prime Minister Sheikh Hamad Bin Jasim Bin Jabr al-Thani has said that “There are a lot of things in the pipeline”

Further developments will come on stream over time, including Brookfield’s purchase of Hammerson’s London buildings and 100 Bishopsgate, an office tower planned near Liverpool Street station which it owns half of and the develop an office building on London Wall Place.

The development game in London is limited to those with large equity reserves, sovereign wealth positions or very strong balance sheets who can take on corporate debt.

Watch this space…..

The value of Commercial Property

The commercial property marketplace in the UK continues to struggle in the current economic climate.  The first 6 months of 2012 show a downturn again and the outlook to be less that favourable.  We posted recently about regional shopping centre acquisitions and it is of note that the survey shows overall values in the sector down by 6.3% in the first 6 months of the year.

There has been a slight up turn in the office sector which, particularly in central London, has shown minor growth.  It is of note that the general trends in the office sector are in a downward direction, in terms of occupancy requirements.  New working methods, including the much heralded opportunity to work from home (how many organisations are getting that one wrong, I think we will have a posting on that subject alone in the near future?) and a changing workforce demographic are all factors that would suggest a downturn in demand could, over time, lead to a diminishing in values.  However, limitations in the availability of funding for new development, the shaky perception of the market in general, the continuing trend for conversion from commercial to residential in parts of Mayfair and the West End combined with the requirements for organisations to develop and implement ever more strict environment and sustainability plans mean that the limitations on supply are bolstering the current marketplace.

Where this will go in future is very much up for discussion.  The standard institutional lease is still alive and well and living a life under a new identity.  In this new guise, there are more opportunities for prospective tenants to negotiate with the landlord from a position of strength and as such a stronger model for occupancy is being introduced.  Watch for further development in the process.

For those with a strong nerve and deep pockets, taking advantage of the current market where values of freehold are potentially at their most advantageous to the acquirer, entering the commercial property sector in any form could be seen as the move to make.  Carefully selected and prepared, commercial sector investment now and held over the long term could be just the thing.

A modular hotel for Western Avenue

Capita Symonds announces that planning permission has been granted for a new hotel on Western Avenue.  The 6 storey 4 star hotel building will have 160 rooms and a bar, restaurant, gym and conference facilities.  Also included in the scheme is an HQ office building and a data centre.

So far so good, but the twist is that the building will be built using off-site modular construction technology.  Designed by architects ESA, part of the Capita Symonds Group, the designers have invested 5 years into the project.  Working closely with a modular construction company the company have developed a flexible solution that allows for the production process to be standardised not the design. 

The scheme which is situated on a site opposite Park Royal tube station will provide an interesting contrast to existing modular built hotels in the London region.  ESA promotes that the hotel will have a unique façade and other high quality design features and we certainly hope the new hotel will help promote the cause of off site modular construction.

It is understood that work will begin on site later in the year.

Picture of the proposed hotel design from Capita Symonds website www.capitasymonds.co.uk

Olympic Gold!!

Our friends at MoveHut (www.movehut.co.uk) have an interesting insight on the impact the London Olympics is having on commercial lettings.  Jodee Redmond blogs:

“With the anticipated influx of visitors expected during the upcoming Olympic Games in London, space is at a premium. Landlords, including commercial property ones, are getting creative to help meet the demand for space. Temporary tenants are not being especially picky at present, and landlords are prepared to rent out all available space during the Games.

The city of London is expecting 11 million fans, athletes and sponsors to arrive in what is already Europe’s second-most crowded city next month. The huge increase in population means there is an increased demand for temporary shops to carry clothing, souvenirs and other items, as well as storage facilities. Media outlets require good vantage points for television cameras, which means landlords have the opportunity to make some money from what had previously been nothing more than dead space.

The Games will run from 27 July – 12 August. Homeowners who have space to rent have already anticipated the increased demand for space by increasing their asking price by up to six times the normal rate. Commercial landlords are also increasing the rates of their asking prices.

In Beijing and Athens, events were either held in outlying areas or neighbourhoods were demolished to create venues specifically for the Games. Most of the sites where events will be held during the London Summer Olympics are in built-up areas.

A former limestone quarry near the Bluewater shopping centre in Kent, southeast England is being offered for hire to contractors looking for temporary staff accommodation during the Games. The site is located close to a high-speed rail link, which means that anyone staying there can travel to the Olympic Stadium in Stratford in a very reasonable 30 minutes.

Empty shops are in high demand in anticipation of the Games, and ones which are situated close to popular shopping areas like Oxford Street and Covent Garden do not last long. Retailers are arranging to rent these spaces to open temporary shops to sell items like high-end clothing during the Games. Depending on the size of the space and its location, landlords are charging anywhere from a few hundred to £20,000 to rent a store which may be open anywhere from one day to two weeks.

The closer an available building is to the Olympic Park, the more a landlord will be able to charge for rent during the Games. Rather than thinking about what the space is currently used for, now is the time for commercial property owners to be creative about what they can offer a prospective tenant and how much occupying the space would be worth during the 2012 Summer Olympics.”

Not sure about that 11 million figure, but we know a lot of people are coming and the opportunities for property owners in the east of London are significant.

Anyone fancy taking August off!!

See the original blog here: http://bit.ly/MXgL6T

Top 5 Relocation Tips:

Moving the business to new location or locations is a process best undertaken with a great deal of planning and forethought.  Commercial relocation is so much more than moving your house, its obvious isn’t it, but you would be surprised how many organisations approach this activity full of confidence due to someone having moved their own home last year, only to fail in spectacular fashion, costing the business dearly.

Here are my top 5 tips for your relocation project:

• Team:  Pull together your in house and professional team early on.  The fundamental requirement for the project team is to have delegated authority to make project decisions.  You will undoubtedly have a project Board with the overall Company authority, but the ability for the Project team to act within bounds is paramount. 

• Programme & Timing:  Your relocation project will almost certainly culminate in one or more moves over a series of weekends or a holiday period.  Planning for your project can start at either end of the scale.  Either working back from a mission critical end date, perhaps the expiration of the existing lease period, or working from the start, based on the longest lead time elements and the date you determine to launch the project.  Either way you cannot start the overall planning too soon.  Informal planning will have been taking place for some while but this needs to be pulled together at the earliest opportunity so that all aspects can be captured and detailed.

• Communication:  Early on in the project you will need to determine your communication strategy with staff and stakeholders.  As a source of rumour and misinformation, there are few better catalysts than a relocation project to stoke the fires!  Planning and implementing an integrated communication plan will greatly assist the project, both in terms of staff satisfaction and also in terms of buy in and co-operation.

• IT and Communications:  Make sure your IT and communications teams are fully engaged from the start.  We have seen projects that have started off in fine form, bringing the communications teams in at a later date, only to find there are practical technical matters that have been overlooked and the project suffers delays and cost overruns.

• Have a clear out!:  Develop time in the programme to encourage staff to have a good clear out of filing cabinets, old machinery, cupboards, loose boxes, equipment, records, files, obsolete bits and bobs and the many other things that will cost money to move, cost money to house and then cost money to move next time!  There will be opportunities to recycle, sell, donate, dispose and, in the process, contribute to the organisations corporate social responsibility agenda.

James Alexander Consultants can help you with your relocation project.

eMail us on innovation@jaltd.co.uk or see our contact page for our numbers.  We look forward to speaking with you.

Home Office?

Planning consents for the conversion of offices to residential buildings in the West End is on the increase.  Last year schemes totalling more that 2 million sq ft of conversion were granted, significantly up on the 202,000 sq ft in 2010.  Values of West End conversions are being quoted at the £3,000 per sq ft mark as against £2,000 per sq ft for office space and a number of office building are currently on the market to attract residential developers to drain even more for the pool of available commercial space.  It is thought the demand is, yet again in the London residential market, being driven by demand from “overseas buyers” with the kudos of Mayfair and St. James’s being too great an attraction to resist.

Westminster Council would appear to be keen on this latest trend, showing limited resistance to the movement to convert.  Indeed, new planning regulations may make it even easier to carry these out without the need for a change of use consent.  The trend will continue to put the squeeze on the West End commercial occupier, those creating and bringing wealth into the capital on a continuing basis.  Rental levels on refurbished space in Mayfair are already breaking the £100 per sq ft level and, with a narrowing range of choice as new developments hit an all time low, there will be continual upward pressure on the limited vacant space available.

This is all very well for the present as the Capital’s residential market continues to resist the national trend of stagnation and even regression in housing prices.  Where there’s a fast buck to be made, why not?  When the economy turns, (and it has to doesn’t it?) the time lag to address the requirement for more commercial accommodation will be significant. Apart from the obvious lack of acreage in the West End, and they’re not making any more of that, the timescales to prepare and develop either new build, conversions or refurbishment will mean that the shortage of available space will be with us for some time to come.

Not all is doom and gloom on this front, however.  There are those who welcome the return to original usage of some fine buildings, with period features once again being brought back to a life they were originally intended for.