A ground-breaking analysis of the biggest office market in the East Midlands points to a massive pipeline of new-build office space standing by for the economic upturn.
The Nottingham Commercial Office Review, which has been produced in a collaborative venture by the city’s property and development professionals, says more than 2.3 million square feet of Grade A space is waiting to be built.
The Nottingham Commercial office Review launched by the Nottingham Office Forum, a group which brings together commercial property consultancies, development professionals and the city’s inward investment team.
The report also shows that Nottingham is holding its own in terms of large office deals.
Matthew Smith at Jones Lang Lasalle and a member of the forum said: “We have had a number of really important deals in Nottingham including Browne Jacobson, Potter Clarkson and Nottingham Building Society.
“The Browne Jacobson deal was the 23rd largest in the UK, the eleventh largest out of London – and the second largest in the Midlands; all comparing favourable with activity in London and Birmingham. What we can see is that Nottingham is really holding its own in the current market.
“But Nottingham is not immune to the challenges of the wider economy and in a climate like this occupiers are firmly in the driving seat. It is a cautious environment and funding remains constrained, but what is encouraging for Nottingham is that we have on the drawing board some exciting proposals which put us in a strong position to take advantage of the long-awaited upturn.”
John Proctor, a director of property consultancy FHP and a member of the forum, said: “The Nottingham Commercial Office Market Review is a comprehensive update of the Nottingham office market which brings all the information occupiers, investors and property market professionals need in one place.
“It is a heavyweight report which builds on the work that the forum has been doing for more than a year now to create a single voice for the property market in Nottingham. It represents a detailed, high-quality marketing tool which we can all use to promote Nottingham and help to attract occupiers and investors into the city.”
Forum member and speaker Craig Straw said: “The market performed relatively well overall in 2011 with take up remaining constant at c250,000sqft but the deals that lead to this headline was markedly different in make up to the previous year. In 2011 there was no pre-letting activity with transactions instead centred on primarily good quality existing accommodation with the market being characterised by lots of smaller deals with transactions of less than 5,000sqft accounting for 8 out every 10 deals.
“Activity was driven by the private sector in particular Business and professional service providers who lead the way with the City’s largest transactions. Although year on year there was a 30% increase in supply with availability standing at c950,000sqft by the year end, this increase was accounted for entirely in poorer quality stock with supply of Grades A and B space, where we saw the majority of activity, remaining constant”.
The inaugural 2011 Nottingham Commercial Office Review pointed to the need for a substantial increase in new Grade A office space to satisfy an acceleration in the jobs market forecast by economists from the business information group Experian. A further report from the Institute for Public Policy Research has since suggested that the East Midlands will return to pre-recession employment levels by 2014 – alongside the South East and several years ahead of northern regions.
While there is still some 940,000 sq ft of space available in the Nottingham market much of it is Grade C space unsuitable for modern occupiers. The 2012 Nottingham Commercial Office Market Review suggests alternative uses for this space must now be considered, with the conversion of Bowman House on Talbot Street into student accommodation an obvious option in a city with two universities.
More than 250,000 sq ft of office space was transacted in the city during 2011. Corporate law firm Browne Jacobson led the way, taking 57,000 sq ft of space at Mowbray House, part of the HM Revenue & Customs campus at Castle Meadow, while the expanding international patent attorneys Potter Clarkson took another slice of the Government estate when it signed up for 45,000 sqft in the Belgrave Centre formerly occupied by the Government Office for the East Midlands.
The two deals are examples of one of the key features of a market where the bulk of the deals involved Grade B space. But new Grade A space has come on stream in the form of the landmark E.on building, a £30m 105,000 sq ft development in the heart of the city centre.
The pipeline of development opportunities includes the 200,000 sq ft Unity Square development close to the city’s railway station, while preliminary work is now underway to support the development of The Portal –a site with data infrastructure that would make it one of the best-connected business parks in the UK.
This year’s review also flags up a healthy level of investment activity in the city, headline deals including the £20m purchase of the Chapel Quarter by Stainton and Kuwaiti investors, and a £10.3m deal for Cumberland Court.
Paul Southby, the former CBI regional director who now chairs the Invest in Nottingham Club, said: “While it’s understandable that people should be preoccupied by the current economic challenges, the public and private sectors in Nottingham decided two years ago that they should collectively identify a way forward beyond the downturn.
“The emergence of the Invest in Nottingham Club is one example of that, and the collaboration between property professionals that has produced this Review is another. We have taken the Nottingham message to investors in London, to MIPIM, and brought them here to look round the city. Occupiers and investors need clear and comprehensive information and that is what the Nottingham Commercial Office Market Review provides.
“Despite the economic challenges, the past few months have actually given Nottingham an even stronger story to tell. David Cameron himself unveiled the Enterprise Zone at the Alliance Boots site in the city, funding for two more lines of the tram has been signed off by Government, and the long battle to widen the A453 link to the M1 has finally borne fruit with news that the scheme is going to be fast-tracked.”
Graham Chapman, the deputy leader of Nottingham City Council, added: “Only last week, we unveiled the Nottingham Economic Growth Plan, a comprehensive strategy for building on the huge potential which we believe the local economy offers. Besides large corporates like Alliance Boots, Experian and Capital One, there is an emerging breed of creative, technology and science-based businesses which represent the next evolution of the Nottingham economy.
“We are committed to policies which will help deliver jobs and growth and I believe that the 2012 Nottingham Commercial Office Market Review provides further evidence of the scale of our ambition.”
