The changing face of North East office parks

Neil Osborne looks back at the changes to North East office parks over the past 25 years

Doxford Business Park in Sunderland
Doxford Business Park in Sunderland

The move towards developing out-of town and edge-of-town office parks in the North East over the past 25 years has significantly changed the office market in the region.

Driven by the need for large floor plates and generous car parking, which had not previously been available in city centre, business parks have continued to evolve since the first examples in the 1990s.

Newcastle’s Quayside development is a good example of a successful city office park.

Enjoying a great riverside location close to the city centre, major corporates attracted there include Royal Bank of Scotland, Deloittes, Dickinson Dees and Regus. Storeys Edward Symmons is currently marketing East Quay 5, at the junction of City Road and St Ann’s Street. This comprises 34,265 sq ft with 68 parking spaces and is attracting strong interest from local and corporate occupiers.

Doxford International Park at Sunderland, is another successful office park. Totalling 50 acres and with more than 8,000 people employed there, major business occupiers include Barclays Bank plc, Northern Rock plc and Royal Mail. At Doxford, Storeys Edward Symmons is marketing Houghton House, a 47,706 sq ft office building for sale or to rent, with 233 car parking spaces, and we are very pleased with the interest the building is generating.

There are concerns that the huge incentives for office parks in Enterprise Zones, which have included up to 10 years rent free on a 15-year term, have had an adverse effect on the city centre market. As the need for some businesses to be located in the city centre has lessened, some tenants from the city centres have been attracted to out-of-town locations. It is not possible to compete with the incentives being offered at the likes of Quorum and Cobalt, and in my view, there are really now two distinct markets.

For those companies wanting large floor plates, but still wanting to be in the city, then the edge-of-town office parks such at The Quayside have proved to be attractive. The issue is that large-scale development has only continued at the out-of-town former EZ locations, driven by tax incentives, and we now have a situation where there is a large stock of unoccupied space .

In the short term, there is not likely to be any large-scale development in or around the city, so the supply of available buildings with large floor plates is drying up. This situation is being made worse by the conversion of empty city centre buildings to hotels under the BPRA scheme.

As well as developments offering just offices, a new generation of business parks has responded to changing needs by providing mixed-use development. Carillion plc and Arlington Real Estate Ltd are developing DurhamGate, on the 53 acre Black and Decker factory site, on the edge of Spennymoor.

With an estimated £45m invested so far, DurhamGate will be one of the largest mixed-use schemes in the North East, providing retail, offices and homes of the highest quality. As well as a new factory for Black & Decker, DurhamGate has consent for 441,772 sq ft of offices, a pub, a hotel, restaurants and retail. Land is also earmarked for homes and site sales have been made to Taylor Wimpey. Storeys Edward Symmons and JLL are agents on DurhamGate.

:: Neil Osborne, Storeys Edward Symmons, Newcastle

Availability is restricted

Whilst there are increasing levels of positivity in the wider economy and the outlook is at last improving, there is likely to be a restricted level of Grade A office availability in Newcastle city centre for the foreseeable future.

This is due to a lack of appetite for speculative development, in part by the developers but also by the banks.

This could be a significant factor when it comes to Newcastle’s ability to compete with other cities, nationally and internationally, in attracting inward investment.

However, this situation creates a superb opportunity for our region’s office parks to accommodate companies moving into the area.

Located four miles north east of the city centre is Quorum Business Park.

For an office park, being accessible is of key importance given the need to attract and retain staff.

For the same reason, over the past five years Quorum has worked hard on its amenities to help it function as a self-sufficient community.

Quorum Business Park
Quorum Business Park
 

Occupiers now benefit from a sports club, creche, parade of shops and over 300 on-site events per year. This combination of amenities and proximity to the city centre is key to making the case that relocating to an office park is by no means a second rate option.

The specification of the buildings available on office parks such as Quorum leads the way in terms of energy efficiency, technical capability, natural light and architectural design.

Office parks have another asset which city centres cannot compete with – parking. An occupier acquiring 30,000 sq ft of new offices in Newcastle city centre may be able to secure the benefit of around 25 spaces and would be charged rent and business rates for each space.

For the same amount of office accommodation on an office park, an occupier would benefit from approximately 100 spaces and at no cost.

In the first half of 2013, Quorum has attracted TDR Training, NCFE and Swiftpage who between them have acquired in excess of 100,000 sq ft.

There is a further 313,500 sq ft of new offices available and buildings can accommodate requirements from 2,000 sq ft to 108,000 sq ft.

:: Simon Taylor, associate director in office agency at Jones Lang LaSalle

Widening of appeal is key to business park success

Since the late 1990s and the start of the dot-com boom, the requirements placed on the working environment have changed significantly. Advances in technology coupled with demographic implications and have had a major impact on working practices.

As a result, business parks have had to evolve in order to keep pace with the appeal of city-centre locations.

Business parks have predominantly attracted technology-related businesses, but more recently, the occupier base has become wider with media, technology, telecoms, pharmaceutical, oil and gas and utilities increasingly favouring out-of-town locations, mainly for reasons of accessibility, car parking and the larger floor plates which are less easy to find in more central locations.

Serviced offices and more flexible leasing solutions have also increased in popularity and are well represented on business parks with occupiers valuing the ability to expand within the same building or park over time.

The North has established itself as a hub for call-centre operations due to the availability of an appropriate labour force and lower occupancy costs.

Cobalt Park in Newcastle is one such example, recently attracting Accenture due to the high-quality, cost-effective recruitment prospects. Further afield the trend for off-shoring has slowed due to quality control issues and the strength of public opinion. In some cases jobs are now being repatriated to the UK.

Cobalt Business Park
Cobalt Business Park
 

Critical mass and control is important factor. Without it, investment in infrastructure and creation of new facilities are usually not viable in terms of cost. As a rule of thumb, a business park needs to have upwards of 5,000 occupants for it to support retail, gyms and other facilities. A good example is Cobalt Park, Newcastle which with more than 12,000 employees has a 4-star hotel, nursery, conferencing facilities, and a Tesco and Greggs.

Parks which have been sold off on a piecemeal basis find this more difficult to accomplish.

In response to these changing requirements, the successful business parks are those that can offer the larger floor plates and landscaped environment, together with the amenities and transport links of a town-centre location.

Historically, city-centre locations have often been favoured for their superior public transport links and amenities. However, recent evidence suggests that this preference may be changing.

The larger, more successful business parks have managed to up their game in terms of facilities and amenities whilst also appealing to cost conscious occupiers during a period of fiscal restraint.

With staff recruitment and retention at the top of the agenda for most businesses, even in recessionary times, locations that can offer staff a modern, accessible working environment with facilities will go from strength to strength.

:: Charles Dady, head of UK Business Space, Cushman & Wakefield

Journalists

David Whetstone
Culture Editor
Graeme Whitfield
Business Editor
Mark Douglas
Newcastle United Editor
Stuart Rayner
Sports Writer