AS the take up of office space remains stagnant due to the economic recession, Ruth Logonne speaks to three commercial property experts about the state of the North East business parks market.
THE financial incentives tied up with the region’s former Enterprise Zone (EZ) business parks, have attracted both investors and occupiers to take up out-of-town office space for a decade.
However, research by top UK commercial property advisor GVA shows evidence of an oversupply situation having arisen on the former EZ parks in North Tyneside at Cobalt Park, Quorum and in East Durham at Seaham and Peterlee.
With more than 1.2 million sq ft of available office space on these business parks, evidence shows that the oversupply situation is leading to downward pressure on rents and capital values.
The position is further exacerbated by the Government introducing empty property business rates on new office space with investors and landlords seeking to mitigate their financial liability. Tony Wordsworth, director at GVA, said capital funding to accelerate major in-town regeneration schemes by way of Accelerated Development Zones and Tax Incremental Funding may see the city centre office market place hitting back against the out-of-town business parks.
He said: “The rate of development in-town had slowed considerably because of the recession, funding difficulties and the strong competition from the out-of-town business parks and in particular the EZ sites with their attractive financial incentives.
“This could further influence the letting of available space on out-of-town office parks. It will be interesting to see how the pendulum swings between the respective city centre and out-of-town business parks over the next few years.
“Many of the already established regional office parks will see only little or no new-build activity until the available office space is taken up and until the economy further improves.”
Tony Horden, director and head of Newcastle-based services firm DTZ, is more upbeat about the plight of the region’s business parks. He believes the first generation business parks such as Newcastle Business Park and Doxford International Park continue to remain popular, well-maintained and have very good occupancy levels.
This is the result, in his eyes, of the general attraction of the out-of-town business solution with the benefits of lower headline rents, together with additional car parking.
He said: “Over the last few years, the North East out-of-town market has fared very well despite being gripped by recessionary conditions and therefore weaker occupational markets.
“Quorum Business Park perhaps represents one of the best performing business parks across the UK.
“There is no doubt the new generation business parks are not merely about bricks and mortar and the office accommodation; it is also about community. It is this ingredient which, in my opinion, has been the real contributing factor for the success at Quorum Business Park, providing not only a wonderful setting with outstanding landscaping, but also events and support throughout the day.
“Quorum Business Park and indeed Cobalt Business Park have been significant additions to the business park landscape for North Tyneside and for the North East as they have been responsible for attracting a number of occupiers and therefore new opportunities to the region.
“We have some 2.5m sq ft already built across the two parks which represents a significant amount of floor space. Recently, however, at Quorum Business Park, we have seen a number of lettings including Insure the Box, Convergys, Balfour Beatty and recently Creating Careers.
“We should not underestimate what we have achieved in the North East during such challenging economic times, and we should celebrate schemes such as Quorum Business Park, which have continued to grow and introduce the concept of community which often is a difficult factor to measure.”
With an estimated £45m invested so far, Carillion and Arlington Real Estate are busy developing DurhamGate on the 53-acre Black and Decker factory site, ten miles south of Durham city.
As well as a new factory for Black and 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 Yuill Homes and Taylor Wimpey.
Agents Storeys Edward Symmons and JLL are offering sites for sale, or accommodation can be developed on a turnkey basis, freehold or leasehold.
Neil Osborne, director of Storeys Edward Symmons in Newcastle, said: “DurhamGate will be one of the largest mixed-use schemes in the North East, providing a range of retail, offices and homes of the highest quality.
“The first-class office buildings will incorporate outstanding architectural design. The development also benefits from superior landscaping and excellent transport links owing to the extensive road network on its doorstep.”