Adrian Griffith, senior surveyor with GVA Grimley Birmingham, argues the outlook may be looking up for the business park sector.
Whilst there is no denying that the recent financial crisis will continue to take its toll on individual sections of the property market throughout 2009 and beyond, it’s not all gloom with trade in some areas enjoying a brighter forecast. Deals are still being done and collectively, some regional markets are still performing well.
Take for example, the M42 corridor. In the first six months of this year, over 180,000 sq ft of commercial space was let, equating to nearly £4 million worth of investment. Collectively, the results show that occupier confidence in the area is far from fragile, with wide ranging sectors including robotics taking advantage of the opportunities the corridor offers.
To date, GVA Grimley has let more space on the M42 than it did in 2006, and is on target to exceed the total let in 2007. This is good news, not only in light of the current climate but also as an indication of ongoing demand for quality office accommodation in this location.
A driving factor for this continued demand compared to levels of the early 90s recession is far fewer occupiers are locked into what were then institutional leases of 25 years rather than the shorter five and 10-year leases of today that are more the norm. This increased flexibility has resulted in more market activity in these more challenging times.
Part of what attracts occupiers to Birmingham’s out-of-town business parks is their quality, both in terms of available office accommodation and on-site amenities. Maintaining a stock of this calibre of space has also been key to the M42 corridor’s continued success.
A prime example is Blythe Valley Business Park, where 530,000 sq ft has already been developed with outline planning permission in place for a further 1.5 million sq ft. Construction of a 90,000 sq ft ‘amenities block’ that will provide office space as small as 3,000 sq ft is due to commence in early 2009.
The park has also attracted big corporations, such as software provider Infor and conveyancing firm My Home Move; that are looking for energy efficient buildings and space to grow. Further to this, international developer Liberty has submitted a planning application for a 47,000 sq ft self-contained building, with expansion of 15,000 sq ft for the occupation of Homeserve, who are relocating from Walsall.
In the late 1990s, the M42 market was heavily dependent on demand from the high-tech sector and similar to the Thames Valley, suffered from a post dot.com depression. With business parks since adapting to the knowledge economy, there has been a noticeable shift in emphasis away from speculative builds to occupier driven development. Offering a tailored scheme that is focused on tenant needs has become the business park penchant.
Birmingham Business Park is a great example of a first generation development that is working to offer more to occupiers.
Plans to extend the park to include 500,000 sq ft of additional business space and various other public facilities are proof that developers are not sitting still on the service front, despite a gloomy economic horizon.
Take-up from organisations like Infor and West Midlands Police is further testament to the future worth of out-of-town business parks.
If the current property market is reminiscent of the 1980s recession, then the success of the M42 corridor is a worthy example of a triumph over adversity.