Preliminary market results for Q4, and indeed the whole of 2018, show a mixed performance for the sector. Continuing volatility due to Brexit uncertainty and the decline in the high street has led forecasters to predict an even weaker 2019 in nearly all sub-sectors. Many commentators are forecasting a weaker 2019 in nearly all sub sectors.
In 2018 the office market continued to show resilience, particularly in London where take up of space was higher than in both 2017 and 2016. Media, information and technology sectors were the most active occupiers in the final quarter of the year whilst growth in professional and financial services stayed relatively flat.
Inward investment into UK office assets however, dipped slightly over the year, the exception being the Central London market which remained strong. Other relative hotspots included Manchester, Cambridge, Dublin and latterly Birmingham, a performance that is broadly expected to continue into 2019.
More significant is the data released in the Autumn by the ONS which showed that construction output in the sector continued in decline from the second half of 2017 into 2018, a trend that many predict will carry well into the new year. Current levels of construction activity will fall off as major projects reach completion and the cautious approach of developers to new projects starts to impact. In more certain times strong occupier demand would stimulate development pipeline but many developers are reluctant to commit in the current market unless a pre-let has been secured.
The challenges faced by the retail sector were well documented throughout 2018 affecting both occupier and landlord confidence. Competition from on-line retailers has impacted high street revenues so strongly that many well-established department and chain stores are in severe financial difficulties. This has prompted significant disposal and closure programmes and the use of the CVA (Company Voluntary Arrangements) process to seek relief from rental obligations. Consequently, proposed new project starts such as Hammerson’s Brent Cross have been put on hold and the sector is predicted to decline further in 2019.
In contrast, the industrial sub sector had a strong year with both take up and construction output in storage and logistics facilities increasing over 2017, due in part to the growing demand for warehousing and distribution created by the on on-line purchasing boom.
The Growth Corridor
The Oxford - Cambridge Arc, aka The Growth Corridor, is an area spanning the counties of Oxfordshire, Buckinghamshire, Bedfordshire, Northamptonshire and Cambridgeshire, and has been described as one of the greatest growth opportunities in the world. Already containing centres of excellence in science, technology, manufacturing and learning it has some of the highest levels of entrepreneurship in the country.
The government has identified the Growth Corridor as a strategic economic area not just for the region but for the whole country. The government has also recognised that the growth ambition will not be achieved without significant investment into future housing supply and infrastructure in order to support the rise in the economic activity demanded.
In March 2016 the Chancellor of the Exchequer asked the newly established National Infrastructure Commission (NIC) to produce a study into how infrastructure could stimulate and unlock growth in the Arc. The NIC’s final report was issued a year later and responded to by the Chancellor in the Autumn Budget Statements of 2017 and 2018, promising billions in strategic investment.
The key commitments are:
- East West Rail – a strategic rail line linking East Anglia and Oxford
- The Oxford-Cambridge Expressway – a new road along the same route
- One million new homes by 2050
In addition to capital investment by central government, this initiative requires the collaboration of all the geographical, political, business and education stakeholders within the Growth Corridor as well as Local Enterprise Partnerships and the private sector investors.
Although in its early days, it is clear that this initiative has given added stimulus to new residential and commercial developments which are now regarded positively in the context of their national/regional significance rather than just their local contribution.
At F+G we are supporting our developer clients with significant commercial project opportunities within the corridor, particularly at the economic hubs of Oxford and Cambridge. One of these, Harwell Science Park is showcased below.
Harwell Science Park
The Harwell Campus near Didcot, Oxfordshire is steeped in history and has been responsible for various medical breakthroughs in genetics and advances in space exploration. The site was first used as a RAF base in 1937 to accommodate various bomber squadrons during World War Two. After the war, the base opened its first Medical Research Council laboratories in 1945, and since then continued to grow its reputation as a science and research centre.
We were initially appointed in 2013 to provide Cost Management Services on the infrastructure masterplan for redeveloping the Science and Innovation Campus which focuses on the following five areas:-
- Space and satellite applications
- Life sciences and healthcare
- Big data and supercomputing
- Energy and environment
- Advanced engineering and materials
The Campus is over 700 acres, a scale that offers a good opportunity for the growth of small, medium and large companies. Millions of square feet of new working and research space is being developed, and the five distinct clusters being created as part of the masterplan will encourage new ways of solving problems, open communication and great opportunities for networking. Hundreds of new homes are also being built targeted at people working on the Campus together with improved on site amenities which include nurseries, sports facilities, cafes, post office, mini supermarket, weekly pop-up food stalls and attractive public spaces.
Our Client is Harwell Science and Innovation Campus GP Limited who are a Joint Venture (JV) Partnership between the public and private sectors, half of the partnership is owned by a Prorsus and U+I JV, and the other half is owned by the Science and Technology Funding Council.
Over the past three years we have provided Cost Management and CDMC (Delivery) Services for the 33,000 sqft Genesis multi-occupier technology laboratory and offices building completed in May 2016, the Quad One 45,000 sqft three storey innovation centre with separate 7,800sqft pavilion building completed in December 2017, and the 35,000 sqft Nanopore laboratory, office and production building which has a first floor mezzanine and is due to be completed mid-February.
We have recently started working on the new Zeus scheme. This is a dramatic angular looking building comprising of two rectilinear structures with the pitch of the roof falling in four directions and a central canopy linking the two sections of the building together. The ground floor is 32,000sqft, it is termed as being a multi-occupier/multi-use building and the architect is Allies and Morrison. We are also working on the 45,000 sqft Quad Two building to complement the original Quad One innovation centre scheme which won project of the year for Commercial Brief at the Oxford Property Festival in 2018 and is again being designed by Hawkins\Brown architects.
The success of the Quad One innovation centre has enabled the second phase of the quadrangle development to start sooner than originally programmed, demonstrating the demand for buildings of this type on the Campus.
As part of our Cost Management role for the masterplan we have also developed a bespoke cost benchmarking report with Harwell capturing projects completed and in progress. This helps understand where the key cost drivers are on the schemes, and highlights design metrics, procurement routes and programme information.