UK: THE PULL OF THE BUSINESS PARK - RELOCATION. - Relocation 3 - Despite a long gestation period the out-of-town alternative to town centre office space is up and runing. Its access to the motorway network and the availability of a more stable and cheape

by Erik Brown.
Last Updated: 31 Aug 2010

Relocation 3 - Despite a long gestation period the out-of-town alternative to town centre office space is up and runing. Its access to the motorway network and the availability of a more stable and cheaper workforce is attracting a widening range of users.

Bob Tyrell, chief executive of the Henley Centre for Forecasting, dropped a surprising statistic into a presentation at the British Property Federation's annual conference in London earlier this year. 'If you ask people where they would like to live in an ideal world, with no constraints (money and so on), 70% of the entire British population say they would like to live in a country village or a small town, compared with only 2% who say they would like to live in the centre of a large town.'

The British love affair with rural life has rarely been quantified with such clarity. Landlords and developers in the audience were all ears as Tyrell closed with a warning: 'Beware of some of the large, prestige office developments - given white-collar redundancy, given teleworking and given the change in corporate structures. On the positive side, get into rural housing... and get into rural and industrial business parks.'

The advice was well meant, but probably unnecessary. Developers and landlords across all sectors have watched the gestation of the business park with a mixture of open admiration and bemusement. It has been a long and difficult birth. In the beginning there were the traditional industrial estates: big, functional buildings with plenty of space for lorries to turn in; developments built for proper 'industry'. Then, as the electronics sector began to take off, there were brave but nevertheless fumbling stabs at 'hi-tech' development, which by and large produced big, functional buildings in fancy dress. Gradually, it began to dawn on developers, occupiers and planners that the division between production, R and D and administration space in these 'business units' was as pointless as it was arbitrary.

The planning system had not been designed to cope with the vigorous young property hybrid demanded by the emerging knowledge-based industries and it began to creak under the pressure. When the Department of the Environment finally announced a new planning use class - B1 - in 1987, the floodgates broke. In 1989, 8.2 million square feet of 'office and hi-tech space' was completed on out-of-centre business parks; by 1990 the figure had nearly doubled to 15 million square feet; and now - according to Applied Property Research - 67.7 million square feet is up and running and there is another 65 million in the pipeline. Given the property industry's funding famine, much of it won't get built. But Geoff Marsh, managing director of Applied Property Research, states unequivocally that the business park is here to stay. 'It is to town centre offices what out-of-town shopping is to high street shopping.'

For the property industry, the fumbling didn't stop - it simply became more frantic. Not everything that was built worked - but the demand was there. And more than 180 companies now occupy office buildings of more than 50,000 square feet on UK business parks. There is also evidence that the out-of-town alternative is increasingly attractive. Jones Lang Wootton's annual report, The Decentralisation of Offices From Central London, shows a significant decrease in the number of companies moving out of the capital over the past few years. But it adds: '... an important feature of decentralisation during 1992 has been the increased proportion of organisations which are relocating to a campus/greenfield location (35%).' The same is true of relocations elsewhere in the UK. The DTZ Debenham Thorpe report, Offices: Choice and Compromise, produced last year, concentrated on companies outside London, and concluded: 'Almost one third of companies interviewed were involved in a process of decentralisation to out-of-town locations.'

The relocation industry talks inelegantly these days of push factors and pull factors. Push factors for city-based business include (traditionally) high rents, traffic congestion, high employment costs and high staff turnover. Pull factors include a cheaper and more stable workforce, easier access to the motorway network, more efficient buildings ... and so on.

It is difficult to generalise about the impact of a move to a business park: the 180 big companies that have done it in the past few years have all done it for very specific reasons and their experiences will, one imagines, be very different. But Arlington Securities, the business park developer owned by British Aerospace, has made the attempt.

Barry Holmes, Arlington Securities' marketing director, warns that the model his company has developed is an indication only and - while it is based on the real experiences of some of Arlington's tenants - it carries the necessary caveat that 'For every business, the specific details and figures will, of course, be different.' The model outlines the potential savings that can be made by a company with 250 staff relocating from a 50,000 square-foot town centre office to a business park location. It tots up to a little under £2 million a year and it allows for: a five per cent reduction in staff; a 50% reduction in staff turnover; a 10% increase in sales; reductions in London weighting allowances for 50% of the staff; a 10% increase in space efficiency; and improvements in flexibility, maintenance, parking and productivity.

Some of these savings look pretty theoretical on paper, a fact that Holmes concedes gracefully. But Arlington's marketing literature bristles with testimonials from companies that have done it. Well, it would, wouldn't it?

Holmes, a new age property man who was head-hunted into the job from an engineering company, admits, 'It's not a very sophisticated document but it is a distillation of people's experiences over a period of time.'

Accommodation costs can be as low as six per cent of corporate overheads, he says. Shaving a few per cent off those costs is not as important as the other 94%, and companies planning a move that is going to last 10 or 15 years are probably more interested in value for money.

There is still some debate on that point. The Jones Lang Wootton report said that 52% of the companies that decentralised from London in 1992 gave cost savings - particularly property costs - as the overriding reason (although some moves were probably planned at the height of the property boom, when rents were still going up). The DTZ Debenham Thorpe report, based on interviews with 30 relocating companies outside the London area, ranked property costs as number 10 on their list of 10 reasons for moving. The top five were: previous accommodation too small; combining several offices; restructuring company operations; setting up a new company or branch; and the potential for more efficient use of floorspace.

Peter Evans, who heads DTZ's research team, has been notably cool about the business park phenomenon. In a report produced a few years ago, Business parks: out of town, or out of touch?, he argued that: 'There is often a chasm between the initial claims made for a business park and the quality of the finished product.' He added: 'Most companies relocate because of a need to expand and, as a result of the decision-making process, tend to place greater emphasis on those aspects directly relevant to the company's business strategy. As a result, property-related issues are often treated as of secondary importance and receive least attention and time. This inevitably gives rise to dissatisfaction in later years.' Another good argument for property strategy as part of intelligent business planning.

The report was written some time ago, Evans says, but the issues are still relevant. He also points out that the rush of business park development has led to high levels of oversupply in the sector (a fact that, looked at another way, could be seen as an advantage for incoming tenants). 'Many schemes', he says, 'currently exhibit worse vacancy characteristics than those which have dominated the central London market over the last two to three years. Further, with prospects for moderate levels of demand over the short to medium term, relatively high availability ratios and a partial erosion of the cost differential between town centre and out of town schemes, business parks will face tough competition for would-be occupiers.' Overall, 20% of the space on UK business parks was unlet at the end of 1992.

These gloomy statistics are unlikely to dismay the business park evangelists: we are, after all, just climbing out of the worst recession since the war, they say. And the pattern of occupation on business parks is changing. Initially, they pulled in hi-tech companies but DTZ's latest research shows that the two most important sources of demand in the past few years have been the public sector and industrial companies (at a combined 45%), with banking, finance and insurance and computer-electronics companies each accounting for 10-14% of the floorspace occupied during 1990-1992.

There are regional differences, though: banking finance and insurance account for 70% of the moves in East Anglia, but in the South West and East Midlands the public sector is a key new occupier. As an aside, it is interesting to note that of the 16 'committed movers' on Applied Property Research's list of potential movers out of London, nine are government departments.

The cost of relocation and the inflexibility of property may make relocation tortuous for large companies. But in other senses the bigger you are the more flexible you can be in your choice of location. As Gerald Blundell of Jones Lang Wootton says: 'Marks and Spencer could probably move to Reykjavik and their suppliers would follow them.'

New technology throws an interesting light on location, too. Research for this feature unearthed the entertaining fact that six per cent of London's directory enquiries calls are routed through operators in Northern Ireland. 'If your business is at the end of a wire,' a press officer in the Northern Ireland Office said, 'it really doesn't matter how long the wire is, does it?' Blundell easily topped this tale with the revelation that part of Sweden's fire service is controlled by a computer in America. 'Yes,' he said, 'the queuing system is driven by something in Tennessee. You're talking about a different sort of space - electronic rather than geographical - but you do have to standardise your information systems to make that sort of thing work. The big firms are more likely to have done that than the little ones.'

Business parks clearly exert a strong pull on an increasing range of business users; and that worries the planners who have a responsibility for balancing employment patterns in and out of town. A new Department of the Environment Planning Policy Guidance Note on transport and development control builds up the case for more environmentally-friendly public transport - and, in the process, it has transferred some of the worry to business park developers.

'By influencing the location of new development relative to transport provision, and vice versa,' the note says, 'development plans can be used to reduce the need to travel, especially by car ....' Since car parking and the ease of access to motorways have been one of the principal attractions for business park movers, this suggests new constraints on development.

But the tussle between town centre landlords and business park developers is likely to continue unabated. Property developer Stanhope, which built Stockley Park near Heathrow, is already planning for the next generation of business parks. Stockley was recently glowingly described by trade journal Estates Times as 'the prince of business parks' and the assumption is that anything Stanhope does is worth watching.

'We've been looking at a new type of business park for the past two years, the commerce park,' said Robert Harris, head of research at Stanhope. 'In Germany, they're called Gewerberparks, in France, parcs d'activites. Stockley Park started life as a mixed use development with flexible space incorporating research and development, customisation of products and a lot more activities than just office use. Commerce parks are a return to that idea in the sense that they do provide space for activities like customisation, distribution, product development, R and D ... Because there are a lot of smaller companies producing higher value products, we believe there is a demand for the mix of uses you get on an industrial estate, with the quality of environment you get on an office park. I believe that will become something quite special in a few years' time.'

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