Cheaper buildings and open minds are critical to break the cycle of urban decay in many of Britain’s biggest cities. Half the biggest conurbations have been ‘disenfranchised’ by investors because they don’t command high enough returns, Joanna Embling of international property consultant Cushman & Wakefield Healey & Baker told an urban regeneration seminar at the British Council for Offices conference in Edinburgh.
Developers concentrate on the top dozen or so office centres, all in central London. But they have some justification A 100,000 sq ft building meeting the BCO Best Practice Guide would cost £100/sq ft to build [£115/sq ft for air-conditioned]. A ‘new financial model’ is required which would reduce this to the £80/sq ft necessary at rent levels in Sheffield or Liverpool, the third and fourth largest UK cities, which can only achieve £17.50 and £15/sq ft respectively.
But investors also need to abandon old prejudices. Charlie Parker of Liverpool City Council pointed out that speculative development was not considered viable by institutional landlords yet it always filled quickly.
Finance is not the only critical factor, however. Cities have to raise living standards and get that message directly to investors rather than rely on ‘parochial’ local agents trying to let space. ‘Poor perception is a key factor and can take a long time to shake off,’ said Parker.
Liverpool was the first city to set up an urban regeneration company and is concentrating on improving its ‘core business’ of the environment, schools and housing. By taking the results of these improvements directly to investors at MIPIM, the international investment exhibition, Parker says he won £10m of potential development, and this may yet double.
Councils must also co-operate with local business and bodies like universities to produce a clear vision of what they need. ‘Often they don’t communicate or act together,’ said Bob Hodgson of Zernika, which has been helping develop an economic strategy for tapping new technology industry in cities like Sheffield. Cities must create environments which will stop young graduates and start-up businesses from drifting away. Developing new technology zones is not enough: they must be vital, dynamic ‘living’ centres.
Cities falling below the breakeven point for office development include:
Liverpool – 4th largest UK city - £15/sq ft office rents
Sheffield – 5th - £17.50/sq ft
Leicester – 8th - £12/sq ft
Hull – 9th - £10/sq ft
Coventry – 10th - £16.50/sq ft
Nottingham – 12th - £14.50/sq ft
Plymouth – 13th - £9/sq ft
Derby – 14th - £13.50/sq ft
Southampton – 16th - £19/sq ft