Business parks under pressure from planners

Copyright: David Lawson/Financial Times 1996

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Patrick Deigman is keen to hear the latest news. 'Tell me what  Labour is announcing  about relaxing planning rules,' he pleads. Normally he would be among the first to know - and to give a reaction  about the impact on property. As head of Arlington, the country's biggest business park developer, he has more at stake than most. But he was calling from a portable phone last weekend while snatching an overseas break just as Labour's  Keith Vaz was airing the party's ideas. Such holidays must be hard to fit in nowadays. Potential tenants have been  waking up from a long hibernation which had begun to cast doubts on the future of a sector which  promised so much when it flowered during the boom.  Further doubts arose as the government  turned the screws on out-of-town development. New guidance makes it plain that developers should target town centres and gear any other schemes to public transport. Labour's hints that it will relax stringent conditions should, therefore, have added to Deigman's holiday  relief.

 He was already relaxed, however, insisting that developers have anticipated  the politician's fears.  Rail  and bus connections  are as much part of  prominent schemes as archetypal glass blocks set in rolling pastures nowadays. Even Stockley Park, a reclaimed  rubbish tip near Heathrow which set the pattern for a generation of  office enclaves, is fighting for a stop on the neighbouring West Coast line.

  In any case, big business parks could benefit from any clampdown on new development, say supporters. Politicians are falling into the same trap as in the Sixties, when office and industrial development permits merely increased the value of  existing sites, claims Angus McIntosh, head of research at property consultant Richard Ellis. Pushing up land values will encourage investors to move out of town rather than force them back in.

  Nor will some occupiers be confined. 'There is simply no room for a MicroSoft or Novell to find large buildings in the centre of a town,' says Alan Patterson of Hillier Parker.  These are the kind of firms bringing a sense of excitement back to a market which went off the boil in the last few years. The former bought more than 30 acres on Argent's Thames Valley Park to build a 280,000 sq ft headquarters last year.  Novell is understood to have paid more than 20 million pounds for a site at Arlington's park in Bracknell as a new headquarters.

 Other recent big lettings include a move by Rhone Poulenc to the Rouse  scheme at Kings Hill, Kent, 100,000 sq ft at Solent Park let to Zurich Insurance and and 30 acres sold to Securicor at Hatfield. So why are there still  long faces when so many tenants seem to be popping out of the woodwork?  The answer lies in the way the market is structured. Almost all these deals have focused on big, high-profile developments. These are the classic image of business parks which captured the imagination in the late Eighties - all fountains, flowerbeds and tinted glass. But a vast underclass of sites scattered around the country is still waiting for businesses to make a move.  'There is a lot of site preparation and selling to owner-occupiers but no speculative development,' says Kevin Storey, a partner with Healey & Baker.

  A few bright spots shine through the gloom. Akeler is heavily committed to expansion on Doxford Park, Tyneside, flushed with success of letting more than a quarter of a million sq ft at rents equivalent to 9 pounds a sq ft. Some credit must go to the attraction of enterprise zone tax allowances but chief executive Mark Glatman insists this has been icing on the cake.  'Success is no different to the rest of the property market,' he says. 'It depends on good location and the right specifications. Doxford has attracted a new breed of tenant like London Electricity, setting up remote customer call centres. They need good local labour supplies and the flexibility of  buildings finished only to shell and core.

 Angus McIntosh agrees that much of the magic attached to the business park label is an illusion.  Take-up is booming west of London, for instance, because that is where demand is traditionally high. 'Try putting one north-east of the capital and see the result,' he says.  This is why much of the  100 million sq ft or so of planning permissions left over from  the boom are  unlikely to be activated  before they run out. Rents are just not high enough to justify development around most regional centres, and development finance is almost impossible to find, says Martyn Williams, investment partner with Healey & Baker.

  Some schemes will motor on as regeneration partnerships with local authorities. St Modwen, for instance,  is working on 180 acres  close to Derby City centre while Arlington has linked with Manchester  city council to transform 80 acres next to the airport into a business park. Others will languish, lacking the public access demanded by government and the local services required by big occupiers.

 Established locations with such attributes will get even stronger, says Deigman. He is confident enpough to be pushing forward with speculative development at Birmingham, Oxford and Reading. Argent  has also started on  300,000 sq ft at Thames Valley Park and a two-year hiatus at Stockley Park has been broken with a new phase  which will see the first pure office  building going up on the landmark site.  Even the Prudential's long-delayed Reading Park, which has permission for more than 2 million sq ft of buildings could take off soon if talks with a development partner are finalised.

  Such confidence appears justified on the basis of figures published by Strutt & Parker and Investment Property Databank this week, showing that business park rents rose 1.2 per cent last year compared with an equivalent fall by town centre offices. Deigman says the struggle for  development finance is easing day by day as banks look for a way back into property to tap this growth and institutions move holdings out of cities.

  Nagging doubts remain, however,  about what waits over the horizon for these multi-million-pound assets. 'No matter what  planners decide, private transport will become more and more expensive over the years,' says David Hutchings of Healey & Baker. 'Some parks could become isolated.'   That does not mean the concept of the business park has to die. Brindleyplace in Birmingham and  the GMEX renovation in central Manchester could be pointers to the future, with their public transport links and closeness to people and shopping. In other words,   visions of comfortable, accessible and efficient working conditions could be transplanted back into city centres.