Copyright: David Lawson/Financial Times April 1998Home page
Cruising into London along the M4 or main rail line, it is hard to believe the endless green fields are the crucible of 21st century industry. Even more difficult to grasp is the claim that the furnace is running out of space.
The Thames Valley, once a quiet rural backwater, now holds more high-tech companies than any other part of Europe. It also has the largest concentration of business parks, driven by the trend for these companies to seek big, modern buildings in green locations.
In the last couple of years alone, world leaders like Microsoft, Oracle, Sun and Computer Associates have burst out of the narrow constraints of the area's small town centres and begun building more than 1m sq ft of space.
Rents have taken off, resuming the dizzy spiral upwards last seen in the Eighties. Latest lettings have past 25 pounds a sq ft and developers are beginning to react with speculative building which ground to a halt in the recession. But it may be too little and too late to prevent overheating.
'They will probably hit 30 pounds this year because potential space available is so thin on the ground,' says James Kennedy-Cooke of property consultants DTZ Debenham Thorpe.
The problem is that investors and banks bruised by the property crash were reluctant to back development until rents bounced back in the last six months. 'A decade ago, a wall of development emerged to satisfy demand, with business parks popping up everywhere,' says Tony Fisher of Chesterton International. 'This time around, the market has been too slow to react.'
But the industry faces a dilemma. If it started tomorrow to meet the sheer volume of demand, buildings would not be ready for at least 18 months. By then the economic cycle may be swinging down and investors could be left licking their wounds again. So they have tended to wait for pre-lets rather than build speculatively.
Such caution is probably overdone. Even if growth slows, IT and pharmaceutical companies will need more elbow room. And there is relatively little left in an area constrained by green belts and other planning controls.
So why not look elsewhere? Oracle is doing this, sniffing around the Midlands after deciding that headquarters being built at Argent's Thames Valley Park are not enough to meet the software giant's ambitions. Drug companies are also drifting into Kent, keen to be near the new European regulation agency in London's Docklands.
But this will merely take the edge off the now-traditional concentration on sites between Hammersmith and Newbury, drawn by access to Heathrow, central London and the pool of skilled labour. Chris Hiatt of property consultant Jones Lang Wootton says he has had twice the number of inquiries as for the whole of the South-east the last month.
There is still leeway for expansion on existing parks being built by firms like Arlington, Argent and Pillar around Reading but the underlying fear is that 10 years down the line the well will run dry. 'There is a real danger that if further land is not released, high technology companies will look abroad for expansion,' says Nigel Aslin, a partner with Strutt & Parker.
Almost 200 acres of land at Junction 11 on the M4 is the area's latest giant business park, with a capacity for more than 2m sq ft of buildings. This is probably the last big greenfield site in the area, so it is appropriately called Green Park.
In theory, it should offer a 10-year breathing space - the timescale for completion once the 50m pound infrastructure program is complete. But at the rate big companies are gobbling up land, this vast acreage could be filled much sooner.
Sun Microsystems absorbed a whole business park taking a site on the M3 from MEPC to build a 350,000 sq ft HQ. SmithKline Beecham's on-off marriage with Glaxo has not shaken plans to take most of the remaining land at Stockley Park, near Heathrow, for a 500,000 sq ft HQ - effectively closing another major supply route.
Mike Rolls of the Prudential, who has spent the best part of a decade preparing Green Park for launch, remains tight-lipped over whether a similar big sale is likely. He prefers to concentrate on plans for a 100,000 sq ft speculative block set to start in June.
This is aimed at smaller tenants. 'It is important to get people onto a development quickly to give it life,' he says. Land has also been sold to Costco, the US discount warehouse club, just outside the park.
There will be no shortage of bidders next year, however, when the A33 relief road link is complete and the park's gates are fully open. The question remains whether the Prudential will go for a long building program or sell the fruits of 10 years' labour to big IT companies looking for sites.