Vodaphone keeps real estate roots in Little England

Copyright: David Lawson- Property Week Jan 2000

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One glaring irony has been lost in the heat of the biggest contested international takeover in history. The war room  handling the bid by Vodafone for  German telecommunications giant Mannesmann  lies not in the  City of London or Wall Street but a tiny office block in the heart of Middle England.

 Vodafone chief executive Chris Gent has seen  his company explode from a pipsqueak to the world's largest mobile phone operator over the last decade but still sits in the modest building where a handful of former Racal staff set up in the centre of Newbury.

  This loyalty to the quiet country town looked doomed, however, when plans for a new headquarters caused uproar a couple of years ago. Newbury was already an environmental flashpoint after its controversial road bypass attracted protesters from around the country. Ministers were also growing paranoid about traffic generation, and called in plans for a campus on open land north of the town centre.

 Then just before Christmas the Government Office for the South East quietly gave the go-ahead subject to access conditions. It was hardly noticed because by then the media was diverted by the 76bn pound takeover bid for Mannesmann.

  The story of a world-class company  trying desperately to remain in a sleepy country town   says a good deal about how location priorities have changed. So do the 'green' buildings and subsidised public transport proposed for the new HQ.

 But there were strong  rumours in the middle of the planning row that Vodafone would desert Newbury. That sent tremors through the town, as it meant  dozens of  offices taken over during the growth years would come on the market. A shadow also fell over more than 3,000 jobs.

 The fears  stemmed from the fact that the company had already gone through one major merger with  Airtouch, the leading US telecommunications operator. That meant  almost twice as many of its customers were now on the other side of the Atlantic than  in the UK. Analysts began hinting that  California would be a better choice for a world base.

  For similar reasons, the takeover of  Mannesmann has been  seen as something of a relief, because it would swing  swing the balance back to Europe.

 California was always a myth, says corporate communications director Mike Caldwell. 'There was never any serious thought of moving to America. Our roots here are too deep.'

 That does not mean a move out of the town was dismissed. And if the current scheme fell it seems likely the firm would have been forced out.

 UK property director Richard Lomax was convinced that Vodafone needed a new HQ, as the company was bursting at the seams. 'Meetings were becoming impossible to organise. Companies within the group were split between buildings. Even individual departments were spilling over,' says Lomax. 'The post room had five people just delivering mail around the offices.'

 But he faced a monumental task finding a clear site of 20-30 acres within a town tightly constricted by protected land. 'We went through all the sequential tests but could find nothing suitable,' he says.

 The only possibility was the Old Showground, just north of the town centre. This was not designated for development in the local plan, so he knew it would be a problem. But it was low-grade agricultural white land rather than green belt.

 The board decided to make its bid with the same boldness which brought in Airtouch - a far bigger company that Vodafone - and motivated the first foreign takeover bid for a German giant.

 Lomax admits looking far and wide around the Thames Valley in case the plans were quashed. Market insiders believe the Prudential would have netted Vodafone for its Green Park near Reading if the decision was taken to leave.

 The fact that the firm was willing to fight so long and hard to remain rather than take what would have been attractive terms to kick-start Green Park shows how priorities have changed among blue-chip giants. Lomax points out that a third of staff live around Newbury. While Reading is within commuting distance, this did not fit into a stance which goes as far as any current scheme to promote 'green' working practices.

  A network of buses is planned to bring staff into the new HQ. Vodafone is also trialling a 1,000 annual bonus for staff who switch from cars to buses and even considered a parking ban in the surrounding area.

  Caldwell admits that this voluntary approach was influenced by what ministers like John Prescott were saying while the application was in government hands. But it still goes further than is likely to have been demanded by planners. Parking places ended up at one per 35 sq metres of building - much lower than originally planned.

 The campus itself is also in the forefront of green thinking. Architects Fletcher Priest have created a series of seven naturally ventilated buildings. 'We looked closely at the Powergen building in Coventry and saw how highly it was rated by  users,' says Lomax.

  But the new space still had to match institutional standards so Vodafone drew on advice from consultants  Strutt & Parker to also include chilled-beam air-conditioning. This will not be required for most of the time, however, as the buildings will take in fresh air during the day and breath out at night.

  Local agents might be expected to be breathing pretty heavily themselves with the prospect of more than  400,000 sq ft  tumbling onto the market over the next few years. But apparently they are quite enthusiastic.

 'Everything ground to a halt while the  Vodafone business was in the air' says John Varney of Deal Varney. That means tenants have hung back, hoping to snaffle cheap  space while development has been almost nonexistent.

 Everything halted, that is, except Vodafone itself, which has continued to take space at a ferocious rate while waiting for its new home, boosting its holdings from  275,000 sq ft to 475,000 sq ft in more than  60 holdings ranging from 2,000 to 30,000 sq ft. Most  will be released but Lomax aims to do this in phases over two years from around the start of 2002  rather than swamp the market.

 Like other agents, Varney is looking forward to the prospect of finally having a product to feed the appetite of other firms looking to expand here. Vodafone's success will rub off, he says, bringing extra pressure on the town, where rents have remained fairly static at around 20 pounds/sq ft for most of the decade.

  It could all have been so different if Gent had not been so committed to Middle England. Half-way through the takeover battle, he was given an open invitation by the Mayor of Dusseldorf, Mannesmann's home city,  to move the HQ across to Germany.

 'I think if he was able to  resist California and Baywatch, it was a sure thing he would decline sausages and sauerkraut,' laughs one insider.