Jonathan Mannings, founder and managing director of Rare Commercial Property, sees a comparison between the decline of retail in Berkshire’s town centres and the decline in demand for office space.
The adage ‘be careful what you wish for’ has rarely seemed so apposite.
The convenience of online shopping, certainly for many beer-drinking chaps who never saw the attraction of spending more time than was necessary shopping, has had the most dramatic effect for a century on many of the South East’s town centres, which now typically play host to a collection of coffee shops, phone shops and charity shops.
Living previously in Windsor and now Newbury, I have witnessed first-hand how high streets have become rather depressing places to be where every week another store announces its closing-down sale and joins the already sizeable ranks of empty stores looking in vain for their next occupier.
In Newbury, despite the hope that Primark would move into the former Debenhams store, nearly a year after the latter’s closure, the former department store sits, rather like the girl that no one wants to dance with, in the corner of the Parkway shopping centre just waiting.
This has led to a direct effect on the office market, particularly in the towns of the Thames Valley. Why this particular area, I hear you ask.
It’s probably one of the lasting legacies of the 2012 Olympics that we saw the development and improvement of many Central London transport hubs, culminating in the eventual opening of the Elizabeth Line last year, all of which has significantly reduced travel times and improved the arrival experience of travelling into the capital by train.
In the line’s opening week, I, together with my colleague, jumped on a train at Reading and 45 minutes later were seated at a restaurant in Canary Wharf enjoying the hustle and bustle of city living.
Given how easy it is nowadays to make a journey that would once have taken twice as long, it’s little surprise that the ‘next gen’ now favour working in Central London rather than the Thames Valley which once played host to the head offices of a Who’s Who of corporate life.
And so, we have witnessed a gradual decline in the Thames Valley office market over the past two decades.
Yes, we still have developments which push rental boundaries. In the last 12 months we have seen schemes such as Windsor Dials achieving new rental highs for Windsor and the region of £47.50 per sq ft and yet the investment of that scheme has failed to attract the investor interest it was hoped it would, despite the valiant attempts of its agents.
I would be surprised if, later this year, we don’t see Station Hill, arguably the best office scheme in the Thames Valley, announcing its first pre-completion lettings – rumours abound of interest from major accounting firms and financial occupiers who are eyeing up the development. But where else can one honestly see more than very lukewarm interest in the developments of the region?
Unless you have a scheme in all but the very best business park, offering significant amenity including retail, a hotel, a decent gym/health club and a train station as an absolute minimum, then forget it!
Simple proximity to ever congested motorway junctions or visibility to passing traffic cuts very little ice with trying to attract the best talent to your business and that’s increasingly what it’s all about.
As an occupier where do I improve my chances of attracting the best talent? For a start it needs to be not only Grade A but the best Grade A available.
Anything less and you might as well now call in the bulldozers and reduce the financial pain of waiting for an occupier. Regardless of the number of parking spaces or the beauty of the surrounding parkland in which it is set, ‘next gen’ will not be persuaded.
Even being in a town centre doesn’t necessarily guarantee success. It’s got to be the ‘right’ town centre and those that were once considered favourably now sit a forlorn shadow of their former selves.
I talk in particular of towns such as Slough, which once boasted the highest number of corporate head offices outside Central London, but now, due to the misguided planning policies and financial mismanagement of its borough council, have achieved junk bond status.
The jury is still out on what will happen in Maidenhead. The town is currently undergoing major heart surgery with much of its old centre being removed and replaced by a never-ending supply of flats.
The town has always enjoyed a good train link to Central London and the surrounding villages of Bray, Cookham and Marlow play host to a significant number of chief executive-suite individuals which has, in the past, augured well in terms of generating demand for office schemes located there.
Whether in the post pandemic world (only 34 per cent of office workers have returned to the office), that remains to be the case, is still to be seen.
Bracknell is an interesting case. It has witnessed a renaissance in its retail offer since the opening of The Lexicon but its core occupier base of major technology, media and telecoms companies has largely evaporated since many of the largest players moved or simply closed.
Although there remains a base of smaller technology occupiers, whether they have the collective strength to sustain the town’s office stock has yet to be seen.
That said, the office stock of Bracknell is now a fraction of what it was with almost two million sq ft having been converted to residential under Permitted Development with other ageing office schemes now awaiting the arrival of the bulldozer with some now being converted to distribution and data centre space.
Towns such as Marlow, Henley, High Wycombe, and Basingstoke which were always regarded as peripheral towns will shrink dramatically in terms of their office capacity which will be replaced with more residential space.
When launching the Town Centre Challenge in 2018, Andy Burnham, the Mayor of Greater Manchester, spoke of the challenges our town centres faced and the role of local councils and stakeholders in meeting these challenges.
Some have clearly been more successful than others but the fact remains that the Thames Valley office market, once the largest outside Central London, is likely to be significantly smaller in the years to come and it faces major challenges in sustaining its office stock.
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Commenting as an RICS expert surveyor – and agent – in the Thames Valley retail office and industrial sectors the correlation between the High Street and office sector performance are not as easy to draw. The retail sector has a significant overhead advantage (75% reduction in Rates Payable from 1st April, for example) whereas the office sector has none. Out of each of these sectors the lowest level of instructions (therefore availability and strongest demand) is in retail and warehousing – the latter derived from on line purchasing / logistics delivery. Supporting the contention of “flight to quality offices” is logical in so far as organisations rightsizing their amount of space whilst seeking attractive offices for their staff to enjoy. In the immediate term office sector performance is masked by The Liz Truss Debacle leaving our nation wearing The Emperor’s clothes on the Global Stage resulting in a significant halt to activity in the last calendar quarter and 0% GDP growth. Thankfully activity is once more gaining traction for what will hopefully be a much more positive 2023.
Who dare argue with an RICS expert surveyo?! The fact is though I wasn’t seeking to draw any correlation only to make the point that the decline in our town centres caused by a variety of factors (Covid, Brexit, Economic headwinds not to mention a move to online retail by a variety of retailers) has left them bereft of any character and therefore any reason for the “bright young things” of the Next Gen to want anything to do with them. They are no longer aspirational places to reside or to shop. A visit to Windsor last week (previously my home town) made me quite sad at what a dump it has become. Simply renaming King Edward Court as Windsor Yards has done nothing to enhance its appeal and the old Fenwick store, Lakeland store, Laura Ashley and Clintons Cards looked ready for demolition. The whole town looked dirty, shabby and a forlorn facsimile of how it used to be. I share your hope of better trading conditions in 2023 but I fear its going to require more than a generous helping of optimism.
Windsor Yards was owned by a closed fund. The new owners have great plans – town centres evolve. The Lexicon of course is a great example.
The sad thing is Chris, The Lexicon took 30 years to reach completion. Let’s hope Windsor Yards can be fast tracked before the town loses any more cachet.