The number of technology, media and telecoms (TMT) businesses taking office space in Leeds has grown by 96% over the past year, significantly more than in any other city across the Northern Powerhouse, according to Adam Varley, Head of Office Agency in our Leeds office.
Such is the scale of the growth that Leeds’ TMT businesses have eclipsed activity from occupiers in the traditionally dominant legal, financial and professional services sector, which has almost halved over the past year.
This change in fortunes could simply be a hangover of the global economic downturn, but the city’s strong emerging TMT talent pool, proactivity and collaboration between the universities and Leeds City Council, affordable rents and relatively low living costs, as well as the impact of recent major developments such as Victoria Gate, First Direct Arena and Trinity Leeds, all serve to elevate its ranking and offer.
Leeds has a strong emerging talent pool that matches the profile of the TMT sector and there is evidence of genuine proactivity and collaboration between the universities and the local authority, through initiatives such as the £38m Nexus innovation and enterprise centre and the launch of the Leeds Tech Hub Fund which has recently announced its commitment to a £2m Tech Hub, which will be based at Platform above Leeds railway station.
However, landlords and developers must continue to adapt their strategies to suit the changing needs of these emerging businesses.
To ensure Leeds maintains this momentum and stays at the forefront, the property community must remain vigilant of the ever-changing market and prepare itself to deliver the kind of spaces that allow Leeds to keep hold of businesses that are already thriving there and attract new talent from outside the city region.
Occupiers in this sector typically prefer to cluster around other like-minded businesses and have a more agile working environment, such as Allied London’s Leeds Dock or Boultbee Brooks’ Concordia Work, while also opting for shorter-term, flexible leases that give them the freedom to upscale and downscale nimbly.
While there is still a nervousness among some within the property industry to embrace the style of working environments this sector demands, there is evidence within the city that carefully designed, stripped back, exposed services buildings can work and deliver a better performance than more 'traditional' office environments. The challenge for developers and landlords is to recognise these nuances of the sector and structure themselves accordingly, thereby enticing TMT businesses and entrepreneurs to move there, grow there and stay there.
South Yorkshire suffered a huge economic blow after the demise of the steel industry in the 1980s. For years it seemed the damage was irreversible, but against the odds the area managed to retain its reputation as a manufacturing hub - and now that reputation is going from strength to strength once more, and it is all thanks to one scheme.
The region scored a major coup early on in 2017 when both McLaren and Boeing committed to bring manufacturing facilities to the Advanced Manufacturing Innovation District (AMID) on the Sheffield-Rotherham border.
In February, McLaren Automotive signed a deal to construct a R&D (research and development) and production facility at the AMID. The car manufacturer is setting up a composites technology centre - its first purpose-built facility away from its campus in Woking, Surrey - in a £50m deal structured through a partnership between McLaren, the University of Sheffield and Sheffield City Council.
According to McLaren chief executive Mike Flewitt, the firm needed a facility at which it could produce carbon-fibre chassis. “We evaluated several options to achieve this objective but the opportunity created by the Advanced Manufacturing Research Centre (AMRC) at the University of Sheffield was compelling,” he says.
Only weeks later the AMID consortium struck gold again, this time signing aeronautics giant Boeing to a facility where it will produce high-tech components for the next generation of three of its aircraft models.
Boeing chose the AMID because it has a long-standing relationship with the University of Sheffield, dating from 2001 when the two came together to create the AMRC - the world-class machining and materials research campus that will be home to McLaren. The proposed 25,000 sq ft Boeing Sheffield facility will be built alongside the AMRC.
“Our decision to start manufacturing high-value components in the UK is a step-change in our engagement and a further example of Boeing’s commitment to grow here, supporting the UK’s long-term prosperity,” says Boeing Europe president Sir Michael Arthur.
SHEFFIELD’S ADVANCED MANUFACTURING INNOVATION DISTRICT
Councillor Leigh Bramall, deputy leader of Sheffield City Council and cabinet member for business and economy, believes attracting McLaren and Boeing is “further proof that the AMID is the place for leading manufacturers to come, not only for research and development and industrial collaboration, but also for production”, and that further such deals will follow.
His confidence is understandable. The AMID is a vast, production-led district that was successful in attracting high-calibre occupiers even before the coup of McLaren’s and Boeing’s deals. Broadly, the AMID encompasses three sites totalling more than 2,000 acres to the east of Sheffield city centre. Two straddle the Sheffield Parkway, which links the city centre and the M1, while the third extends through the historic heavy industrial sites of the Don Valley, taking in the site of the old Don Valley athletics stadium.
The most developed is Harworth Group's’ Advanced Manufacturing Park (AMP), south of the Parkway. The 100-acre site already houses Rolls-Royce and Castings Technology International and will be the new home of McLaren Automotive.
It forms part of the wider Waverley scheme, Yorkshire’s largest-ever mixed-use development. This 740-acre former industrial site, which once housed the Orgreave colliery and coking works, is being transformed by Harworth into a community boasting 4,000 homes as well as shops, restaurants, schools, leisure and public facilities, and parks, in addition to the AMP.
To the north of this, is the site of Peel Holdings’ short-lived Sheffield Airport, which operated from 1997 to 2008 and has been relaunched as the Sheffield Business Park. This is now home to the University of Sheffield’s AMRC, where Boeing and McLaren will operate.
The centrepiece of phase one is Factory 2050, which was formally opened earlier this month. The spectacular circular complex is described as “the UK’s first fully reconfigurable collaborative research facility, dedicated to digital assembly and flexible component manufacturing”. Teams at Factory 2050 are already working with manufacturing partners on projects spanning robotics and automation, digitally assisted assembly and manufacturing informatics.
For phase two of the Sheffield Business Park, which will be built on the site of the disused runway, Peel has consent for 900,000 sq ft of mixed-use space with enterprise zone status.
The third element of the AMID is in the Don Valley, where Sheffield Hallam University, Sheffield Teaching Hospitals NHS Foundation Trust and Sheffield City Council will work together to develop the Olympic Legacy Park on the site of the former Don Valley Stadium.
“Our team has led the charge to create a place that draws in and develops world-class people and a place where the world’s leading companies come to explore new technologies and operating methods and to deliver research and technology into the UK’s supply and value chains,” says Bramall.
So what does all this mean for the Sheffield market? Adrian Lunn, director at Lambert Smith Hampton in Sheffield, believes that this year’s spate of high-profile deals has changed perceptions of Sheffield.
“We’re seeing companies actively looking to place R&D and high-tech uses in the area,” he says. “They’re saying ‘we’ve got to be as close as possible to this’.”
One of the reasons the approach has been so successful is that it builds on Sheffield’s traditional strength in materials science and precision engineering. “We’re never going to compete with Leeds in financial services or with Manchester in media, but what we’re good at is manufacturing,” Lunn says. “We’re building on the existing skills base, and the universities have been key to that.”
Lunn adds that the AMID is already having a measurable impact on the market. New space at the AMP is quoting a rent of £7.50/sq ft - £2/sq ft higher than sites elsewhere. That £2/sq ft difference is a significant one. At that higher level, development of more new space is financially viable without the need for subsidies. And that means further phases of development could be self-sustaining.
“At that level, it stands on its own two feet - it could finance new development,” Lunn says. “When a city’s time has come, it’s a wonderful thing.”
Sheffield’s time came and went. Now, it appears to be enjoying its second coming.
This article was first published in Property Week on 20 April 2017 - click here to view the original article.
Just as coffee shops become the major takers of high street space in the last decade, will the new need for space for coworking drive organic change and growth in our town and city centres or will we see a ‘corporate approach’ evolve as it becomes more popular, asks Josh Levy, Head of Office Agency in our Manchester office.
Coworking is defined as the use of an office or other working environment by people who are self-employed or working for different employers, typically to share equipment, ideas and knowledge.
Businesses and individuals typically commit to flexible memberships rather than licences or short-term leases, in return for access to a workstation with a personal mailbox, storage and landline services, as well as meeting room hire, catering facilities and often a calendar of networking events, for a specified amount of time.
In the seven years since it was officially launched, the number using the model has grown to more than 100,000 and could rise to one million by 2018. The ‘coworking’ model was originally used as a way to manage property costs in London, but has become increasingly popular in the Northern Powerhouse, albeit, largely in the form of more traditional serviced offices, incubation centres or small office suites offered on inclusive ‘easy in/easy out’ licences.
However, this is all changing – coworking demand is on track and set to take over in 2017 and beyond. Although it is still early days, the number of micro businesses (the greatest users of coworking space) is increasing and now equates to 96% of all companies in the UK.
One operator to fully embrace the coworking ethos in the North is pay-per-minute work, meeting, social and event space concept Ziferblat, which is adding to its award-winning Edge Street facility in Manchester's Northern Quarter with the acquisition of 6,000 sq ft at MediaCityUK's the Tomorrow Building. Ziferblat charges 6-8p per minute depending on location (8p in Liverpool). It also charges by the hour for meeting rooms depending on size, from £30 to £550 per hour.
Elsewhere in Manchester, after experimenting with the concept at the old Granada Studios, Allied London realised that it is not just the micro business that would benefit and has invested in the 160,000 sq ft XYZ scheme. Designed with coworking and interaction at its core, this was created to disrupt the financial district of Manchester and has successfully done so, with demand far outstripping supply.
In the regions, Manchester seems on the tip of everyone’s tongue with new entrants Head Space and WeWork taking root. Others now have northern cities on their radar too.
A model is evolving. Coworking space should offer the promise of collaboration with a business community ideology that is supportive and inclusive. Privacy is not forgotten and can be a major issue as users could find themselves working alongside competitors. Hence some developers are introducing vetting procedures for space users.
Coworking is still very much an emerging form of asset class and changes are needed if it is to have the same impact on property as Starbucks and the rise of the coffee shop. One example of this is traditional leases which do not usually permit businesses to ‘share’ occupation of their premises with businesses outside their own corporate structures. Fundability is also an issue where institutional leases are required to determine viability.
Think identity, buzz, community and amenity – by adding these organically into a building, it will enhance its potential with minimal impact on a landlord’s lettable space. In order to remain current, competitive and meet the burgeoning demand, the property industry must acknowledge the importance of this growing trend and react quickly.
This article originally featured in our Northern Powerhouse Office Market Report 2016/17 and was updated for CoStar News in March 2017 - click here to view the full report.
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