icentrum Market Demand Study

Transcription

1 icentrum Market Demand Study Prepared for Birmingham Science Park-Aston and Birmingham City Council Final Report November 2011

2 Contents 1.0 Introduction Appointment Study Objectives Work Undertaken Document Structure Incubation, Innovation and Economic Development Introduction Incubation Innovation Innovation, Business Birth Rates and Growth Business Birth Rates: Regional Variations and the Role of Cities The Business Incubator / Innovation Centre The Role of the Public Sector Business Innovation and Incubation as an Industry Next Generation Incubation and Innovation BSPA and icentrum The Science Park Digital Plaza and icentrum Faraday Wharf The icentrum vision Summary A Review of Existing Supply Introduction Critical Assessment Criteria Overview of the UK Position Floorspace Tenant Type Accommodation and Services Offered Overview of the West Midlands Position Supply Overview Floorspace Tenant Type Tenant Numbers and Occupancy Rates Accommodation and Services Offered...17

3 3.4 Sustainability of the icentrum offer Income Streams The importance of high occupancy The Market Leader: Palo Alto, USA Palo Alto and the Return of AOL Exemplars from the UK Summary Stakeholder Engagement Introduction Stakeholder Interviews Type of Organisation Reasons for Locating at Aston Strengths of Aston as a Location Weaknesses of Aston as a Location Aspirations for icentrum Summary Business Survey Introduction Profile of Respondents Sector profile Age of business Business size Business Premises Current premises Future requirements Requirements of icentrum Offer Importance of facilities and services Business support services (including additional services) Overseas Markets Priority Markets Future attitudes to overseas trade Components of overseas support Summary Local Economic Characteristics Introduction Population and Demographics Population and Population Change...47

4 6.3 Economic Activity Qualifications Occupational Profile Employment Business Structure and Entrepreneurial Capital Births in New Enterprises All Sectors Deaths in New Enterprises All Sectors Business Survival Rates Entrepreneurial Capital Travel to Work Area Summary Property Market Context Introduction Overall Performance National Context Local Context Market for Serviced Accommodation Custard Factory E-innovation Centre, Telford Summary Profiling Demand Introduction Entrepreneurship The Market for Managed Accommodation Demand Profile...72 Annex One: Stakeholder Consultees... 1 List of Consultees...2 Annex Two: Serviced Accommodation in Birmingham City Centre.. 3 List of figures Figure 5.1 Stage of Business Development...39 Figure 5.2 Length of time Trading...39 Figure 5.3 Business Size (Number of Employees)...40 Figure 5.4 Size of Premises Floorspace (ft 2 )...41

5 Figure 5.5 Importance of Facilities...42 Figure 5.6 Importance of Services...43 Figure 5.7 Business Support Requirements...44 Figure 5.8 Overseas Markets...45 Figure 5.9 Key components of overseas support...46 Figure 6.1 Occupational Profile, % of total employed Figure 6.2 Hi-Technology Employment in Birmingham City Region (2010)...54 List of tables Table 3.1 Contributory factors to the success of Palo Alto and Silicon Valley...19 Table 3.2 Boho Zone Middlesbrough...21 Table 3.3 Liverpool Science Park Innovation Centre...23 Table 3.4 Tech Hub, London...25 Table 3.5 St John's Innovation Centre, Cambridge...26 Table 6.1 Working Age Population (2005 and 2010)...47 Table 6.2 Population by Age Cohort - Birmingham...48 Table 6.3 Economic Activity Rates...49 Table 6.4 Economic Inactivity Rate by Type (% of economic activity 16-64))...49 Table 6.5 Business Survival Rates (after 1 and 2 years)...58 Table 6.6 Entrepreneurial Capital...59

6 1.0 Introduction 1.1 Appointment Ecorys was appointed by Birmingham City Council to undertake this study in September The client for this study is a combined group of representatives from Birmingham City Council and Birmingham Science Park Aston (BSPA). Ecorys is working in partnership with Thomas Lister on this study. Thomas Lister is providing specialist input on the property market. 1.2 Study Objectives Fundamentally, the study is to provide a rapid review of the potential market demand for the icentrum building which is proposed as Phase 1 of the Digital Plaza proposals at BSPA. The study is part of a suite of studies being prepared simultaneously including: Partnerships and Networks Study Ecorys Building and Infrastructure Study GVA Grimley 1.3 Work Undertaken Our approach and work undertaken has included the following: an inception meeting at BSPA; a review of the role of incubation and innovation space; a review of socio-economic characteristics in the city, city-region and region; preparation of a selection of case studies profiling existing examples of supply and highlighting elements of good practice; consultation with key stakeholders; consultation with existing tenants at Faraday Wharf, BSPA; an electronic survey of tenants at BSPA and businesses within the West midlands ICT cluster; and based on the preceding areas of work an assessment of how the demand profile may emerge. 1.4 Document Structure The remainder of this report is structured as follows: Section 2 provides an overview of incubation and innovation space as tools for economic development; Section 3 presents a review of existing supply and good practice; Section 4 reports back from our stakeholder engagement work; Section 5 sets out the findings from the business survey; Section 6 highlights analysis of local economic characteristics; Section 7 contains our assessment of the property market; 1

7 Section 8 is a profile of demand; and Section 9 contains the study conclusions Annex 1 contains the stakeholder consultee list Annex 2 sets out our assessment of the Birmingham market for serviced accommodation 2

8 2.0 Incubation, Innovation and Economic Development 2.1 Introduction Innovation is a key economic development policy for UK and other western industrialised nations. It is reflected in policy interventions at national, regional and local policy and, in the current economic climate, is viewed as an effective means of assisting economic growth through business development, job creation, increased productivity and Gross Value Added (GVA) growth. This section sets out the context to innovation policy in the UK. 2.2 Incubation Business incubation refers to the provision of services, facilities or conditions aimed specifically at assisting businesses to develop. Since the early 1980s there has been a marked growth in the number of incubation centres in the UK and in the USA, Germany and Southeast Asia. Storey & Greene (2010) 1, have outlined four particular features of incubator support: Shared office accommodation Typically this is provided at a subsidised rate. The advantage being that it helps the new technology business to retain its working capital. This is helpful to the fledgling business that is likely to be spending heavily on R&D at this stage and have minimal revenue flow. Shared support services This also provides a cost saving to the business by reducing its overheads and running costs. Professional business support and advice The value of this support is that technology-oriented business founders are expected to bring with them technical knowledge but may have little or no business knowledge. Providing expert advice and assistance is, therefore, designed to overcome this imperfect knowledge. Network provision Another advantage for businesses in incubator units is that they can use the brand of the unit to enhance reputation and legitimacy of their business. So, if the incubator unit is on a science park or a university research facility, the new business becomes more credible to its customers and suppliers. Businesses can also develop linkages and networks with other businesses in the incubator. Incubation sites are generally selective in terms of businesses that are accepted. Preference is often restricted to younger businesses (start-ups and those that are less than five years old) and/ or hightechnology-related businesses. 1 Storey, D. & Greene, F.J. (2010) Small business and entrepreneurship, Harlow, Pearson 3

9 2.3 Innovation Innovation, Business Birth Rates and Growth Innovation is critical to the ability of developed economies to sustain their relative national income levels in the face of competition from emerging economies. Increasingly the goods and services countries like the UK can provide will fall within the capabilities of countries like India and Brazil as these countries increase their base of knowledge industries. Over time, this competition will drive down rewards to labour and capital in the developed countries in those sectors where outputs become increasingly commoditised. Put another way, the ability to sustain high levels of rewards to labour and capital in the UK will increasingly depend on the ability to operate competitively in markets which cannot be contested by emerging economies. In such markets the UK and other developed economies can more readily exploit the potential that more limited competition gives for high levels of added value. Sustaining high levels of added value therefore depends critically upon exploiting attributes of goods and services that cannot readily be replicated by competitors, these include: Reputation - the major accounting and legal firms are examples of businesses where clients are prepared to pay more for work backed by the repute of a few major players, who in turn are able to recruit the very best people; Experience / expertise - the City of London is an example of an area populated by firms whose combined and accumulated experience and expertise would be very difficult to replicate elsewhere; Brand value the high-end German car sector and the Italian garment industry are examples of industries where the brands command high prices based on design and manufacturing quality; Product leadership every product and service evolves, in some sectors very rapidly and in some cases with large step changes rather than evolution; staying ahead in areas such as technical capability, design, presentation, marketing and distribution all contribute to retaining a dominant market position. Innovation is a common and critical factor across all of these; innovation covers areas such as the development of new ways of financing investment, new legal structures, financial products (including those which contributed to the current recession), new materials, new products as in sectors such as pharmaceuticals, enhancing the performance of existing products such as cars in response to CO2 reduction measures, enhancing aesthetic or ergonomic design, and so on. While innovation in processes is important in all sectors, but especially in those where price competition is keenest, innovation in products and services is a key driver of value retention and growth. The role of new and small firms in product and service innovation varies by sector and also by region. In industries where the costs of R&D are high and act as barriers to entry, such as pharmaceuticals, small firms will play a limited role. In others where barriers to entry are low, small firms usually play a stronger role, whether selling to final consumers or within a supply chain selling to larger firms. 4

10 In sectors where barriers to entry are low, many new firms are founded specifically to exploit and develop a new idea, so that a high proportion of innovation will be concentrated in such new firms. Small firms, both new and established ones, also tend to have internal structures that do not stifle innovation or delay responses to opportunities, whether generated externally by changes in the market, or internally through innovative thinking Business Birth Rates: Regional Variations and the Role of Cities As with previous recessions, at the present time small firms are expected to be a key element in the recovery of output and employment. However, the experience of past recessions and of measures to increase regional growth rates by increasing small business start-up and survival rates suggest that the already more prosperous regions achieve higher rates, and usually in sectors which have higher added value and higher growth rates. Regions such as Scotland and the North East of England had lower birth rates than regions like the West Midlands, which in turn lagged behind the south and east of England. Most previous research has shown that there were large differences between the regions in selfemployment and small firm formation, and that it was the more prosperous areas which had higher birth rates and where small businesses were growing faster. Much of the research in this area has looked at factors such as business finance and support mechanisms such as the role of regional agencies, but more recent work on agglomeration and its role also sheds light on the underlying factors, in particular: Larger agglomerations of people and businesses provide wider and deeper markets and therefore proportionately more opportunities for niche businesses to find markets large enough to deliver adequate returns to labour and capital. Variety is a critical driver, and more people with higher incomes mean the spread of demand for varieties of goods and services is wider: put another way, a provider of a specialist service will find a larger and wealthier market in Birmingham than in (say) Dundee, so where a threshold market size is required, it is more likely to be found in larger cities; Innovation frequently comes from interaction between individuals and businesses, and the cost of interaction and therefore of innovation is much lower in a large agglomeration because people and businesses are concentrated more densely in such areas which also tend to have better transport links; Large agglomerations attract migrants (whether from other regions or countries), and migrants tend to be less risk averse and / or better qualified than those who choose not to migrate; in some sectors such as the media, the largest city may be the single, dominant concentration of talent and opportunity and will therefore tend to draw in, and re-cycle, people looking to develop businesses (including single person self employment) in that sector. The evidence therefore suggests that a limited local market base, together with the strong pull exerted on talent and entrepreneurship by the larger and more affluent cities, will limit the number and / or quality of start ups within the less prosperous regions. Accordingly, because of their importance for future growth and for retaining skills, the less prosperous regions must try to retain and nurture their start ups, and especially those which involve innovation rather than those which are simply more of the same. In contrast, the more prosperous regions can sustain overall growth even if the churn of small firms is higher; a high churn points to more risk taking, which will pay off for successful firms, while with a sufficiently high rate of start up there will be net growth even if the business death rate is also high. 5

11 In the less prosperous regions which lack all the benefits of the large agglomerations, innovation centres and incubators exist to make the option of remaining within the region more attractive to the start up and small growing firm. This is achieved by providing a range of support functions, some of which are intended to improve access to markets and resources, either directly through providing access to contacts and networks, or indirectly by providing assistance in areas such as administration to free up the owners time to develop the market and/or the product or service. The latter is important, as any new start and small business encounters significant regulatory and other demands which can distract the owner from the core tasks of finding and serving customers and continuing to develop the offer The Business Incubator / Innovation Centre Economic development agencies and partnerships in the UK have long recognised the problem of low business birth rates and have developed various programmes and initiatives to try to address at least the symptoms, if not always the underlying causes. In the 1970s and 1980s, much of the focus was on resources external to the business; business premises and finance, and the policy debate was on whether there were market failures in provision of these resources. As wealth (including home ownership and therefore collateral for borrowing) has increased, and as the lessons from interventions have been learned, more focus has been given to three critical areas: converting would-be entrepreneurs into actual businesses; putting business skills alongside the technical skills which are typically the basis of the business; and business aftercare, to sustain fledgling businesses and enable them to grow Enterprise events, for example, tend to generate substantial interest in business start-ups, but follow up has often been poor, and more recent emphasis has been on improvement so that interest is converted into action. Initiatives here have included team business models and mentoring by established entrepreneurs; and also have resonance with the Government s latest mentoring programme designed to support economic growth. Business incubators or innovation centres are designed to address all three of these areas for selected businesses that have growth potential, and which are expected to benefit from close support, with the objective of accelerating and sustaining company development. In the UK, incubators are largely seen as facilities in which a number of new and growing businesses operate under one roof sharing services and equipment, and having equal access to a wide range of professional, technical, and financial programs. In contrast, the US literature sees incubation as a programme; the distinction is important, because facilities alone will not achieve the objectives of enhancing business skills, freeing up resources for tasks such as market development or providing adequate aftercare. Both within UK and internationally, incubators vary in the way they deliver their services, in their organisational structure, and in the types of clients they serve. The main variations are whether there is an attempt to cluster similar types of businesses, and the extent to which the incubator provides business support resources and services. There are also differences in delivery mechanisms; in many instances support services are organised through a dedicated incubator management team and delivered through a combination of in-house expertise and an external network of contacts. 6

12 A comprehensive incubator programme might provide all or most of the following: Assistance with business basics through to comprehensive business training programmes Help with networking activities both with other incubator firms and externally Assistance with market research / marketing / presentation skills Help with accounting and financial management which might be a service available on site Links to higher education resources and strategic partners Access to business angels / mentors, investors or venture capital Management team development including assistance with sourcing non-execs Advice with product / technology commercialisation and with intellectual property Access to legal and financial services and advice Help with regulatory compliance Help to identify specialist suppliers and other resources. In addition, the facility housing the incubator would be expected to provide good quality business premises with services such as high-speed Internet access. In some cases incubators provide access to facilities and equipment that would not otherwise be available or which would be too expensive for a new start business to buy or lease. The other important advantage claimed for incubators is that they encourage a positive and mutually supportive business culture among firms, by exposing small businesses to similar firms and therefore enabling the sharing of experience and ideas. There is some evidence that this helps to reduce the risks involved in business start up. However, this is difficult to test, as most incubators are selective with regard to the businesses which are admitted, and which are, therefore, those most likely to succeed in any event. The added value of the incubator is that incubator businesses grow at a faster rate than they would outside the incubator programme. Where an incubator provides a tailored programme, the amount of time a business spends in that programme can vary, depending on the type of business and the owner s business expertise / competence. Time to market and the need for research and development are key factors, with life science businesses typically spending more time in an incubation programme than a manufacturing or service business with a shorter time needed to bring a product or service to market. With increasing use of ICT, the "virtual Incubator" has developed to provide services to tenants and businesses within an area and not just within an identifiable facility; in time this is expected to increase, and incubation may therefore increasingly be seen as a process or programme rather than time spent within an incubation facility. The icentrum and Science Park Without Walls concepts are very well placed to tap into this changing preference for fixed place working and are proposed with a model of working in mind that speaks to the future rather than the past. As the type of assistance provided by an incubator programme and especially by a physical centre is resource intensive, it is also important to consider: the commercial model, and how tenants of a physical centre and any remote or virtual users will be charged for services, and whether charges should be linked in some way to ability to pay as the business develops; and 7

13 the business exit strategy: there is an opportunity cost to society if a business remains in a centre beyond the point where it can grow unassisted in an external environment, as that company will be using space and services that could benefit another new start business. As discussed further below, the role of the private sector in providing incubation facilities and services may lead to some tensions both with regard to the admission strategy and to the exit strategy - a churn of businesses and a focus on high growth but potentially high risk businesses is potentially at odds with the need to generate adequate returns from rental income at a physical centre The Role of the Public Sector While there is clearly a need for some public funding to create and sustain business development schemes, reviews of business start up schemes have pointed to the apparent contradiction that arises when the public sector takes too strong or prominent a role, namely that people in (what are perceived to be) safe jobs are encouraging others to take risks, while possibly never having done so themselves. The public sector has therefore increasingly played a role as funder, as information provider and as a broker, pointing people to appropriate sources of advice and assisting with funding. Especially in the early stages, while the public sector plays a critical role in, for example, organising and funding start-up events, there is a need for advice and counselling some of which is best provided by an advisor or mentor that has direct business start-up experience. There is reported evidence, for example, that the majority of would-be entrepreneurs prefer to talk to, other entrepreneurs, rather than public sector officials; at the same time, would-be entrepreneurs see the public sector as the better source of some types of advice and information. It is therefore important that programmes established to increase business start-ups strike a balance between public and private sector roles. Innovation centres are part of the support process designed to enable a business to grow once it is through the start-up and has the capability to produce a basic business plan. The existence of support services, of which innovation centres are a particular type, have very little impact on the business birth rate, but the evidence suggests they do affect survival and growth rates. As discussed below, with support from the public sector, business incubation has developed as a business sector in its own right, albeit one in which the great majority of players are not for profit organisations Business Innovation and Incubation as an Industry In the UK, business incubation has developed as an industry, in which the private sector has taken on a significant role alongside the public sector. Many business incubation facilities (or environments) operate as not for profit organisations, providing services to start-ups and early stage businesses. As noted above, this traditionally includes space, shared admin and business support services; as businesses mature the basis of the service offer and its price usually adjusts. While the focus remains on start-up businesses, the need to generate commercial returns means that some centres also include established businesses as anchor tenants, which clearly assists with revenue and cash flow. Increasingly, centres offer a range of pre-incubation activities, which blurs the distinction between start-up and the traditional role of incubation as it assist with concept development and first stage business planning. Pre-incubation services usually target under-represented groups and/or areas where self- 8

14 employment and raising awareness about entrepreneurship are important components of the programme. The other main trend is for incubators to extend their reach into the wider business community, and now the majority of businesses assisted by centres are not located within the centre itself. Business incubation environments are tending to become increasingly sector specific. The principal sectors include high tech industries, creative industries, knowledge-based businesses, bioscience/ biotechnologies, advanced manufacturing and energy. This may reflect the fact that many centres are linked to universities or have links with major local firms, but occupancy will also reflect the centre s selection criteria; in this instance high-tech and high growth SMEs. Even though tenants of the centres represent only 23% of the client base, UKBI report that 67% of operating costs come from rentals indicating the importance of revenue from tenants. However, 28% of income comes from grants and other sources (which would include external parties using the premises and facilities), and only 5% from consultancy and external work. This does suggest a property focus in commercial terms, and does raise a concern that the need to generate returns based on rentals and occupancy rates may generate a tension between the core business development objectives and the need to break even, which is an inevitable consequence of a strong private sector role. At the same time however, it also signifies the importance of non-property rental income and the scope to grow this by making icentrum more attractive to non-tennants. It should be noted that, unlike many business assistance programmes, business incubators do not serve any and all companies. Entrepreneurs who wish to enter a business incubation programme must apply for admission, and acceptance criteria vary between different locations. In general, only those businesses with feasible business ideas and a workable business plan are admitted. It is this factor that makes it difficult to compare the success rates of incubated companies against general business survival statistics. Again there may be a tension in the selection process, where a centre may have to consider the risks involved in terms of rental payments in admitting a business offering leading edge innovation and high growth potential, but with higher risks than a less innovative but commercially more attractive tenant. The existence of such tensions highlights the need for effective monitoring and regular auditing / evaluation, and the avoidance of simplistic box-ticking as a way of overseeing public sector investment in incubators Capital funding of centres is typically a mix of public sector funds including HEIF (Higher Education Innovation Fund), ERDF, development agencies and local authorities. There is usually also a Public Service Agreement (PSA) which sets out objectives, targets and monitoring plans; as noted above, it is important that monitoring and evaluation are robust, because of the potential conflicts between the objective of covering operating costs and that of assisting high growth potential businesses. UKBI reports that there are some 300 business incubators in the UK with some 12,000 companies. There is a spectrum from stand alone business incubators to those based on a science or business park, within a University campus or a private sector large corporate. Business incubators can be found throughout the UK and in all types of locations, depending on market need. However, many are in close proximity to research activities where there is technical support and equipment. Examples include universities with a strong bioscience offering, where it is usual to find a business incubator dedicated to commercialising bio businesses or innovations. Similarly, incubators can be used to drive forward the 9

15 development of a strong cluster of businesses; such as IT, creative industries, and environmental technologies, which then attract other innovative start-ups in related sectors. The size of business incubation facilities varies quite widely; the average size is around 36,000 ft² but there are large variations around this. The average centre has 32 units, but some have up to 200 while virtual centres have no actual units Next Generation Incubation and Innovation Next generation centres will be used by (current and) next generation entrepreneurs. The physical and service offer will be less about the configuration of space and more about the support services on offer, connectivity to the outside world and fast, state-of-the-art Broadband provision. Increasingly, connections beyond the West Midlands and the UK will be more important to next generation entrepreneurs and will be in demand. BSPA s Science Park Without Walls concept is responding to this changing requirement. The partnership with Cisco is a key aspect in the delivery strategy and will support the high-tech cluster development at icentrum. A further point worthy of note is in relation to the way space is configured in the centre. Clearly some businesses and entrepreneurs will want to have a unit with their name on the door and to develop their business from that base. Others will want a much more flexible approach and to reduce their overheads at the same time. If a creative business does all its social networking on-line, then it won t want to pay for meeting room space or plush reception areas. If a creative business is used to working with cloud computing systems such as Huddle or Dropbox, then it may have less need for access to servers. The Broadband connection speed and reliability will be an important consideration and the development of tailor-made networks for the creative and knowledge sector (i.e. sohonet 1 ) illustrate how important this is to this type of business. The space at icentrum can offer something different to the commercial market in Birmingham and, simultaneously, attract a new type of entrepreneur if it considers space for the following types of user: Coworking is a style of work which involves a shared working environment, sometimes an office, yet independent activity. Unlike in a typical office environment, those coworking are usually not employed by the same organization. Typically it is attractive to work-at-home professionals, independent contractors, or people who travel frequently who end up working in relative isolation. Coworking is the social gathering of a group of people, who are still working independently, but who share values and who are interested in the synergy that can happen from working with talented people in the same space. A collaborative workspace or shared workspace is an inter-connected environment in which all the participants in dispersed locations can access and interact with each other just as inside a single entity. The environment may be supported by electronic communications and groupware which enable participants to overcome space and time differentials. These are typically enabled by a shared mental model, common information, and a shared understanding by all of the participants 1 Sohonet is a global expert in connectivity and data management for the media and entertainment industry. It offers an extensive range of services backed up by unrivalled support and expertise to enable pan-global collaboration within the media community. Sohonet provides services including secure high-speed networking, Internet connectivity, hosting, data management and digital negative management for file-based productions. 10

16 regardless of physical location. Users of this approach may want to be based in icentrum but then linked to colleagues wherever they choose to be. Open innovation is a paradigm that assumes that firms can and should use external ideas as well as internal ideas, and internal and external paths to market, as the firms look to advance their technology. The boundaries between a firm and its environment have become more permeable; innovations can easily transfer inward and outward. The central idea behind open innovation is that in a world of widely distributed knowledge, companies cannot afford to rely entirely on their own research, but should instead buy or license processes or inventions (i.e. patents) from other companies. In addition, internal inventions not being used in a firm's business should be taken outside the company (e.g. through licensing, joint ventures or spin-offs); icentrum has potential to develop this approach over time. 2.4 BSPA and icentrum This section is taken from the GVA Grimley report on Buildings and Infrastructure which has been produced simultaneously to this report and both are informing development of the icentrum proposals The Science Park BSPA is located on a 14-acre campus close to Birmingham City Centre. The Park is wholly owned by Birmingham City Council (BCC) which is working towards the creation of a Digital District incorporating the Digbeth and Eastside areas, co-located with Birmingham s Enterprise Zone. The aim of a Digital District is to encourage business growth, inward investment and improved services in the sector. At BSPA there is an opportunity to create a new focus and expression of the Digital District vision, in the form of a 11,000 m² development known as the Digital Plaza an exemplar for the City and the Region Digital Plaza and icentrum The icentrum building is to be the first expression of the Digital Plaza concept on the BSPA campus and is intended as a 4,200 m² home for new incubator space, new innovation space and the icentrum programme. The building is to become the front door to BSPA and, through state of the art connectivity, the hub of a virtual science park the Science Park Without Walls (SPWW). Science Parks stimulate innovation through aggregating or Clustering talent, technology and finance. By facilitating collaboration, Science Parks support inter-cluster communication and support invention and innovation. icentrum will go a step further, enabling collaboration within the ICT, digital media and games sectors across physical boundaries as part of a virtual network utilising digital connectivity. The SPWW concept includes transnational EU funding for the District+ project, linking BSPA and icentrum to key European locations with a similar vision for virtual clustering Faraday Wharf The icentrum building is to be integrated into the Science Park and located next door to the highly successful Faraday Wharf building at BSPA, which provides a home for cluster-relevant innovation space and for programmes which support start-up firms and incubator concepts such as Entrepreneurs for the Future and International Investment Forum, the fast-track Oxygen Accelerator mentoring programme and the Cisco-supported Tele-presence conferencing tool. Faraday Wharf is currently 90% occupied and 11

17 space is required for physical growth and for the further development of these successful programmes and initiatives The icentrum vision The icentrum building will exemplify connected real estate, offering state of the art ICT collaboration platforms in a state-of the art eco-friendly building. Workspace within the building will promote smarter working, promote creativity and collaboration and support environmentally sustainable working. Broadband links and internal wired and wireless connections will facilitate the virtual collaboration and development that new businesses require. Space will be made available to new and established firms on a service-based arrangement, with the emphasis on flexible occupation, flexible allocation and flexible use of space. This study, and the design work which will follow it, present an opportunity to turn the vision into reality by translating concepts into specific design requirements and a design approach for the spaces and systems within the icentrum building. 2.5 Summary The proposals for icentrum are exciting and can support a new dynamic in economic development and entrepreneurship in Birmingham. It will be part of a new paradigm in supportive business environments to accelerate development of jobs and economic activity for the twenty-first century. Moreover, the potential for icentrum to be part of a network of like-minded centres based in universities around the UK and internationally should not be underestimated either. The business model for delivering icentrum will need to determine the delineation of space between incubation and innovation users as there is a clear link with ability to pay rent and, therefore, a link to the fundamental viability of icentrum. At the concluding chapter of this report we set out our thoughts on the split and the sources of demand able to support that split, but further detailed discussions will be required between BSPA and its joint venture delivery partners about the economic model to be used for the centre. In broad terms, incubation and innovation has been a relatively successful policy approach in the UK and one that has grown in stature since the 1970s/80s. However, there is no guarantee of success and a series of key determinants of success can be identified which include: the skills and experience of Centre management staff who have to understand the sector (high-tech in this instance), be able to deal with property enquiries, be competent financial managers, have an aptitude for marketing and be the public face of the Centre. the range of services on offer must go beyond what is on offer by competitors and be part of the unique selling point of the Centre. the rent charged must take account of the Centre s business model but also be responsive to prevailing market trends in the area so that the market position is based on a combination of rent charge and service offer; and the mix of businesses on site must be such that agglomeration benefits from them clustering together can be possible and a growth-oriented culture can develop on site. 12

18 3.0 A Review of Existing Supply 3.1 Introduction In examining the issue of supply, there are two interrelated factors that could have a measurable impact on market demand, particularly if icentrum looks to attract entrepreneurs, investors and blue-chip companies from the West Midlands, the UK and overseas. Firstly, there is the need to obtain an understanding of the current supply of incubator and science park accommodation in the region, since icentrum will have to directly compete for local demand on parameters such as location, type and quality of service, rental and service costs and relationships with local businesses, sector representatives and higher education institutions. Secondly, the icentrum offer will have to sufficiently differentiate itself from other incubators and parks located throughout the UK. For overseas businesses and investors, what is it that will persuade them to choose icentrum and Birmingham Science Park, Aston ahead of other locations such as Tech Hub, Liverpool Science Park and Cambridge Science Park, to name but three? Critical Assessment Criteria To ensure that icentrum sufficiently differentiates itself from regional, national and even international competition, it is of critical importance to understand the current and future supply of incubation and growon space across the country. In undertaking an examination of existing supply, it is necessary to identify how icentrum can compete and how the proposed development can add value to existing provision, whilst avoiding displacement from Faraday Wharf and other regionally based parks. Critical factors to be discussed include: linkages and formal relationships with universities and other Higher Education Institutions; establishment of partnerships with 'anchor tenants' and well known and established companies; size of similar developments in terms of overall and individual unit floorspace; the proportion of sector specific parks and those with more open tenancy; type and number of tenants; trends in core accommodation and support services offered, including the identification of potential selling points for icentrum; ratio of incubation to innovation space; and occupancy levels, including information on time required to reach current occupancy and the prevalence of waiting lists The long-term vision and aspiration for icentrum is to become an ICT cluster within ten years. This is a bold endeavour and one that will require significant investment in both the physical infrastructure, but also the entrepreneurial culture and environment. With this is mind, there is a need to identify critical success factors from regional, national and international examples, with an emphasis on identifying factors that can be readily transferable within the icentrum concept. 13

19 3.2 Overview of the UK Position Given the breadth and volume of incubators and science parks in the UK, an assessment of four or five parks per region has been undertaken, including provision offered in Scotland and Wales. Selection criteria centred on the similarities and relevance to the proposed icentrum development Floorspace The proposed icentrum development is a 4,200m 2 or 45,208ft 2 mixed use development entailing flexible office space, break out areas and conferencing/meeting rooms. It is important to the short-term success of the development, that the total floorspace is appropriate for the likely demand. Too small and businesses will look elsewhere and too large and there is the unwanted scope for lower occupancy rates that could make the development unsustainable. Reflecting on the national incubators and science parks has facilitated the identification of important trends for both total floorspace and the size of individual units. The total floorspace of most developments ranges from 15,000ft 2 to 65,000ft 2, indicating that the proposed icentrum development falls in the middle of this range. In respect of individual unit size, proposed office space tends to be small, particularly within the incubator space, with sizes in incubators peaking at 250 to 300ft 2. Unit sizes for grow on office space tend to peak at 5,000ft 2, whilst floorspace for individual laboratory units can vary significantly Tenant Type There are currently discussions taking place regarding the criteria for prospective tenants, most notably whether icentrum should target a specific sector or group of sectors or whether the development should be open to a range of sectors and tenants. Analysis of UK science identifies an important trend in respect of tenant focus. The majority of parks reviewed bring together companies from four or five principle sectors, usually Creative and Digital, Medical Technologies and Biotechnology. However, there are some notable examples of sector specificity across the UK and two, in particular, that are worth highlighting (greater detail on these two parks is provided in Annex 2). Firstly, Begbroke Science Park, in Oxfordshire, which offers office and laboratory space to spin out companies and new starts in Nanotechnology, Aerospace and Automotive sectors. The park is home to research groups from six different academic departments, and over 30 high technology/start-up companies which have either spun out of the University or which have located there because of the close links available. A more pertinent example, particularly given the target audience and likely competition for icentrum, is Cambridge Science Park. In developing the selection criteria for prospective tenants, Cambridge Science Park wished to preserve the intrinsic nature of the park for the mutual benefit of all occupiers and has successfully introduced a range of selection criteria. With this in mind residency was restricted to: scientific research associated with industrial production; light industrial production which is dependent upon regular consultation with the tenant's own research, development and design staff established in the Cambridge area, or the scientific staff of the University or of local scientific institutions; and ancillary activities appropriate to a Science Park. 14

20 3.2.3 Accommodation and Services Offered For both the UK and regional assessments, there are two important components in relation to accommodation and services. Firstly, it is important that icentrum provides a certain core of services that are required by businesses regardless of sectoral focus. Secondly, there will be a need to identify services and facilities that can differentiate the icentrum offer from direct competitors. In analysing the service offer of UK science parks and incubators, the following represent core accommodation and service content: Administrative and operational support relating to the day-to-day running of the business; Access to onsite or online business support services, including accounting, leadership and management, access to finance and business/strategic planning; Availability of communal areas; Conference and meeting rooms; Hot desk facilities and drop-in office locations; Laboratory space, if required, depending on user type; Office space of varying sizes to accommodate expansion and development; The ratio between innovation space (80% of floorspace) and incubator space (20% of floorspace) is approximately 80:20. Based on findings from the UK analysis there would appear to be scope in developing a unique service offer for icentrum. For example, and particularly given the sectors prioritised for the development, only one of the science parks reviewed provided resident businesses with access to 'thinking or conceptual space'. In addition, there appears to be a lack of an integrated service offer, where businesses can readily access all the services required within the same premises. Thoughts here turn to examples from Silicon Valley relating to venture capital/investment opportunities and access to legal services where these services are integrated as part of the package including the physical building offer. Perhaps more importantly, icentrum needs to consider the service offer in the light of technological advancements and the reduced requirement for a physical space. Striking the appropriate balance between virtual and physical services will have an implicit impact upon overall market demand and take-up of the facility. It is important to note here, the recent promise of investment by Cisco as part of the British Innovation Gateway (BIG) initiative, which is a five-year investment of cash, technology and human resources, which aims to develop Britain s innovation ecosystem and create an environment in which start-up digital businesses and their ideas can flourish. The next stage of the BIG initiative is Cisco s investment in a National Virtual Incubator (NVI), which is a sustainable public technology network that promises to stimulate entrepreneurship by connecting physical sites through IT infrastructure. The main goal of the NVI is to help accelerate the growth of start-up and SME businesses, by facilitating their contact and collaboration with other like-minded businesses, partners, advisors and investors. The development of such an initiative in the innovation hotspot of the silicon roundabout 1 (which has seen a 200% increase 1 Silicon Roundabout is on Old Street in London located between the City of London and the Eastend. An availability of cheap premises has led to ICT start-ups and SMEs locating in the area creating a high-tech cluster. The cluster is now attracting firms like Google to the area, see: 15

21 in the number of technology start-up businesses over the last 12 months) will have important implications for icentrum and the nature of its core offer. 3.3 Overview of the West Midlands Position Following on from an examination of incubator units and science parks across the UK, it is imperative to obtain a more detailed understanding of the supply of such services in the West Midlands, again with an emphasis on identifying trends in relation to partnerships and affiliations, tenant type and number, floorspace and core service offer. Detailed information on each of these factors will go a long way to ensuring a differentiated product and service offer that will, in turn, secure sufficient market demand to make the centre economically viable Supply Overview Before looking in detail at the nature and extent of supply, a light touch assessment has served to highlight a number of key trends in respect of partner affiliation and tenant companies. As can be seen in Annex 2, the overwhelming majority of successful science parks and incubators reviewed in the West Midlands, have direct links, affiliations or formal partnerships with regional universities. Many are located on university campuses with relevant departments facilitating access to research opportunities and services. It is interesting to note that the university affiliated incubators and parks tend to have higher tenant numbers and overall occupancy rates, when compared to privately owned parks. A quick assessment of tenant type highlights that companies tend to be new start-ups or fledgling businesses, with a significant number spinning out from university departments and research programmes. The companies are often high growth businesses that seek to expand and internationalise rapidly in the early years of development. There is only limited engagement with well known and established businesses and icentrum's idea of securing an 'anchor tenant' could represent a unique selling point that may serve to increase interest in the wider development and service offer. Such a tenant would serve to place the Birmingham ICT cluster on the technological map Floorspace As in the case of the UK assessment, the proposed size of the phase one icentrum development closely reflects the size of similar developments in the West Midlands, with total floorspace ranging from approximately 30,000ft 2 to 50,000ft 2. There are examples of incubators and science parks that have far larger floorspaces in excess of 100,000ft 2, but these are well established, have benefited from a phased developmental approach and often provide access to laboratory space. Focusing briefly on the size of individual lettable units, the trend points to units of between 100ft 2 and 4-5,000ft 2. The smaller units often represent office space for fledgling businesses, those that require access to broadband, but limited additional floorspace Tenant Type Following on from the assessment of UK tenants, a review of West Midlands tenant groups highlights two differing but equally successful approaches. The majority of parks reviewed focus attention on three or four sectors, but these sectors are related in some way by their focus or type of technology. The most 16

22 common group of sectors brought together are IT, Creative and Digital, Medical Technologies and Biotechnology. Although different sectors, they have been placed together because of their usage of similar technologies and the related crossover in terms of research and development. Provided that an appropriate entrepreneurial culture and environment can be established, there is significant scope for knowledge sharing and developmental networking. However, there are examples, thinking primarily of Birmingham Research Park, where the technologies used and research undertaken are so specialist that the benefits and added value to be obtained from 'rubbing shoulders' with companies from other 'related sectors' is minimal. In this instance, however, it is important that an effective network is established to ensure resident companies can benefit from research and technological development occurring among like-minded businesses at other regional, national and international locations Tenant Numbers and Occupancy Rates As touched upon in the supply overview, those incubator units and science parks affiliated with, or attached to, regional universities, tend to have a greater number of tenants and overall occupancy rate. Of those directly affiliated or partnered with regional universities, the number of tenants range from between 65 and 150, whereas as those identified as private parks cater for between 15 and 45 tenants, although clearly, tenant numbers correlate directly with size and quality of site. Based on these figures, however, it would appear that the presence of a university, and active engagement between it and the innovation/ incubation centre can command a higher level of occupancy and a greater number of overall tenants Accommodation and Services Offered As in the case of the UK assessment, there are clear trends in both the types of accommodation offered and the core service offer of parks in the West Midlands. All of the incubators and parks reviewed have the following core accommodation and service offers: Flexible workspaces and hot desk facilities; Access to both incubator and innovation space that provides opportunity for growth and expansion; Conference facilities and meeting rooms; Laboratory space (not directly relevant to the proposed service offer of icentrum); Administrative services, including reception, secretarial, mail, IT support; Superfast Broadband services; Either onsite or referral access to business support services, including business planning, intellectual property, academic research and development, access to finance and grant funding; For icentrum to differentiate itself sufficiently from other facilities in the West Midlands there is the need to identify and provide additional services at reasonable cost. Such services could include onsite access to banking and funding, legal services and venture capitalists and investors, the latter of which will be discussed in relation to Palo Alto and Silicon Valley. 17

23 3.4 Sustainability of the icentrum offer Income Streams During the design, construction and early occupation phases of icentrum development, much of the income generated will result from public and private funding agreements, together with rental and business support charges. Whilst such sources of income would ensure the short-term viability of a science park, longer term sustainability will be dependent on the identification of alternative sources of income. Examples of potential income streams include: Membership and subscription charges; The attraction of a transnational anchor tenant, with both the time and monetary resources to invest in the concept and its ongoing development (See the AOL business incubator case study below) Associated with the above, the attraction of foreign direct investment opportunities, primarily via engagement with entrepreneurs and businesses seeking development or expansion within the UK market (These can be achieved through offering soft landing and networking services, as exemplified by Liverpool Science Park s Innovation Centre which has been constructed with funding from ERDF and is jointly owned by Liverpool City Council, University of Liverpool and Liverpool John Moores University); Charges for other services including conferences and networking events, meeting room/drop-in space and provision of other recreational and networking activities, a point supported by the service offer of the AOL business incubator The importance of high occupancy As recent European Commission Community Research 1 has outlined, science parks are property initiatives engaging in leasing land and office spaces. However science parks and commercial properties are different in their objectives. Commercial properties usually target the achievement of substantial profit, whilst science parks are driven by supporting and assisting economic development, measurable through increased employment and tax revenue through assisting technology commercialisation and enterprise creation. The common requirement for both types of property to assist in the achievement of their aims is a high occupancy rate. The achievement of a viable occupancy rate will be heavily dependent on the specific service offer and the attraction of suitable market demand, Research undertaken by UKSPA has shown that the highest occupancy rates tend to be in science parks and incubators that target particular sectors or sub-sectors and have formal linkages to higher education institutions and research and development activities. It is important to note that the most successful science parks are those that have an occupancy rate of between 85 and 95 per cent. A long-term trend of 100 per cent is not as appealing to potential tenants as there is no availability for grow-on space or for the introduction of entrepreneurs and business start-ups with new ideas and knowledge to share. Whilst it is not possible to identify the occupancy rates of individual regional and national competitors, the annual survey of UKSPA members indicates a national average occupancy rate of approximately 85% 1 Regional Research Intensive Clusters and Science Parks, European Commission Community Research 18

24 3.5 The Market Leader: Palo Alto, USA Numerous attempts have been made by national governments to 'clone' Silicon Valley and replicate many of the environmental and infrastructural 'ingredients' that make the area so successful. Academic research has contributed a great deal in support of these attempts and yet nothing to date has mirrored the level of success. It is true that the UK has the Cambridge Phenomenon and countries such as Sweden, Germany and China, to name but three, have made significant contributions to technological advancement. It would also be true to state that elements of Silicon Valley's infrastructure and 'culture' have been replicated in such locations, however the results have been far less pronounced. The factors that contribute to the success of Palo Alto are well known and include: low taxes, venture capital, risk-taking start-up culture, business webs, physical infrastructure, IT-savvy local population, good local markets, networking skills, activities and organisations for communities of interest, co-location of companies in various stages of development, flexible organisational structure, legal/accounting services, local academic and research institutes, commercial partnerships between academia and industry, activist government policy, presence of role models and human talent. However, whilst the factors are simple, the 'basic chemistry is complicated and the order in which they come into play and the reactions they will produce are hard to finesse'. A key message for individuals with a vested interest in icentrum is that the infrastructure, environment and culture prevalent in Palo Alto and the wider Silicon Valley has developed organically and over many years. Relationships and partnerships are constantly changing as individuals and companies adapt to new technologies, 'fads' and client/customer demands. Whilst aspiring to emulate the success of Palo Alto and Silicon Valley is very noble and understandable, in reality it is not feasible, at least in the short-term. However, in setting the bar and the standards so high, it will be possible to replicate 'elements' of the Silicon Valley model in icentrum and facilitate the project's progression towards being one that attracts companies and entrepreneurs from across the UK and internationally. Table 3.1 sets out some of the key components of Silicon Valley that make it so successful and draws out some pointers for the development and sustainability of icentrum. Table 3.1 Contributory factors to the success of Palo Alto and Silicon Valley Social Networks and the regional advantage of Silicon Valley: The difference between Silicon Valley and many other areas that have sought to replicate it is not in resources or location but in their 'commercial culture'. In essence, the relative success and failure of the two areas centred on the dichotomy between an 'insular' and an 'open' culture. Route 128 (in Massachusetts) firms were characterised as insular and proprietary whilst Silicon Valley firms were open and linked by social and economic networks that facilitated their adjustment to the vicissitudes of market shifts. Inter-company engagement: One of the most important aspects of Palo Alto and Silicon Valley that has made it so successful is the way in which the internalised labour market works, characterised as it is by extensive labour mobility. There is a far higher propensity and incidence of inter-firm mobility with the loyalty of engineers and developers to advancing technology rather than to individual firms or industries. The inherent sense of community, and the loyalty to that community, promotes the establishment of cross-institutional ties enabling Silicon Valley, as an 'organism', to solve technical problems more easily and rapidly than technical people limited to contact with other employees within their company. 19

25 The role of Venture Capital: The openness and flexibility of Silicon Valley's social and economic networks extends much further than simply the companies. In particular, venture capitalists and lawyers play more than their conventional roles; they influence the structure and future development of the client companies. Venture Capitalists, often successful entrepreneurs of the past, not only provide the necessary financial resources to support start-ups and spin-offs, they also play the multiple roles of broker, management consultant and recruiter. Stanford's place at the epicentre of technological innovation: The final piece in the Silicon Valley Network 'jigsaw' is the University of Stanford and the implicit role it plays at the epicentre of technological innovation. the education sector has been vital because 'the constant movement back and forth between industry and university has blurred the boundaries of both and created elaborate social networks that keep academic research focused on practical problems and infuse industrial activity with up-to-date science'. Most notably, in the last fifty years university faculty, staff and graduates have launched some 1,200 companies, including Hewlett Packard, Facebook, Apple, Google, Intel and Cisco Systems, more than 50 percent of Silicon Valley's product comes from companies of Stanford alumni and, in addition, Stanford is responsible for generating lots of patents and those patents are heavily featured in the research of others. It would be difficult to argue that any other single university has had the same impact on the technology and ICT landscape Palo Alto and the Return of AOL The four contributory factors outlined above should not be viewed in isolation from the physical and cultural environments that have been created in Silicon Valley over the last fifty to sixty years. However, what they do illustrate are some of the transferable lessons than can be implemented as part of the icentrum development. They also played an important role in encouraging AOL to return to Palo Alto last year in an attempt to re-invigorate its business and, in particular, it's technological and product development. The story of AOL represents the first of a number of case studies and serves to highlight some of the strategic advantages that can be obtained from the presence of an 'anchor tenant'. Case Study One: AOL Business Incubator AOL Tries for Some Silicon Valley Cred The benefits to be obtained from locating your business in the Silicon Valley area, in terms of research and development, product innovation and knowledge sharing, play an important role in the attraction and retention of large and successful companies. Indeed, some of these companies, thinking principally about AOL and Nokia, have established their own research centres in order to continue to benefit from the entrepreneurial spirit and knowledge sharing that takes place. Rationale for re-locating Established twenty eight years ago, AOL was 'a hot stock' in the 1990s, arguably leading the way in dialup internet technology. However, a disastrous merger with Time Warner in 2009 has seen the scale and influence of AOL diminish significantly. Nevertheless, the brand still has a certain degree of 'pulling power', particularly when you throw the entrepreneurs and technologists of Silicon Valley into the mix. Having recently signed a seven-year lease on a 225,000 ft² building, the Internet giant is taking the opportunity to tap into the youthful technological knowledge base of Palo Alto. 20

26 The Offer Opened last August, AOL has thrown the space open to a wide assortment of start-ups, which work in close proximity to 170 of the company's own engineers. The accommodation itself, situated less than a mile from Facebook and round the corner from 'buzzy' start-ups such as Cloudera and Box.net, is a mix of corporate office, start-up incubator and part college community centre. Current tenants range from a digital comic book maker to a developer of anti-spam software, so what is it that AOL hope to achieve through attracting such a diverse range of entrepreneurs and businesses? Benefits of Re-locating The benefits of this new venture are two-fold for AOL. From a crude corporate standpoint, the company is hoping to get the inside track on investing in and acquiring one or more of the fledgling companies. The bigger idea, however, is that being surrounded by start-ups will help create an 'alluring' culture at AOL, attracting good people who will, in turn, create new products. Even after only one year, there is evidence that the exchange of ideas is starting to occur. For example, the founders of MapMein, a company trying to develop online floor plans of indoor spaces, have been trading technical pointers with Christian Dwyer, senior vice-president of AOL's MapQuest site. AOL's head of initiatives, who is largely responsible for the effort to attract start-ups, is very pleased with the influx of new talent and hopes that this creative spirit will 'rub off' on the twenty-eight-year-old Internet 'sleeping giant'. 3.6 Exemplars from the UK As part of the supply-side analysis, a number of best practice case studies from around the UK have been identified. Each case study has been carefully selected to illustrate an element of the strategic offer that could potentially be transferable within the development of icentrum. Table 3.2 Boho Zone Middlesbrough Case Study Two: Boho Zone, Middlesbrough Context At the time of concept development for BoHo, successful creative clusters had already been established, such as Newcastle's Pink Lane that provided accommodation of the right kind, in the right place and with appropriate business support. The most successful of these creative clusters is London's Soho and the replication of its unique environment and atmosphere was the inspiration behind the Boro's Soho or 'BoHo' initiative. One of the aims of BoHo was for the public sector to act as a catalyst to stimulate a creative cluster round Queens Square and Exchange Square in the Victorian heart of the town, where there were considerable vacancy levels within older commercial properties. One North East committed investment of approximately 5.8 million for the provision of a 35,000ft 2 new build and refurbished accommodation to house creative industries to sit alongside Middlesbrough Borough Council's investment in the provision of 30 live/work units. Size, Tenants and Location The BoHo Zone is 10ha of city centre land reserved for the development of commercial property for housing digital technology companies. Situated within close proximity of the city train station, university 21

27 campus and Teesside International Airport, the Boho Zone is at the centre of the 'New Economy' in Teesside. Office units in Boho vary from 375 2,150 ft², therefore offering a range of options for different companies. There are also more than fifty networking spaces in the building, including 10 breakout zones, 12 secure exterior areas, concourse area, and 3 private multimedia meeting rooms; Accommodation The Boho Zone currently comprises three major builds: BoHo One: This 10m + development is the commercial flagship building for the Digital City project and sits on an impressive site on Bridge Street West in Central Middlesbrough. Core Building 1 provides the workspace for digital media, technologies and creative companies and is the main centre for DigitalCity business activities. The buildings also provide accommodation to SMEs focussing on this specialist sector in turn assisting in filling the skills gap within the area. Bohouse: Is a relatively new development completed in June of last year. It provides 20 self contained units all with living and working a space together with the following facilities: range of one and two bedroom units; cooker, washing machine, fridge/freezer; secure parking space; rent free incentives on selected units; and available to rent for as low as 100 per week. Platform Arts: This occupies newly constructed, purpose built studios within Middlesbrough Railway Station. At the time of opening, it housed 14 professional artist and craftspeople, each leasing studio spaces. Services Services at BoHo include: High quality space for digital media, digital technologies and creative businesses; Accommodation in a BREEAM Excellent-rated building; Easy in, easy out or longer leases to suit your requirement; Virtual office deals also available; Ultra highspeed communications occupants enjoy unrivalled speeds; Ultra highspeed collaboration - as one of Northern Net s Media Enterprise Centres, Boho One is a major hub for Northern Net s collaboration engine offering businesses across the north of England the chance to bid, win and work together on large scale media projects; Wifi in public areas; Secure, air conditioned server room minimises cooling burden on companies and maximises security; Onsite link to Northern Way s ultra highspeed collaboration engine; Heating and cooling using groundwater heat pump, heat retaining concrete ceilings, computer modelled natural lighting, natural and assisted air circulation, solar shading, and wind turbines to give environmentally sensitive and economic all year comfort; Social spaces allow for effective networking and socialising, and the ability to hold events; Refreshment areas - all towers, all floors; Washrooms - all towers, all floors; Multiple shower facilities; Private outside garden areas for users; Close access to DigitalCity Business; and Parking spaces [limited supply, for rent]. 22

28 Table 3.3 Liverpool Science Park Innovation Centre Case Study Three: Liverpool Science Park Innovation Centre Context The purpose of Liverpool Science Park is to provide a home for developing science and knowledgebased companies through a combined offer of high specification accommodation, business support services and links to specialist experts. The science park operates a 'gateway policy' to ensure that appropriate companies are identified and this has proven successful in drawing companies from outside the region and abroad, as well as retaining home grown talent. The park has successfully brought together an exciting range of companies from knowledge-based sectors including creative industries, pharmaceuticals, life sciences, ICT, software development and genetics. Ownership is via a partnership of Liverpool City Council, University of Liverpool and Liverpool John Moores University. Size, Tenants and Location Liverpool Science Park is home to a number of science and knowledge-based companies, each with differing accommodation and service requirements. Tenants within the various premises (currently 61 according to the website) are diverse and represent a number of sectors. Since its introduction in 2006, ic1 has attracted over 50 companies and has maintained full occupancy over much of this period. Companies range in size from single entrepreneurs to larger, more established companies and business support and leases are tailored according to individual needs. Accommodation Currently, accommodation is available in two premises, Innovation Centre 1 (IC1) and Innovation Centre 2, both of which are located within the 'innovation cluster' at the heart of the city's knowledge quarter. This wider knowledge quarter comprises landscaped public spaces, access to university facilities and use of a host of amenities, including theatres and restaurants. ic1 ic1 was launched in January 2006 and provides 40,000ft 2 of highly specified flexible office and laboratory compatible accommodation for commercial and knowledge based companies. The centre benefits from flexible internal space planning that provides a range of unit sizes throughout the building. Individual suites start at 285ft 2 and increase to 'floor plates' of 10,000ft 2, thus providing suitable facilities for companies with one employee through to those with more than 100. ic2 Following the success of ic1, the second state of the art facility, ic2 opened its doors in April This facility provides another 40,000ft 2 of flexible office space and laboratory compatible accommodation for the science park's expanding companies and for new enquirers ic3 In addition, a 7.6m funding package (including ERDF from the Merseyside Objective 1 Programme) has recently been agreed to help finance the development of ic3. It is hoped, once completed, that the centre will play a vital role in the long-term development of Liverpool's Commercial Knowledge economy by providing 42,000ft 2 of much needed R&D offices and laboratories to support, retain and expand the region's thriving life sciences and physical sciences sector. It will also offer purpose built starter pods for young knowledge based companies and state of the art open innovation space for all park tenants. 23

29 Services There are four principle services that form the basis of the Science Park offer to tenants: Graduate Enterprise Centre: Provides a professional and secure environment for new and recent graduates to build and develop a business. It is designed for graduates working within science and knowledge-based sectors including life and physical sciences, creative industries, ICT and software development. Starter Pods: Designed for between one and four workstations, these pods are ideal for businesses that require a private office space without high overheads or long lease commitment. The pods are equipped with: High-speed broadband connections, DDIs and telephone handsets, Wireless, access to communal space, access to six free meeting rooms, reception services and an LSP address. Flexible Office Space: Provides services for businesses that do not want a physical office space but, like all growing companies, need to stay connected. Depending on the requirements of businesses, there are three levels of service provision ranging from Silver to Platinum, each with differing costs and access to support. Soft Landing: Companies working in the knowledge and high-tech sectors, currently based outside the north-west, are eligible to apply to the soft landing centre for membership. The park offers two distinct packages to international companies or companies currently based outside the region. Business Support On-site business support services are offered, although these may be subject to additional cost. These include: Assistance with access to regional and national funds; Access to regional business support and networks; PR &Marketing support (available on request); Growth planning and management of leases (available on request); Access to university departments and business development teams; Innovation Centre activity programme (seminars, socials, networking events); and Ability to feature on LSP website with link to own website. ic1 ic2 24

30 Table 3.4 Tech Hub, London Case Study Four: Tech Hub, London Context The focus of Tech Hub is in the establishment of a working environment that promotes and facilitates networking between businesses. Tech Hub provides an affordable and accessible environment that brings together the right people in one place. The location of the Tech Hub, right on the Silicon Roundabout places it in the middle of an existing cluster of technology start-ups. Focusing on product-orientated technology companies, rather than agencies, consultants and media companies, TechHub is the physical hub for the technology start-up community. Launched first in the Shoreditch/Old Street area of London, the hub consists of desk space, co-working space, meeting rooms and an event space. London represents the first TechHub but it will be followed by others within the network around the world. Whilst there is currently only one physical embodiment of TechHub, there are business members from London, around the UK, Europe, the Middle East, India, China, the US and beyond. Networking, collaboration and knowledge-sharing occur via events, introductions, website activity and face-toface/word of mouth. In addition, network members are able to use the facility to 'plug into the tech community', whenever they are in London, whether a few times a week, or a few times a year. Services The tech hub facility in London provides companies with access to a range of services including: A permanent workspace at the TechHub including desk space, 100mbps wifi, power, use of the communal kitchen area, use of the shared laser printer and use of the TechHub London mailing address; TechHub membership for one named individual facilitating access to the TechHub community, listing within the Members list; A TechHub member account to access the exclusive member network online; Access to TechHub events, including free member only networking and other events Preferential member rates for meeting room bookings Guest passes for named guests to meet members in the TechHub Tech City Tech Hub is located at Old Street, close to the City of London, and at Silicon Roundabout. In 2010 it was noted that there were 200 high-tech firms in the area and on 10 th November 2011 it was reported that this had grown to 600 ( This is a demonstration of agglomeration and clustering which has been quite spontaneous and organic, though the Government is providing support as well. Some of the small tech firms have noted their concern that property rents were starting to creep up as big players (such as Google) moved into the area. 25

31 Table 3.5 St John's Innovation Centre, Cambridge Case Study Five: St John's Innovation Centre, Cambridge (SJIC) Cross Fertilisation of Ideas and 'Soft Landing' Context St John s Innovation Centre (SJIC) was established by St John s College, part of the University of Cambridge, and opened in The Centre provides early stage knowledge-based companies with business advice, strategic consultancy and flexible accommodation. It was the first innovation centre of its kind in Europe and has become world-renowned for its success as a business incubator. Size, Tenants and Location As an Innovation Centre, SJIC aims to help develop, retain and attract world class businesses where there is a comparative advantage. Sectoral focus is on scientific and knowledge based businesses particularly software, ICT, instrumentation and technical consultancy. Biotechnology and medical instrumentation businesses are also represented and supported. Currently, there are about 60 companies located at SJIC, employing over 300 people, creating a vibrant community with an entrepreneurial spirit. Tenants are start-up and early-stage companies operating in a wide range of leading-edge technologies. Unlike other innovation centres, SJIC is also home to a number of companies offering services such as marketing, accountancy and legal services. This creates a diverse business community and encourages the cross-fertilisation of ideas. It also provides tenants with ready access to a range of support services. In addition to the 60 companies, there are a further 270 virtual tenants who use SJIC Star Service 1 rent an address facilities. Accommodation The Innovation Centre s main building contains 92 units ranging from 90 to 4,500ft 2 in floor area, with most units in the 200 1,000ft 2 range. All of the individual units come equipped with or have access to: Direct-dial telephones from a central switchboard, Broadband internet access, Individually monitored and controllable security and central heating, kitchenette facilities, access panel ceilings and flooring, 24-hour facilities access and security, three-phase electricity supply, fire detection/smoke alarm systems and goods access via individual loading bays (ground floor units only) Hot Desking: Use of a fully equipped office by the hour, day, week or month. This service is complemented by access to onsite facilities including restaurant, conference / meeting rooms and Reception services. 1 A rent-address service called the Star Service, which offers a business address, telephone, fax and post handling plus access to the building s facilities to high-tech companies or companies that provide directly relevant business support services and that want an Innovation Centre office but is unable to take up residency on the Park 26

32 Services and Business Support (Core Components) SJIC Soft Landing Service: SJIC Soft Landing service is part of the international soft landing service offered through European Business & Innovation Centres Network (EBN). Currently in its pilot phase, it is planned that the service will be available at more than 200 incubators across Europe and many more across the world. The service is a reciprocal arrangement amongst groups of business incubators, whereby short term business support is provided to visiting companies, with the aim of boosting their international development. Boost Your Business: Boost your Business is a programme of business support delivered annually by St John s Innovation Centre on behalf of Huntingdonshire District Council. The programme is organised into two constituent parts. Boost your business performance is a business coaching programme designed to fill the gap between the EEDA-funded Coaching for High Growth and the new BIS-funded Business Coaching for Growth. It is aimed at Huntingdonshire-based established SMEs with demonstrable growth potential. Boost your Business Skills provides a series of 9 workshops on topics of vital interest to all growth-oriented and focused businesses, with topics including market planning, use of social media, recruitment, access to finance and sales. 27

33 Table 3.6 University of Exeter Innovation Centre Case Study Six: University of Exeter innovation Centre Context Exeter Innovation Centre is situated within the Stratham Campus of Exeter University and provides a home for knowledge based industries undertaking research and development. Exeter University is a centre with an excellent research foundation, specialising in science, engineering, mathematics and medical research, as well as humanities and social science. The University s research facilities are extensive and diverse from materials and manufacturing laboratories and workshops to environmental building services, financial and business amenities. It is proposed that the Innovation Centre and University will be key partners to the Exeter Science Park project which is currently underway on a 24 hectare site adjacent Junction 29 of the M5 Motorway, approximately 4 miles (15 minutes drive) to the east. Initial Science Park buildings will be ready for occupation in 2013 providing grow on space for Innovation Centre tenants as well as business space for major corporations, hotel and conferencing facilities. Size, Tenants and Location The Innovation Centre is located within the Exeter University Campus, approximately 1 mile to the north west of Exeter City centre and accessed via the internal campus road network. It is home to over 30 businesses of varying sizes and spanning a wide range of industry sectors, including biomedical, bioscience, environmental, software, advanced manufacturing and the internet. The Phase I building opened in 2000 and provides a net internal area of around 1,491 sq.m. (16,050 sq.ft.). It was fully occupied within two years. The Phase II building constructed to a BREEAM excellent specification was opened in December 2007 bringing the overall Centre up to a total of 3,475 sq.m. (37,000 sq.ft.) of offices and laboratories providing a total of around 55 units. Individual units are available from around 10 sq.m. (100 sq.ft.) to 215 sq.m. (2,314 sq.ft.) at rentals of up to 20 per sq.ft..between 18 and 22 per sq.ft. (including service charge). There is a differential in rentals between the phases, the latter more modern facility commanding an uplift of around 1.50 per sq.ft. (i.e. c. 7.5%). This tiered rental level forms part of a deliberate strategy and has been in place from when the Phase 2 building came on line. Immediately prior to the new building opening, over 90% occupancy levels were achieved. Within 3 years of the Phase II building opening a similar overall rate was achieved, however over the past 18 months a number of larger clients who were reliant on public sector funding have vacated and whilst replaced to some extent by new start up clients, the overall occupancy level has fallen to around 79%. Levels of enquiries have diminished over the past 18 months and hence new tenants are often home grown from companies starting up and making use of hot desking facilities, being nurtured through business support provided by the centres to ultimately take on their own office space. The University has to approve all potential new clients, with a requirement that they are Research Development intensive. If approved a new 3 year lease is provided with a requirement for an annual survey to be completed confirming that they remain eligible to remain within the centre, with an opportunity (not used to date) for termination of the lease. Services and Business Support (Core Components) All units are fully serviced with access to the internet and the Centre s telephone exchange. There is a staffed central reception, secure internal VLAN, access to a high specification phone system and IT services as well as access to business and technology support services. 28

34 Also available are hot desks for rental with provision of internet and phones on a flexible basis and virtual offices with access to a range of facilities and services designed for companies in remote locations or at an early stage of development. Meeting rooms, conference suites and in house catering facilities are available. Business Support Services Tenants are able to use the Centre s business and administration services and business advisors who draw in support from the University, other Innovation Centre clients and professionals from the operators networks. The Centre has also opened a SETsquared facility to accelerate clients ability to develop and access technology, markets and finance. The Centre is also partnered with the Exeter Business Support initiative, employing a dedicated Business Support Advisor for Exeter who focuses on the requirements of any business (not just those that are knowledge based). Phase 1 Phase 2 29

35 Table 3.6 University of Keele University Science and Business Park Case Study Six: University of Keele Context Keele University Science and Business Park is one of the leading developments of its kind in the UK. It is wholly owned by Keele University and was established in It comprises buildings of circa. 150,000 ft² and is home to over 50 companies from the fields of medical technology, healthcare, information technology and engineering. The Park is centrally located to the UK on the Campus of Keele University in North Staffordshire. A range of business accommodation is provided in the form of high spec offices and laboratories within a number of Innovation Centres constructed in a number of phases since The four existing Innovation Centres provide approximately 140,000 ft² of mixed use accommodation with suites starting from 400 ft². Innovation Centres 1 & 2 comprising circa. 31,000 ft² and 30,000 ft² respectively and offering flexible high tech office and workspace considered ideal for start ups, spin outs or larger companies. Innovation Centres Media 3 & Media 4 comprising circa. 24,000 ft² and 32,000 ft² respectively offer stateof-the-art laboratories and high specification office space, specifically developed for medical technology businesses. Innovation Centre 5 is proposed to provide 28,298 ft² of net lettable B1 grow on accommodation over 3 floors and consists of workshop units on ground floor and office above available to let separately or in a combined arrangement. The gross internal area is 33,907 ft² and parking for spaces will be provided. The overall cost to bring forward the centre is understood to be circa. 6 million. The Centre will be aimed at High Technology business. The Nova Centre is an incubation centre due to open in 2012 aimed at businesses in their early stages which are keen to expand. New businesses locating within the Centre will benefit from reduced occupational costs and business mentoring services. In addition to the above are the Radio Pharmaceutical building which houses Erigal (supplier of radiopharmaceuticals) and the Stephenson Building, built and occupied by Recipharm Cobra Biologics who operate in the field of development and manufacture of proteins, viruses, DNA, vaccines and therapies. The Park offers additional business services, a virtual office facility, catering and restaurants, conference and event facilities and a childrens day nursery. The Park is highly successful with few vacant units and is seeking to expand, with an identified 13 additional plots available for development on a Design & Build basis aimed at commercial organisations linking to the Science and Business Park ethos, although one of these is proposed for a 150 bedroom hotel development incorporating 6,500 sq.ft. of conference and exhibition space and another is allocated to Innovation Centre 5. Total development sites available comprise acres in a range of sizes from 0.44 acres to acres. Size, Tenants and Location The Keele University Science and Business Park is located within the 617 acre Keele University Campus, approximately 2 miles from the market town of Newcastle Under Lyme and about 5 miles to the west of the City of Stoke on Trent in North Staffordshire. It is around 10 minutes drive from Junction 15 and 16 of the M6 Motorway. High quality, high spec serviced office/laboratory/workshop units, starting in size from around 400 ft² are available on flexible leases or all inclusive 12 month licence agreements. The Nova Centre is a planned former farmhouse to be converted into a 1,500 ft² office environment aimed at new start up businesses who will join a 2-year growth programme including advice on sales, marketing, 30

36 HR, performance and strategy and opportunities to network. The list of tenants now exceeds 40 companies in total employing approximately 650 people and includes tenants such as Alliance Medical, Adecco, Capita, Navman and Siemens Wind Power. Approximately 75% of space is for office uses, 10% laboratories, 15% workshops. Categories of occupiers are understood to be circa. 5% Environmental, 30% Healthcare, 10% Design & Technology, 25% ICT, 12% executive recruitment and 18% management services. Very little of the 100,000 ft² space is currently available, with a regular average occupancy rate of 95% being achieved despite the present economic climate. Present availability is limited to a single suite of 405 ft² on the first floor of IC1, four offices totalling 4,040 ft² on the ground floor of IC2, none available in IC3 and 2,000 ft² of lab space in two suites on the ground floor of IC4. Rentals at the Park commenced in 1999/2000 at a base rent of around 12 per ft² and have subsequently increased although set at individual levels dependent upon needs. Space as it becomes available is often let to existing occupants wishing to expand. Average rental within IC5 (offices and workshops) are anticipated in the region of 14 per ft². An initial pre-let has been identified taking a 5-year lease and remaining units will be let on 12-month licence arrangements. It is anticipated that the unit will be fully (90%) let within 12 months of opening. It is noted that IC5 is designed to include minimal non-lettable space and communal areas, so as to limit operational costs. Many of the initial leases were for terms of around 5 years. A service charge of between 5.50 and 9 per ft² is added to the above rental figures. Services and Business Support (Core Components) Services available include; 24/7 access Dedicated car parking Meeting rooms with integrated multimedia provision Dedicated on site business support Dedicated on site facilities management Swipe card security to all buildings CCTV and 24 hour security staff On site delivered catering Office administration and virtual PA services Virtual incubation space is available at two levels of service for either 100 plus VAT or 175 plus VAT per month. Business Support Services Business support services at differing levels are available from a full 2-year business growth programme through to office administration assistance as required including; Advice on managing growth and exploring business strategy. Marketing and sales opportunities. Guidance on accessing finance. Opportunities to network. Flexible monthly tenancies at low cost monthly fees. Through a dedicated Support Manager, the Science Park can provide information relating to grants, technology consultants, legal, financial and business advice and sources of finance. Also guidance is offered to University Links and Technology transfer opportunities through the Research and Enterprise 31

37 Services. The Business & Innovation Group was formed in August 2011 through a partnership of the University Science and Business Park, Keele University, Staffordshire University and Staffordshire Chamber of Commerce to offer specialist and strategic business advice. Delivery Vehicle Keele University Science & Business Park has formed a joint venture with Staffordshire County Council to build IC5 and help drive economic growth. The Council has invested 6 million into the new Centre which is also supported by the new Stoke on Trent and Staffordshire LEP. ic1 ic3 3.7 Summary Reviewing the concepts, development and performance of existing centres is an interesting exercise and one that reveals encouraging signs from the experience of other centres. Although it is important to note that no two centres are exactly similar and direct comparisons can be misleading, there are certain points which we can identify as having a relationship to the potential demand for space in icentrum, as follows: incubation and innovation centres are able to generate their own demand through bringing something different to the local property market demand for a physical entity is easier to stimulate once people can get a feel for the quality of the build, its internal layout and the communal spaces; association with a university is a factor in developing demand from the start-up, growing and anchor sub-sectors as they all have reasons for locating in proximity to a university; a phased approach is important and icentrum as Phase 1 of Digital Plaza is in-line with this approach and will also be the initial recipient of demand for space at Digital Plaza allowing its market profile to build from the very start of Digital Plaza; a mix of space for different types of user is essential and communal space is a vital ingredient for developing a successful centre; and the communal space proposed for icentrum will be one of the key facets that set it apart from competition now and in the future. 32

38 4.0 Stakeholder Engagement 4.1 Introduction This section reports the findings from our stakeholder engagement work conducted through stakeholder interviews at Faraday Wharf, BSPA. The role of Faraday Wharf is explained in Section 2. The material used here is non-attributable and provides a composite view of the comments we recorded during the study process. 4.2 Stakeholder Interviews Stakeholder discussions were held over two separate days in October Both sessions were held on an informal and semi-structured basis at Faraday Wharf and invited the entrepreneurs and occupiers of the site to describe their experiences, aspirations and needs. The organisations involved in the stakeholder dialogue are listed at Annex Type of Organisation A range of organisations were involved in the discussions each having different employee numbers: Incubation Space Web design studio Games developer Webcasting and meeting management 3 staff, all on-site 5 staff on-site, also take on temporary staff as required 6 staff on-site Innovation Space International Broadband company Virtual world solutions Telemarketing Internet search engine development 3 staff on-site but part of a much larger organisation 5 staff on-site no staff details recorded by study team 10 staff on-site Although many of the businesses are young and developing, they already have established client bases throughout the UK, Ireland, Europe, USA, Middle East and beyond Reasons for Locating at Aston Faraday Wharf was noted as facilitating a corporate environment but with a soft edge to support creativity, it allows businesses to buy into the innovation brand and in that sense offers something more than the Custard Factory which is a competitor. The e4f (entrepreneurs for the future programme) was a key attractor and once businesses graduate from it they can become paying tenants in the building. One business had started from scratch and been there for fourteen months, expanding gradually over that period and considering international expansion into the USA market. An international company had chosen to have its local base there due to proximity to a key client (although that client had now moved elsewhere). Staff split their time between Aston and London, with the corporate aspirations of the company suited to a high-tech environment. 33

39 For one company, the main attraction of BSPA was the offer of being able to locate in close proximity to other technology companies, thereby generating a clustering effect (one issue with St Pauls Square in Birmingham was that it had too many companies from other sectors, such as law that the company could not really network with). Good transport links (the employees are from various parts of the conurbation) and availability of video technology (to save journeys to the South East) were the other key attractions. They selected BSPA over other sites in the Jewellery Quarter and sites on Broad Street and Birmingham Business Park. Another company moved to BSPA in 2010 as a start-up - participant in e4f, having previously been located in the Custard Factory. Financial assistance is a big factor in attracting enterprises with the e4f scheme a key factor in attracting the companies, one of which was offered 80% off the year one rent. The provision of 24 hour offices was a key factor attracting one company to BSPA as was the availability of computer servers in the same building. The company looked at Birmingham Science Park (which had no room to accommodate them) and Longbridge Science Park (which was too far away from the city centre) Strengths of Aston as a Location The layout in Faraday Wharf creates a community through providing a kitchen, lounge and meeting room for the high-tech businesses. The communal space is good for interaction but people can also get their head down to work as well, it s a good mix. Some business recommendations have come from other tenants and the networking potential in the building was an asset. The ability to discuss technical issues and exchange information with like-minded people and entrepreneurs was an added advantage of this location over others. Parking was noted as being important, especially for clients as some would prefer to come by road and park outside the front door. This is an asset over other locations such as Custard Factory. One company also explored the possibility of moving into the Fazeley Studios, but elected to locate at BSPA due to the proximity to the transport links (motorways, rail station) and the availability of on-site parking Other points noted as strengths included: Meeting rooms are a good standard and useful if clients visit. Access on Bank Holidays is possible which is a good point Tech Wednesday is a good idea for bringing people together and there could be more events of this nature provided. The coffee shop was well used by most consultees The street was a particularly innovative and unique feature of the building Serendipity was mentioned as a good, intangible, feature of the centre The corporate and high-tech image lent some credibility to the businesses occupying the building. Videoconferencing was considered an added advantage though it had rarely been used by most of the businesses we spoke to. There has been flexibility to increase and reduce the amount of space required at short notice over and above the core space rented. This has allowed the business to shift with requirements from customers. The availability of events is also a key strength of the science park, which provides opportunities to network with potential clients, and enables tenants to showcase their work 34

40 The brand of BSPA is good from the standpoint of a corporate image (clients like the fact the company is based at a science park). BSPA being located in an area undergoing significant regeneration was a positive attraction. The support provided by BSPA in Public Relations and press releases is also a key strength. Being located at BSPA has enabled one company to attract financial investment ( 150k of start up funding). The clustering effect is a key strength of the science park (bringing like-minded people and complementary skills sets together). The networking opportunities are invaluable - this interviewee provided examples of networking events putting him in contact with potential investors, and recommendations to undertake training in sales pitches. They were also invited to the EU ICT Conference 2010, where they were introduced to universities delivering FP7 activities (potential clients). The business support to new start-ups is excellent. Internet connectivity is reliable, key strength given that the business requires the use of the internet to connect with clients. The speed of connectivity has improved dramatically since The Science Park has a good ambient atmosphere - more important to one company than the provision of networking opportunities, given its overseas client base. They also do not use the video conferencing facilities and prefer face to face interaction with clients Weaknesses of Aston as a Location It was noted that the communal areas can sometimes become quite noisy when the table football is in use which can disturb some people. Additionally, one business noted that its current room can accommodate current numbers but if it expanded to five-or-six people it may move elsewhere as the current environment is not suited to larger numbers. Another company currently has five employees, but is advertising for three new positions - if filled successfully, this will be the maximum capacity that the existing office at BSPA can accommodate. Other points noted as weaknesses included: Bandwidth needs to be improved Car parking costs were considered relatively expensive and when added to the cost of the rent it was thought that the package was less competitive than it could be. More ITC support staff would be good, especially for businesses that are cloud-based Longer coffee shop opening hours, a higher number of walk-in meeting rooms, and water coolers on each floor There is a lack of recycling facilities. The building lacks life aesthetically, and needs more art to give it a creative look. The science park is not particularly well connected to the city centre in physical terms. The canal-side is not exploited - outdoor meeting space overlooking the canal would be a big improvement. The internet can be unreliable - a major problem for several companies given that all of their work is internet based (i.e. webcast). The cost of hiring the video conferencing facilities is perhaps too much. Not enough cycle parking. BSPA policy of turning heating off at 5.30pm is a negative, particularly as many companies need to undertake work at evenings and weekends. The cafe ideally should be in a canal facing position. 35

41 4.2.5 Aspirations for icentrum In the longer term, one company noted that it would like to have its own front door and thought that paying extra for space in a high quality designed building would be worthwhile for them but were less enthusiastic about paying more for a low carbon building. Another noted that the design of the exterior of the building was considered unimportant, as was the extent to which the building conformed to BREEAM standards. Conversely, a more established company noted that the low carbon image that could be portrayed through a new building would be welcomed and reflect the CSR of a multinational company. Another company was favourable about the Digital Plaza development, and would welcome the idea of locating in a flagship building from an architectural standpoint - it would make a big statement to potential clients that the company was cutting edge and had leading edge technology people. It would also be a positive factor from a corporate image standpoint if the building was BREEAM compliant. Links between the centre and any corporate HQs that can be attracted in future to Digital Plaza would be seen as beneficial and reinforcing the high-tech sector s profile in the city. In terms of the proposed new building, the importance of plasma screens being available in each room was noted, with Maple House in Central Birmingham cited as an example of a facility it should aspire to. Some further other key requirements that were noted as important in the design and specification of the new building included: The provision of outdoor seating. The provision of opportunities to enable SMEs to network with larger corporates. The provision of a gymnasium. The need to ensure sufficient meeting room provision (this includes break-out areas). The need for powerful and reliable wi-fi provision. The provision of social spaces where business people could interact; Use of art to enlighten the building and 'show the story of science in Birmingham' (Citylab in Barcelona was cited as a centre worth emulating); The internet provision would need to be cutting edge and potentially even made available at subsidised rates to companies to help trigger innovation. The provision of green space The need to ensure sufficient car parking provision; The need for the cafe to be open longer hours; The need to ensure the provision of good server rooms for computers, within the building; The need for fast and reliable internet connectivity; The provision of informal meeting space. Being located in a BREEAM compliant building was not considered important to some companies, but was important to others. A key factor would be the cost of any design features coming through to the charge to tenants. The other key opportunity potentially facing the icentrum development is that it is located in an area earmarked as an Enterprise Zone (EZ), and could stimulate demand through low rates. 36

42 4.3 Summary From the stakeholder consultations a series of key points can be identified that support the case for icentrum and begin to demonstrate where demand may be derived from, including: entrepreneurs will be attracted to the building because of the support services on offer, the reputation for providing support tailored to the needs of high-tech start-ups and the proximity to like-minded high-tech businesses; existing companies will be attracted to icentrum because of the affinity it will have with Birmingham s high-tech cluster, proximity to key clients and decision-makers in the high-tech sector and because the overall package is more attractive than competing centres such as the Custard factory or Birmingham Research Park; the ability to network in the communal space and be part of a high-tech cluster are two important determinants of demand but ones that are difficult to quantify in terms of the role they will play in driving demand to the centre; and the use of EZ 1 powers to reduce rent and rates in some way could also make icentrum more attractive and stimulate demand as the relative cost to business of operating from icentrum will be a key determinant of demand. 1 All Enterprise Zones will benefit from; A business rate discount worth up to 275,000 per business over a five year period All business rates growth within the zone for a period of at least 25 years will be retained by the local area, to support the Partnership s economic priorities and ensure that Enterprise Zone growth is reinvested locally Government help to develop radically simplified planning approaches for the zone using, for example, existing Local Development Order powers Government support to ensure that superfast broadband is rolled out throughout the zone, achieved through guaranteeing the most supportive regulatory environment and, if necessary, public funding. Government has also stated that it will work with local enterprise partnerships on additional options, to suit local circumstances, including consideration of: Enhanced capital allowances for plant and machinery, in a limited number of cases and subject to State Aid, where there is a strong focus on manufacturing Tax Increment Finance to support the long-term viability of the area UKTI support for inward investment or trade opportunities in the zone. 37

43 5.0 Business Survey 5.1 Introduction This section presents the findings of our business survey conducted electronically with BSPA tenants and firms in the West Midlands ICT cluster during October Profile of Respondents In collating the views and responses of regionally based businesses, a detailed web-based survey was designed and sent out for online completion and immediate return. The findings detailed below are based on a snapshot survey of 41 businesses, of which 24 are located in the wider West Midlands region, 15 currently have premises on Faraday Wharf and 2 did not provide their location. Key topics for discussion with respondents included: views on current premises and floorspace; future requirements for office space; the science park offer exploring facilities, service and support requirements; and importance of overseas markets and attitudes to overseas markets and support services Sector profile The businesses surveyed represent a wide range of sectors, reflective of the profile of companies located in Faraday Wharf. There are a number of ICT and design companies, together with businesses engaged in pharmaceuticals, biotechnology and web design. There is also a small number of venture capital, legal and third sector respondents, businesses that could well contribute to the supporting infrastructure of icentrum Age of business Respondents were asked two questions with regard to the status of their business. Firstly, they were asked to identify the developmental stage of their business, i.e. whether they are start-up companies, growth companies (businesses that have identified an increase in trading turnover over the last 12 months) or established companies. Secondly, businesses were asked to state how long their business had been trading. With reference to the first question, just over two-fifths of respondents (43.9%) identified themselves as established businesses, just under one third (29.3%) were growth businesses and just under one quarter (24.4%) were new business start-ups that had been trading for less than 12 months. 38

44 Figure 5.1 Stage of Business Development 2.4% 24.4% 43.9% 29.3% Pre-trading idea Start-up (0-12 months) Growth Established Figure 5.2 Length of time Trading % 23.1% % 15.4% 15.4% Percentage (%) % Less than one year 1-5 years 6-10 years years 25 Years years Length of Trading In terms of length of time trading, just under one quarter respectively (23.1%) had been trading for less than one year and for between 1 and 5 years. 17.9% of companies have been trading for between 6 and 10 years and 15.4% have been trading for between 11 and 15 years and for more than 25 years. These 39

45 figures are particularly important given icentrum's objective to attract both new business starts and established companies Business size As would be expected given the business profile of the region as a whole, just over half (51.2%) of businesses surveyed employ between one and five members of staff, with a further 26.8% employing between 10 and % of businesses surveyed employed between 100 and 249 and only 5% employ in excess of 250, with the latter group potentially providing an 'anchor tenant' for the development. Figure 5.3 Business Size (Number of Employees) 2.4% 2.4% 4.9% 4.9% 26.8% 51.2% 7.3% Self employed 1 to 5 6 to 9 10 to to to Business Premises Respondents were asked a number of questions about current business location together with views on the likely future for the business and the possibility of moving to a new site Current premises Of the 41 businesses surveyed, just over one third (36.6%) are located in rented incubator or innovation space, the majority of which are on Faraday Wharf, 34% rent general purpose premises and 14.6% work from home. Only 2.4% of businesses surveyed own existing premises, which serves to highlight the potential for businesses to move, with low levels of ownership giving potential tenants the opportunity for re-location. Figure 5.4 below details the size of respondent premises according to floorspace in ft 2. This graph serves to highlight the potential for expansion with almost one third having accommodation of less than 100 ft 2 / At the other end of the scale, over one quarter of businesses (27.8%) occupy a floorspace of between 40

46 2,501ft 2 and 5,000ft 2. This data provide a useful benchmark against which to design the individual unit spaces within icentrum. The figures identified here also correlate with those identified in the assessment of supply. Figure 5.4 Size of Premises Floorspace (ft 2 ) 5.6% 16.7% 30.6% 13.9% 5.6% 27.8% sq ft sq ft 501-1,000 sq ft 1,001-2,500 sq ft 2,501-5,000 sq ft 5,000 + sq ft Future requirements An important consideration for icentrum will be the sufficient provision of innovation and grow on space to enable businesses within the incubator to grow whilst still benefiting from the support and services of the science park. When asked to consider the likelihood of re-location into larger premises, over half of respondents (53.7%) were expecting to require an increase in floorspace in the future, with only 1 of the 41 companies surveyed looking to downsize from their current premises. Business respondents were then asked to reflect on the type of premises they would like to move to and encouragingly from the perspective of icentrum, 58% stated they would definitely consider remaining or re-locating within a science park, with a further 24.4% stating they may consider relocation. It was also encouraging to note that 58% would be likely to remain in Birmingham, although over one fifth (22%) highlighted their desire to move out of the area, although these could still remain if the icentrum concept was appropriately marketed to them. 5.4 Requirements of icentrum Offer Importance of facilities and services The next line of questioning focused on the facilities and services of incubator units and innovations spaces, and specifically what facilities and services respondent businesses considered to be of importance. 41

47 Figure 5.5 Importance of Facilities Flexible rental terms Competitive rents Flexible office space Private office space 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Percentage (%) Very important Important Neither important nor unimportant Not very important Not at all important Figure 5.5 above illustrates the relative importance of particular facilities to potential tenants. As would be expected, particularly given the current economic climate, 70.7% considered competitive rents to be 'very important' with a further 22% identifying it as 'important'. Associated with the issue of rental cost, more than 4 in every 5 companies (87.8%) stated that the opportunity for flexible rental agreements was either 'important' or 'very important'. Whilst not as important as financial issues, 78% considered flexible office space to be important and 75.6% would like the option of private office space. Having focused on park facilities, respondents were then asked to outline their views in relation to networking opportunities and support services. As Figure 5.6 below illustrates, 61% of respondents considered informal networking to be 'important' or 'very important', with just under half (48%) stating they would like access to communal networking spaces. Whilst still of importance to respondents, less consideration was given to the presence of onsite business support (39% stating it as 'important or 'very important'), onsite ICT support (43.9%), teleconferencing facilities (31.7%) and proximity to other technology businesses (31.7%), the last of which highlights the potential benefits to be obtained from hot desking or a soft landing zone. Other considerations in relation to facilities related to 24 hour access and the proximity to grow on space which was considered important by 90.3% and 70.7% of respondents respectively. 42

48 Figure 5.6 Importance of Services Informal networking Communal networking space Proximity to technology businesses Onsite business support Teleconferencing Facilities Onsite ICT Support 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Percentage (%) Very important Important Neither important nor unimportant Not very important Not at all important 5.5 Business support services (including additional services) Almost two in five businesses considered the provision of onsite business support to be important as part of a core service offer. Aside from the facilities themselves, the business support services offered by icentrum will be the most effective mechanism for differentiating themselves from the competition and attracting businesses from overseas. It is important to note that the services outlined above are considered 'core' services by respondents and icentrum will need to identify 'additional' service provision that will 'add value' and be a 'unique selling point'. As Figure 5.7 below illustrates, support and guidance with business planning and marketing and promotion represent the two most important areas of business support for respondent businesses. These two areas are of particular importance to new business starts seeking to establish themselves and develop core domestic and overseas markets. Other important areas of business support include assistance with identifying partners and suppliers (48.8%), access to finance (46.3%) and product development (43.9%). When reviewing the critical success factors of Palo Alto and Silicon Valley, support with legal issues and the presence of lawyers alongside venture capitalists, was crucially important and it is worth highlighting that over one third of respondents (34.1%) would like legal support. 43

49 Figure 5.7 Business Support Requirements 70.0% 60.0% 63.4% 61.0% 50.0% 48.8% 46.3% 43.9% Percentage (%) 40.0% 30.0% 34.1% 29.3% 26.8% 20.0% 10.0% 7.3%.0% Business planning Marketing and promotion Finding business partners and suppliers Financial advice Product Legal support development Type of Business Support HR and training Trading in overseas markets Others 5.6 Overseas Markets The world in which we live today, characterised as it is by globalisation, technological advancement and global competition has led to businesses in all sectors to consider internationalising far earlier in their developmental cycle. It should come as no surprise therefore that many of the businesses surveyed are already operating in, and selling goods and services to, overseas markets. Of the businesses surveyed, 87.5% already trade in European markets, with over half (54.2%) trading with suppliers and customers in North America. Interestingly, the Middle Eastern and Asian markets are becoming of increasing importance to companies in all sectors, particularly given the disposable income of potential customers. 44

50 5.6.1 Priority Markets Figure 5.8 Overseas Markets 90.0% 87.5% 80.0% 70.0% 60.0% 54.2% Percentage (%) 50.0% 40.0% 37.5% 37.5% 30.0% 20.0% 16.7% 12.5% 10.0%.0% Europe North America Middle East Far East Indian subcontinent Other (specify)... Overseas Markets Future attitudes to overseas trade The importance of overseas trade has not been lost on the businesses surveyed and it is positive to see so many businesses considering expansion into new and existing market and product areas. Of the businesses surveyed, almost half (48.8%) are hoping to break into new overseas markets and over one third (36.6%) are looking to increase their share of existing overseas markets Components of overseas support Given the proportion of businesses that are hoping to increase their presence in existing markets or expand into new overseas markets, it will be important that icentrum offers practical support and advice to facilitate this activity. When asked to consider the types of support they would like access to, the most readily identified were contacts with potential business partners/suppliers, identification of sector experts in foreign markets and access to more market and sector intelligence. 45

51 Figure 5.9 Key components of overseas support Information about trans national business networks More market/ sector intelligence Contacts with suppliers in foreign markets Contacts with sales agents in foreign markets Contacts with sector experts in foreign markets Contacts with potential business partners or suppliers 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Percentage (%) Very important Important Neither important nor unimportant Not very important Not at all important 5.7 Summary On the basis of the business survey conducted in relation to icentrum, the following points can be identified as having a bearing on potential future demand: Almost half (48%) of the survey respondents were located in general purpose premises or worked from home; there is good potential for demand to be derived from these market segments once icentrum is built or has plans that can be shown to prospective tenants in order to transform latent demand into demand. Similarly, over half (53%) of respondents reported they would require an increase in business space in the future and icentrum would be positioned well to capitalise on this pent-up demand. Nine-out-of-ten (93%) of respondents noted that the rental levels for icentrum would be very important or important in their decision-making process over potential relocation and will therefore be a key determinant of demand Other key features that could support demand for space in icentrum include the provision of flexible space and linkages to grow-on space either in icentrum or in the subsequent phases of Digital Plaza. 46

52 6.0 Local Economic Characteristics 6.1 Introduction This section provides a baseline review of the socio-economic profile of Birmingham and the wider Birmingham City Region. In particular, it provides an overview of the economic context for icentrum through examination of: current trends in the population and demographics of Birmingham and the City Region; current economic performance measured by levels of employment and business growth; changes in the economic structure of the area to identify the dominant sectors of the economy and those responsible for driving economic growth; It is important to note that the 'Birmingham City Region' has been defined using NOMIS local authority areas, with its scope closely reflecting that of the Local Enterprise Partnership boundaries. The vision for icentrum centres on it becoming a business incubator comparable to the best in the UK and Europe. As a consequence, it is expected that its sphere of influence and catchment will extend beyond the immediate city centre and attract both domestic (primarily regional) and international entrepreneurs and new business starts. 6.2 Population and Demographics Population and Population Change Mid-year population estimates for 2010, derived from NOMIS data, state the population of Birmingham as 1,050,000, which equates to 30.7% and 19.0% of the population across the Birmingham City Region and the West Midlands respectively. Table 6.1 Working Age Population (2005 and 2010) Area 2005 % of Total 2010 % of Total Average Annual Change Birmingham 642, , Birmingham City Region 2,108, ,153, West Midlands 3,412, ,462, Table 6.1 above, details the proportion of the population that is of working age, defined by the Office for National Statistics as those aged between 15 and 64. In comparing the working age population in 2010 with figures for 2005, it is clear that all three spatial areas have seen an increase in their population. 47

53 However, as the average annual change figures illustrate, this growth has been minimal, with Birmingham experiencing the largest year-on-year increases of 0.008% Table 6.2 below, displays a breakdown of Birmingham's population by age band. Between 2005 and 2010, the proportion of the population aged between 15 and 29 has slightly increased, whilst there have been slight decreases in the proportions aged between and over 65. The proportions for the other age categories have remained relatively stable over the period. The trends outlined for Birmingham were also mirrored in data collated for the Birmingham City Region and the West Midlands, with both showing an increase in the proportion of the population aged between 15 and 29 and a decrease for and over 65. Table 6.2 Population by Age Cohort - Birmingham Age Band Level % of Population Cumulative % Level % of Population Cumulative % , , , , , , , , , , Total 1,018, ,050, Economic Activity As the definitions in Table 6.3 below illustrate, economic activity is the sum of the working age population who are in employment together with those registered as self-employed, unemployed and students. These figures provide a useful insight into the potential market demand from which icentrum can attract tenants (particularly students) and highlights the propensity of the local population to start-up a business and become self-employed. In contrast, economic inactivity refers to those of working age that are not in work due to retirement, sickness and or disability, caring for loved ones and dependents or 'other. As would perhaps be expected given current economic conditions and the associated increases in unemployment across both the public and private sectors, the economic activity rate for all three spatial areas is lower in 2010 than it had been in All three areas have seen a decrease of between 1.2% and 1.6% and it is likely that further decreases will have been recorded for Looking next at the unemployment rate, Birmingham City Region has seen the largest increase over the period 2005/10, with the rate increasing from 6.2% to 10.9%, a trend mirrored in both Birmingham, where the rate has 48

54 increased by 4.3 percentage points and the West Midlands which has seen a 3.8 percentage point increase. Table 6.3 Economic Activity Rates Birmingham Birmingham City Region West Midlands Insert heading Economic Activity: Employment (excluding selfemployed) Economic Activity: Self-Employment Economic Activity: Unemployed Economic Activity: Fulltime education However, more positively from the perspective of BSPA, all three spatial areas have seen increases to the self-employment rate and the numbers of people entering full-time education aged between 18 and 24, two statistics that could point to an increase in interest for icentrum among the local and regional populations. Table 6.4 Economic Inactivity Rate by Type (% of economic activity 16-64)) Birmingham Birmingham City Region West Midlands Economic Inactivity: Student Economic Inactivity: Looking after home/family Economic Inactivity: Permanently sick or disabled Economic Inactivity: Retired Economic Inactivity: Other

55 Table 6.4 above, analyses economic inactivity by type, focusing on the working age population, There are no significant variations between the three spatial areas across any of the types of inactivity, apart from the proportion of economically inactive people looking after the home or family, which is slightly higher in Birmingham. Approximately one-quarter of economically inactive people are classified as students with a similar proportion unable to work due to long-term illness and/or disability. 6.4 Qualifications Qualifications are the most accurate proxy for illustrating the skill levels of a community or spatial area. Given the focus of icentrum and BSPA on high-technology-related Research and Development, innovation and the knowledge economy, it is important that there is a strong higher level skills base. Whilst, encouragingly, one-quarter of the population in Birmingham, the city region and the West Midlands, are qualified to degree level and above, all three figures are lower than the national average of 31.1%. In addition, almost one-fifth of the population in Birmingham lack any formal qualifications, which is significantly higher than the regional and national averages of 15.1% and 11.1% respectively. Table 6.5 Qualifications by Highest Level Attained Birmingham Birmingham City Region West Midlands England NVQ NVQ3 Only Trade Apprenticeships NVQ2 Only NVQ1 Only Other Qualifications/level unknown No Qualifications Total Occupational Profile Another measure for assessing the skill levels of the population is the proportion of the workforce at each occupational level. Figure 6.1 below, shows the occupational profile for the three areas in It indicates a mixed picture for Birmingham, with the city having a lower proportion of Managers and Senior Officials and Associate Professionals & Technical Occupations, but a higher proportion of Professional Occupations. In addition, all three areas have similar proportions of their workforce employed in elementary occupations. 50

56 Figure 6.1 Occupational Profile, % of total employed Percentage (%) Managers and senior officials Professional occupations Associate prof & tech occupations Administrative Skilled trades and secretarial occupations occupations Personal service occupations Sales and customer service occupations Process, plant and machine operatives Elementary occupations Birmingham Birmingham City Region West Midlands 6.6 Employment In 2010, overall employment across all sectors in Birmingham stood at 476,139, which represented a decrease of 0.07% from the 2008 figure of 571,983. This decrease in overall employment was replicated across all spatial levels, with the City Region seeing a 0.05% decrease to 1,473,475 (from 1,551,690) and the West Midlands experiencing a 0.04 decrease to 2,422,649 (from 2,521,038). Having detailed total numbers in employment across all sectors, Table 6.6 below provides the distribution of employment across the Broad Industrial Classifications as defined by the Business Register and Employment Survey (BRES) (formally Annual Business Inquiry). From the data it is clear that employment in Birmingham is highest in Health (13.55%), Education (12.1%), Retail (9.27%), Public Administration (8.82%) and Manufacturing (8.64%), a situation again mirrored across all spatial regions. Comparatively, however, Retail and Manufacturing are more important to the wider city region and the West Midlands. Employment in Information and Communication Technology is small scale with less than 3% of people employed within this sector in Birmingham, compared with 3.01% in the West Midlands and almost 4% nationally. 51

57 Table 6.6 Employment by Broad Industrial Sector 2010 (%of Total) Birmingham Birmingham City Region West Midlands England Manufacturing Construction Wholesale Retail Transport & storage Accommodation & food services Information & communication Professional, scientific & technical Business administration & support services Public administration & defence Education Health Arts, entertainment, recreation & other services An important consideration, given the emphasis on market demand, is the relative trends in employment growth by sector. Usually trend analysis would incorporate data for a minimum of five years, however, the data collation and recording mechanisms were adapted in 2008 making pre-2008 analysis incomparable. However, as Table 6.7 below illustrates, between 2008 and 2010, the general trend across all sectors has been that of decline, which would be expected given the current domestic, European and World economic climates. However, it is interesting to note that the Construction, Public Administration and Information and Communication Technology sectors have bucked this trend and have seen a slight recovery over the same period. Table 6.7 Employment Growth by Broad Industrial Sector (Average Annual % change ) Birmingham Birmingham City Region West Midlands Manufacturing Construction Wholesale Retail Transport & storage

58 Birmingham Birmingham City Region West Midlands Accommodation & food services Information & communication Professional, scientific & technical Business administration & support services Public administration & defence Education Health Arts, entertainment, recreation & other services Clearly, the focus of icentrum is on high technology companies and specifically those individuals and companies that can demonstrate they are 'leading edge' in terms of how they apply their use of technology. However, in analysing ABI and sectoral statistics, it is almost impossible to identify what represents high-technology within any given sector. In an attempt to minimise the affect of this, emphasis has been placed on reviewing data for ICT and Digital media sectors, the breakdown of which is detailed in Table 6.8 and Figure 6.2. Based on our definition of Digital and ICT industries, there are just over 35,500 employed in these sectors across the Birmingham City Region, of which 10,755 are employed in Birmingham. As Figure 6.2 below illustrates, within the Birmingham City Region, just over one third of businesses (34.12%) work in Computer Consultancy Activities, with other prominent sectors including 'Other Tele-communications Technologies' (23.51%), 'Other IT and Computer Service Activities' (15.87%) and 'Computer Programming'. A sector of particular interest to icentrum is computer games. As the data illustrates, this still represents a small sub-sector, employing only 0.01% of the workforce, however it represents a real growth sector and one that readily lends itself to significant generation of profit. Creative and Digital Media industries have undergone a golden period of growth and development. The issue now is how sectors and individual businesses in Birmingham and the wider region recover from the economic downturn and whether or not the momentum built-up pre-september 2008 has been lost. 53

59 Figure 6.2 Hi-Technology Employment in Birmingham City Region (2010) Publishing of computer games Motion picture, video and television programme production activities Motion picture, video and television programme distribution activities Sound recording and music publishing activities Wireless telecommunications activities Other telecommunications activities Computer consultancy activities Other information technology and computer service activities Other software publishing Motion picture, video and television programme post-production activities Motion picture projection activities Wired telecommunications activities Satellite telecommunications activities Computer programming activities Computer facilities management activities Having analysed the data for the Birmingham City Region, Table 6.8 below details and compares shortterm trends in high-technology employment for Birmingham, the City Region and the West Midlands. As can be seen, there is a mixed picture in terms of proportions employed across the various sub-sectors. Between 2008 and 2010, there has been an increase in the proportion of the High Technology workforce employed in Motion Picture, Video and Television programming (Birmingham has seen an increase from 11.55% to 17.98%, the City Region from 7.09% to 11.61% and West Midlands from 5.89% to 11.9%), Computer Consultancy Activities, together with a slight increase in the proportion of people employed in Sound Recording and Publishing. These increases have been offset by a reduced proportion employed across all the other sub-sectors, most notably 'Other Telecommunications Technologies' and 'Other IT and Computer Service Activities' Table 6.8 High Technology Trends in Employment ( ) Birmingham Birmingham City Region West Midlands England Publishing of computer games Other software publishing Motion Picture, Video

60 Birmingham Birmingham City Region West Midlands England and Television Programming Sound recording and music publishing activities Wired telecommunications activities Wireless telecommunications activities Satellite telecommunications activities Other telecommunications activities Computer programming activities Computer consultancy activities Computer facilities management activities Other information technology and computer service activities Business Structure and Entrepreneurial Capital The emphasis of this report is to identify the potential market demand for the proposed icentrum and specifically, the levels of interest among young entrepreneurial people who are already intensive users of Information Technology. A proxy for looking at likely demand is the birth of new enterprises and trends in business start-up rates. However, before looking at this data, it is useful to consider the number and proportion of IT enterprises operating in Birmingham and the wider region. 55

61 Table 6.9 Proportion of IT Enterprises in the West Midlands West Midlands UK Company Size ICT Companies Total No. of Companies Proportion of Enterprises ICT Companies Total No. of Companies Proportion of Enterprises 0-9 6, , % 102,725 2,109, % , % 6, , % , % , % Total 7, , % 109,060 2,547, % As Table 6.9 above illustrates, according to 2011 ONS data, there are 7,250 ICT enterprises in Birmingham, which equates to 3.5% of the total number of enterprises in all sectors, a figure which is slightly below the UK average of 4.3%. As would be expected 94.2% of these 7,250 ICT enterprises employer fewer than 10 staff, a trend that is also reflected at national level where the proportion is also 94% Births in New Enterprises All Sectors As highlighted at the commencement of this sub-section, births of new enterprises represent a useful proxy for considering likely market demand. Table 6.10 below details the number of enterprise births per 10,000 of working age population (16-64). As can be seen, there had been an increase in the number of births between 2006 and 2007 across all spatial levels, however, there have been significant decreases in the following two years (2008 and 2009) as a result of the economic downturn. Birmingham has seen a decrease of 4.9 births per 10,000, compared to the city region figure of 9.8 births per 10,000 and the West Midlands figure of 13.5 per 10,000. Table 6.10 Births of New Enterprises per 10,000 population ( ) Year Birmingham Birmingham City Region West Midlands England Business Demography 2009, ONS 56

62 6.7.2 Deaths in New Enterprises All Sectors In the period , whilst there were fluctuations in the number of enterprise deaths per 10,000 population, the changes were not all that significant when compared to data for In the 12 months following the onset of the economic downturn, the number of enterprise deaths per 10,000 has increased significantly across all spatial levels This is reflective of the uncertain economic climate and the difficulty faced by new businesses to remain trading. Table 6.11 Deaths of New Enterprises per 10,000 population ( ) Year Birmingham Birmingham City Region West Midlands England The last two sub-sections have illustrated a decrease in business start-up activity and an increase in businesses closing down. Against this backdrop, it will be vital that icentrum pitches its services and business support at the right level and to an appropriate audience in order to ensure suitable occupancy rates Business Survival Rates There has been a great amount of research conducted into the impact of Science Parks and Incubators on business survival rates and there is a commonly held belief that locating in such facilities maximises the prospect of short-term survival, development and expansion. Science Parks and incubators provide tenants with fully integrated business support and inter-business networking opportunities in a controlled and supportive environment. The likelihood of their survival is increased as a result. Currently, the most up to date data on the survival rates at the 1 and 2 year points dates back to 2008 and any analysis should be cautionary as the full implications of the continuing economic uncertainty is not presented in this data. However, as Table 6.5 illustrates, there are some interesting trends that are worth highlighting. Between 2004 and 2007, there was a general increase in both 1 and 2 year survival rates across all three spatial areas. Birmingham saw a 0.9% increase in 1 year survival rates and a 2% increase in 2 year survival rates, which were both higher than the increases at regional and UK level. 57

63 Table 6.5 Business Survival Rates (after 1 and 2 years) Birmingham West Midlands UK Births 1 Year survival (%) 2 Year survival (%) Births 1 Year survival (%) 2 Year survival (%) Births 1 Year survival (%) 2 Year survival (%) , , , , , , , , , , , , , , , However, following the peak in survival rates in 2007, there were significant decreases in 1-year survival rates across all spatial levels in Between 2007/08, in Birmingham, this decrease was 4.3%, compared with more modest decreases of 1.5% in the West Midlands and 3.5% in the UK. This decrease indicates the early stages of the economic downturn and the financial uncertainty that comes with it. Without seeking to extrapolate too far in the absence of more up-to-date data, it is likely that this downward trend in survival rates has continued in the light of continued economic hardship, characterised by business closures, higher rates of unemployment and lower consumer confidence and spend. However, between 2004/08 there had been a more positive trend in relation to 2-year survival rates, with increases of 2.7% for Birmingham, 2.8% for the West Midlands and 2.5% for UK. Undoubtedly, data for 2008 is likely to show a decrease but the underlying trend of entrepreneurial resilience is relatively encouraging for Birmingham. Whilst this continued uncertainty may lead to a contraction in the number of people establishing new businesses, there are two notable positives that could serve to sustain market demand for icentrum. Firstly, and perhaps most importantly, provided that the facilities, business support and service offers are appropriate, there are significant benefits to be gleaned for entrepreneurs who locate in science parks and incubators when compared to 'going it alone' in the private sector, at the mercy of market conditions. Secondly, the focus of icentrum on potential high technology and high value added growth sectors including Computer Gaming and ICT (both of which saw a renaissance in growth prior to the economic downturn), will ensure the most viable entrepreneurs and business start-ups will be attracted into the facility. Add to this the possibility of an anchor tenant and the attraction of overseas businesses, both of which will serve to increase likely survival rates through access to foreign markets, and you have a highly compelling offer against which to create market demand. 58

64 6.7.4 Entrepreneurial Capital This analysis presented above can be taken further to look at entrepreneurial capital, the number of new enterprises expressed per 1,000 working age population. Table 6.6 sets out this analysis which shows that although there has been a decline in entrepreneurial activity across the three areas over the past five years, the decline has been less pronounced in Birmingham and, in effect, Birmingham is showing itself to be more resilient and more entrepreneurial than the other two areas at this point. This is an encouraging point and demonstrates a degree of entrepreneurism and entrepreneurial resilience within the city which may support demand for space at icentrum. Table 6.6 Entrepreneurial Capital Area New Enterprises Working Age Population Entrepreneurial Capital per 1,000 Working Age Population Birmingham 2005 Birmingham ,915 3, , , Birmingham City Region 2005 Birmingham City Region ,420 11,230 2,108,300 2,153, West Midlands Region 2005 West midlands Region ,115 18,245 3,412,400 3,462, Note: Data for new enterprises is for 2005 and Travel to Work Area On the basis of discussions we have held with current occupiers at Faraday Wharf we can report that the catchment area for icentrum is large and could potentially extend to: Birmingham and the West Midlands conurbation. Shrewsbury. Worcester. Northwest Leicestershire. This is encouraging as the wider the catchment area the greater the potential pool of entrepreneurs to draw from. Again, the ability of icentrum to substantially differentiate itself from the competition will have an effect of attracting more businesses from further afield. 59

65 6.8 Summary On the basis of the socio-economic baseline work undertaken the following points in relation to demand for space at icentrum can be drawn out: Some marginal growth in population and working age population supports a need for ongoing employment growth in the conurbation in future. Similarly, a larger working age population can also be a driver of demand for employment space at icentrum. An increase in the age cohort also provides an indication that the potential for entrepreneurship from this age group should increase in future, more so if the facilities to support them are visible. Growth in this cohort is also evident at city-region and region level too. In the past five years, the proportion of self-employed people in the workforce has increased across all three geographic areas, which is an encouraging sign of growing demand for entrepreneurship support and business space. The number of full-time students has also increased and could potentially provide a more important source of demand for space in future than has hitherto been the case. A slight decline in employee jobs recently due to global economic conditions reinforces the need for future-oriented jobs in growth sectors to be created at the heart of the city-region, which icentrum can assist with. The information and communication sub-sector as a proxy for the high-tech sector indicates that it is under represented in Birmingham and has shown some signs of growth at city-region level. There could be potential, therefore, for icentrum to provide support and stimulus to this sector while simultaneously capturing demand for space. 60

66 7.0 Property Market Context 7.1 Introduction This section has been prepared by Thomas Lister and sets out the context to the national and local property market before focusing on the market for serviced accommodation in Birmingham. 7.2 Overall Performance National Context As has been well documented over recent years, the property market has been significantly affected by the banking crisis which commenced with the collapse of Lehman Brothers in September 2007, since when funding institutions have been generally unwilling to lend at affordable levels and the economy and property values have faltered. Although property values reduced significantly in 2007 and 2008, they have subsequently recovered to some extent, apparently stabilising over the past 18 months although the global economy with deteriorating growth and euro zone sovereign debt crisis together with higher levels of inflation have recently affected optimism. The latest RICS UK Commercial Market Survey (Q3 2011) suggests that the tentative recovery in property values is showing signs of faltering with occupier demand falling back for the first time since Q and capital value expectations outside of London having turned more negative as investment demand has diminished. The RICS survey presents a picture of reduced tenant demand and rising levels of available space, resulting in a more negative view on rental expectations across the UK with London and the south generally remaining flat. Most significantly, the RICS survey shows that whilst sentiment has fallen across all sectors of the market, rental expectations at the national level were most negative for offices, with a similar expectation for capital values and declined development status across all sectors Local Context The central Birmingham office market is estimated to contain around 17 million ft². of office stock across around 720 buildings with a further 5 million ft². with planning consent in the development pipeline. This runs in a linear fashion between Aston University in the east to Edgbaston in the west and includes the potential of the Eastside schemes, Snow Hill, the City centre, Broad Street, Brindleyplace and tower blocks at Five Ways, Hagley Road. The largest proportion of stock is centred in and around Broad Street and Colmore Row. The Birmingham office market generally up until Q3 of 2007 was particularly buoyant, with over 1 million ft². take up in central Birmingham between March 2006 and April Year-on-year increases were seen in take up between 2004 and 2008 with the largest take up being in the business services sector, with financial services, insurance, healthcare and legal sectors featuring strongly, but also the public sector taking substantial amounts of space. A shortage of space over this period to 2008 placed pressure on Grade A office rentals such that these reached per ft² and yields dropped to a record low of 4.25%. This is considered to have been due to both a shortage of space and the profile of the City as an investment location. 61

67 The low point of the office market within Birmingham was reached in the second quarter of 2009, but even at this point take up was still marginally higher than in the first quarter of 2006, showing a certain resilience even during recession. A significant element of take up over this low period was due to Birmingham City Council agreeing to take 196,000 ft². to be built at BSPA for a new Council HQ, due to complete 2011/12. Other public sector transactions including the Department of Health at 54 Hagley Road, OFWAT at Hill Street and the Highways Agency at The Cube has assisted Birmingham to remain relatively more resilient than other UK cities outside of London. The property market downturn saw rentals drop to around per ft². in 2009, increased rent free periods (around 3 years on a 10-year lease currently considered achievable) and shorter term leases with average lease lengths falling from 5 years in 2007 to 3 years. Prime office rents for Grade A space in Birmingham currently stand at around per ft², prime office yields at around 6% and office availability at around 2.79 million ft², of which around 27% is new stock (CB Richard Ellis/Regional Market Forums). The supply of new Grade A stock is diminishing and with take up for the first half of 2011 reaching around 255,000 ft². a circa. 5.5 years supply appears to currently exist, albeit a substantial element of this will be secondary stock which will be difficult to transact. The City s image and connectivity will be enhanced through the New Street Station redevelopment and, perhaps some way off, proposals for a Metro Link between Snow Hill and New Street, Eastside Regeneration and also the possibility of the High Speed 2 Rail Link between London and Birmingham. These strategic infrastructure projects could act as catalysts for increased demand for space in the city centre in future Market for Serviced Accommodation The serviced office market forms a sub sector of the wider office market and includes incubator space, innovation space and more usually takes the form of small office suites, often fully furnished located within buildings or floor(s) of a building which has a fully managed reception, meeting room(s) and a selection of additional services available. The serviced office sector does not cater for small start-up companies alone, despite these offering an ideal means of moving from home into a professional environment with flexible terms and with minimal capital expense available. Established companies. particularly during recession, that are perhaps downsizing or seeking greater flexibility in the space that they require, will often consider serviced offices as offering a cost effective and flexible solution that suits, rather than fixed longer-term lease arrangements and fixed physical boundaries to their office accommodation. The icentrum proposition is something that will appeal to start-ups and established companies and will be able to tap into demand from both segments of the market. Whilst most serviced office providers will maintain statistical data as to occupational levels, the extent to which other statistics such as numbers of enquiries, numbers of workstations per enquiry, etc. is either not collated or held in varying forms, rendering comparisons difficult. Also, this information tends to be treated as commercially sensitive and is not generally made readily available. Contact has been made with a number of centre managers and an analysis is provided below, together with commentary as to the market position based on these discussions yet supplemented and supported 62

68 by evidence provided in the form of statistical data obtained through which is a specialist web-based serviced office agent. Within the overall category of serviced offices there are approximately 278 buildings/premises within the West Midlands and supply continues to increase despite the present economic downturn or perhaps even because of the present economic downturn, as the availability of such space is seen as a potential means of encouraging entrepreneurship and the creation of new companies, just as redundancy often provides an impetus to make a new start on one s own. Also, owners of vacant office accommodation might consider the provision of Serviced Office space an alternative means of achieving a letting or higher occupancy levels, within a building. Current availability ranges from purpose built publicly owned or supported centres offering new or modern facilities and often aimed at the new/ start-up business, privately owned purpose built centres, sometimes operating/ owned as charities, e.g. Basepoint Centres owned by the ACT Foundation, or prestigious centres such as some of the Regus owned/operated centres but also includes offices of all eras which might have been fully or partially (perhaps on a floor-by-floor basis) converted to serviced office use. Of the 278 Serviced Office centres in the West Midlands, there are 36 in the immediate Birmingham area. Figure 7.1 provides some examples of the varied nature of the serviced office accommodation offer in the West Midlands. Figure 7.1 Example Range of Serviced Office Accommodation Available in West Midlands Business Centre 1 Victoria Square Birmingham B1 1BD Serviced Offices 13 St Pauls Square Birmingham B3 1RB Cambrai Court Stratford Road Birmingham B28 9AA Planetary Business Centre Planetary Road Wolverhampton WV13 3SW Sandwell Business Development Centre Oldbury Road Smethwick Warley B66 1NN Enterprise House Unit 3 Meadow Drive Hampton In Arden B92 0BD Enterprise Centre Coventry University Tech. Park Puma Way Coventry CV1 2TT Park Business Centre Hastingwood Industrial Park Wood Lane Birmingham B24 9QR 63

69 The following graphs in Figure 7.2 provide an overview of the market throughout the West Midlands over the course of the past four years: Figure 7.2 Overview of West Midlands Serviced Office Market, 2008/11 SERVICED OFFICE QUANTUM - WEST MIDLANDS ANNUAL AVERAGE STATISTICS GRAPHICALLY REPRESENTED: NB 2011 Figures based on Year to Date No. of Buildings Year AVERAGE COST PER WORKSTATION - WEST MIDLANDS INITIAL LICENCE LENGTH - WEST MIDLANDS Cost Per Calender Month Average Initial Licence Period (months) Year Year Over the past 12 months, whilst supply has increased around the West Midlands with new entrants such as Pure Office development at Broadwell Road, Oldbury becoming available, the level of enquiries has actually slightly decreased by around 4%, following the UK trend (3% decrease year-on-year to September 2011). Key points to note include: The number of serviced office tenancies entered into over the West Midlands also decreased by around 7% over the year to September 2011 (4% over the UK same period) but the average size of unit entered into increased from 3.8 workspaces per tenancy to 4.3 (4 to 4.6 UK). The average cost of a workstation has also increased slightly over the course of the past year and currently stands at around 197 over the West Midlands. The average licence term entered into over the year to September 2011 increased from 7.7 months to 8.5 months in the West Midlands (8 months average unchanged in UK). It is noted that statistics for Birmingham appear to show greater variance than comparative data for the UK. Whilst enquiry levels have fallen by around 28% (Q compared to Q3 2010), the number of signed up tenants has increased by around 29%, showing a greater conversion rate of enquiries to lettings. The average number of workstations taken per letting also increased on a Quarterly comparison basis, for the most recent quarter standing at around 8, and no doubt this is at least part of the reason for 64

70 the reduced average workstation rental to around 157 over the last full Quarter. The average licence period also reduced in Birmingham (Q compared to Q3 2010) from 12 months to 7 months. It is inevitable that studying any one short period will show greater variations, rather than taking yearly averages and hence it is important to consider the year-to-date data for Birmingham which shows the following headline average figures: Enquiry Levels decreased by 19% (West Midlands down by 7%) New Tenancy Levels decreased by 11% (West Midlands down by 7%) Average No of Workstations per Letting increased to 6.9 (West Midlands 4.1) Average Cost per Workstation reduced to 190 (compared to 178 West Midlands) Initial Licence length reduced to 9 months (on a par with West Midlands generally) The above statistics are all obtained from a single data source (officebroker.com) and it is possible that the greater competition in agents both online and traditional in nature will have affected the data to some extent (e.g. numbers of enquiries) but it is considered that they provide a useful consistent indicator of market conditions subject to verification through direct contact with Centre Managers. With more centres coming on line and fewer enquiries, serviced offices are becoming ever more competitive and need to offer ever increasing incentives to attract tenants. This normally takes the form of initial rent free periods or rental reductions over a period of time, but can also include free use of meeting rooms or other facilities/services for a particular period of time. The total amount of serviced office space provided within a ½ mile radius of Birmingham City centre, is estimated to lie in the region of 300,000 ft². From discussions with various centre managers, it appears that occupancy levels tend currently to lie in the region of 75% and hence a hypothetical overall availability of serviced office accommodation is circa. 75,000 ft². The offer at icentrum however is not considered standard serviced office space, due to the specialist high tech nature of the accommodation, its location and those occupiers envisaged. More evidence as to the levels of demand might therefore be derived through examination of demand at competing/more comparable centres such as the Custard Factory (including Fazeley Studios), Keele University Science Park and the e-innovation Centre at Telford. It will be noted that these, centres typically have higher occupancy levels at typically 90-95% but variable due to tenant churn Custard Factory The Custard Factory comprises refurbished space within Digbeth and is situated within Birmingham s Eastside quarter. The former historic factory premises was acquired in 1990 and has subsequently developed with funding assistance from AWM into one of the most established creative industries hubs in the UK, being now home to a 700 plus community of individual artists and employees of small to medium sized creative industry companies. The most recent elements opened within the complex include Zellig within Devonshire House, which having been restored at a cost of circa. 10 million opened approximately 1 year ago and provides 100,000 ft² of space around 3 courtyards. Studios, offices, galleries and other spaces range from 200 ft² to over 3,000 ft². Rents start from 300 a month (circa 15 per ft²) plus service charge and leases are available from 12 months to 12 years. 65

71 One particularly interesting element of the Zellig scheme in the context of the present study, is the Nomad Club which comprises a huge and lofty area where Zellig clients can work with mobiles or laptops, with WiFi and broadband, pool table, coffee bar, meditation space and a small gymnasium which is proposed in the future. Services available within Zellig include manned reception area, access to advice from funding agencies, 24-hr security and free use of Nomad. The Digital Digbeth fibre optic broadband service offers fast reliable easy internet connectivity, supplemented by WiFi, Voice services are provided by Dig Dig s Allocated VoIP service. Security includes digital CCTV, card swipe access, central station monitoring, individual linked studio alarms and controlled visitors access. Zellig is currently, after 1 years operation, around 50% occupied and the Centre Manager anticipates reaching 90% within a further year. Enquiry levels for the overall complex currently stand at around 25 per week and have been stable over the last 3-year period. When potential clients view the accommodation, the conversion rate from enquiry to letting is understood to be high. Whilst rental incentives are available, these tend to be reduced rates over the initial 2 months without initial rent free periods being offered. Older elements of the scheme comprising Scott House (the first restored building) which opened in 1992 and comprising 80 studios (300 ft² 2,000 ft²), The Green House focussing on media and media businesses having opened in 2002 and comprising 100 studios (170 ft² 600 ft²), Gibb Terrace (5 small rental units) are all understood to have a stable 75% occupancy rate. Fazeley Studios is another recently opened facility which although a separately run company, is closely associated with the Custard Factory. This facility comprises 44 studio offices ranging from 200 ft² to 10,000 ft², centred on a courtyard and fronting onto River Street, Floodgate Street and Fazeley Street, Digbeth. The space comprises a converted Unitarian School and Chapel and a series of factory buildings. Within 3 months of opening, Fazeley Studios was 60% occupied and within a year around 90% occupied. It is now fully occupied. Companies that have taken space are predominately Media and Digital Organisations and include Rare Games, a Microsoft Games Studio who have taken 10,015 ft² on a 5- year lease at a rental understood to equate 10 per ft² in February The Custard Factory considers it extremely important to ensure a sufficient population density of likeminded companies take space within the centres offered. This ensures a thriving business environment with easy networking between like-minded individuals and companies which promotes and thrives self perpetuating and jointly marketing as a hub or cluster, a strategy that has clearly worked in this location E-innovation Centre, Telford This smaller centre was launched in January 2006 and is located within the University of Wolverhampton Telford Campus, north of M54 Junction 4. It offers fully furnished accommodation and business support services, providing incubator facilities aimed at e-business and e-learning start-up and small businesses. It comprises day hire launch pad units, 36 incubator units and additional commercial/grow-on space. The total incubator and grow-on space available is around 14,000 ft². with additional office/meeting room space of circa. 3,000 ft². 66

72 The Centre offers a particularly high level of ICT support and a pool of ICT expertise on the doorstep from the Wolverhampton University s IT Futures consultancy team. Occupancy levels at the centre have grown from 50% for incubator units at the end of the first financial year of opening (within 3 months) rising to 91.7% to end of financial year 2008 dropping back slightly to 86.1% mid-2009 but having recovered again to around currently 88%. This is reflected in slightly higher turnover rates. The centre is managed more as an investment than an incubator unit as companies are not encouraged to move on other than through their success and requirement to expand or through (less frequently) failure, i.e. natural turnover. Whilst grow-on space is provided, this is limited to circa m². (6,173 ft²) and has been fully occupied since financial year end 2007, with little turnover/churn. e-innovation Centre, Telford - Occupancy Levels 100.0% %age Occupied 80.0% 60.0% 40.0% 20.0% 0.0% Year End Incubator Units - %age Occupied Grow -On Space - %age Occupied e-innovation Centre, Telford - Rental Breakdow n 3.60, 14% 4.59, 18% 11.81, 44% Rent psf Service Charge psf Rates psf VAT 6.16, 24% Rental at the centre is charged at a rate of in respect of the incubator units and around 27 for the grow-on space. The breakdown of these all-inclusive figures is shown in the above pie chart which shows that rental comprises (44%), service charge at 6.16 (24%), business rates at 4.59 (18%) and VAT at 3.60 (14%). It is noted that rentals at the centre have remained relatively unchanged since its opening in January 2006 and that whilst consideration has been given to reviewing rents, due to economic conditions it has been decided to postpone any increase. 67

73 Grown-on space is limited to circa m² (6,173 ft²) and has been fully occupied since financial year end 2007, with little turnover/churn, indicating that the centre started to be run more as a property investment with little encouragement to move on. This situation has recently changed and new companies must now meet technology related criteria in order that the centre might retain its reputation as a Centre of Technology Excellence. 7.3 Summary The property market is an important component of analysis for market demand and tends to be cyclical in nature. It has been deeply affected by the economic crisis and whilst there has been some recovery since 2008 there is still some way to go before a buoyant market is again attained. With this in mind, the following summary points in relation to market demand for icentrum are made: The broad context at national, regional and local level is one of generally reduced tenant demand for property resulting in rising levels of available space and a general downward pressure on rents. The supply of Grade A office stock in Birmingham currently stands at 17 million ft² with a further 5 million ft² in the development pipeline Prior to the economic crisis, Birmingham had witnessed 1 million ft²of take-up in the office market across a range of sectors (public and private). In 2008 rent for Grade A offices had reached / ft² but fell back to / ft² before recovering slightly to / ft² during The market rents at icentrum will need to carefully gauge this general trend and be positioned at what is deemed a commercial and viable price point in the market given the offer that icentrum is providing. Comparable if not slightly higher rental levels than those at Faraday Wharf are considered appropriate. Grade A office supply currently stands at about 2.79 million ft² in Birmingham, one-quarter of this being new stock. Take-up levels in 2011 indicate that a supply of about 5½ years exists for office space. However, a good proportion of this is secondary stock which will be more difficult to transact. The supply of serviced offices has been increasing in the West Midlands in spite, and perhaps in response to, the economic downturn. It appears that demand from start-ups and small businesses for serviced office accommodation has shown signs of increasing as people become more entrepreneurial in response to a more restrictive supply of employee jobs. However, the increased supply of serviced office centres has resulted in a slight over-supply position at present with average occupancy levels having fallen to around 75%. It is therefore imperative that any new market entrant can be price competitive and differentiate itself from the competition if it is to succeed. The more specialist serviced space providers are tending to fare much better than the market norm. For example Keele University, Custard Factory and Fazeley Studios, where high quality space, differentiated from the norm through the environment provided, ensure high levels of demand and occupancy rates are maintained, despite present market conditions. Assuming Zellig at the Custard Factory to continue to fill out over the next months to full occupancy, then icentrum should be well positioned to ensure adequate space to exist for new companies of the digital and media technology sectors within the Birmingham City area. 68

74 8.0 Profiling Demand 8.1 Introduction According to UK Business Incubation, there are approximately 300 incubators in the UK supporting in excess of 12,000 dynamic, creative and innovative businesses. They provide a broad range of firms in a diverse range of sectors some centres are sector specific, others are more diverse. It is estimated that a business in an incubator environment will have a 98% success rate, compared to a national average of 50%. This fact itself will be a feature in driving demand to the icentrum. However, demand is difficult to predict precisely and this section sets out our thoughts on how demand can be profiled and originate from. A great deal will depend on the marketing and awareness raising of icentrum and, of course, word-of-mouth from tenants will be a critical means of getting the message across that icentrum is a good place to do business. 8.2 Entrepreneurship The e4f programme at Faraday Wharf has been running since November 2009 and the fiftieth company is just moving in. This provides an average of 25 start-up enterprises each year and the average size if two employees. This equates to approximately 25 start-ups and fifty jobs per annum. The failure rate is approximately 20% with two-out-of-ten failing at six months. A total of 4,500 ft² is given over to the e4f entrepreneurs and it is currently 97% full. Once the enterprises graduate from the e4f programme they move to a variety of places: hot-desking; incubator space on larger scale if required; elsewhere on the science park; move on to Custard Factory (one has just gone), Wolverhampton Science Park (one has just gone tempted by the offer of free space) or the Jewellery Quarter. Interestingly, graduates are not proving to be a source of demand for space. Rather, start-ups are generally from the 25 to 35 age group who are the drivers of the business but who do employ younger people including graduates. Hot desking is provided on a 7:1 ratio (seven people to one desk) and takes up about 1,000 ft². This space is becoming full now. The Oxygen Accelerator Programme (funded by private investment) delivered at Faraday Wharf is similar to e4f except that the funding to deliver it comes from an angel investor. It is similar to e4f but has been marketed worldwide attracting applications from Argentina, Brazil and other places. There is space for twenty teams per annum, ten of which are now in place and a further ten being sought. Of the current ten, seven are from the UK and three from overseas. They are all start-ups focused on: web-based activity, software as a service, cloud-based operations and mobile gaming/ platform play. 69

75 8.3 The Market for Managed Accommodation Average rental levels for serviced office space within a half-mile radius of Birmingham is circa 228 per workstation or in terms of floor area per ft². Note that these rates tend to be fully inclusive. The rental rate per centre is largely dependant upon three main influences location, nature of accommodation (era/ appearance) and extent of services available. A schedule has been prepared (see Annex 2) which provides an assessment of all those serviced offices of which we are aware within a circa half mile radius of Birmingham City Centre, providing detail as to address, distance from Birmingham City Centre, brief description as to accommodation and services available, rental levels on a per workstation and/or floospace basis, an indication as to whether this is inclusive of service charges and business rates Faraday Wharf has a current occupancy level of circa 90% and rental levels averaging circa 16 per ft², within the range of 15 and 22. The service charge for the present financial year equates to 9.27 per ft² which takes the range of rentals from to per ft². These figures are exclusive of business rates which would currently add a further 5.32 to the overall occupancy costs, however due to business rate relief, in instances where the rateable value is 6,000 or less (i.e. most of the units), this will not be payable at all (for rateable values of 6,001 to 11,999 it will only be payable at 50%) until September Due to the small non-domestic rates level of individual units within the proposed centre, Enterprise Zone status will not provide much assistance from business rates relief, however other tax incentives and the potential additional scope for other incentives to be gained will be of interest, the extent and nature of which are yet to be confirmed. It is considered that there would be scope to enhance rental levels beyond the present Faraday Wharf levels within icentrum, with the quality and nature of space provided enabling a potential uplift to say an average rate of 20 per ft² (exclusive), equating a rate including service charge averaging around 30 plus rates (ie approx 35 fully inclusive). Tenants are unlikely to recognise comparable rates per m² or ft² but will more likely base comparison on a per workstation basis. It should be recognised that rental levels at icentrum might be utilised as one of a range of tools to manage the impact of icentrum on Faraday Wharf, with a view to managing occupancy rates and levels of service and technology provided. Other tools might be in terms of additional flexibility of licence arrangements and maximum occupancy rates within the various natures of overall accommodation provided. It is noted that most competing schemes have licences available of circa 12-months plus. Shorter, easy-in/easy-out, licence arrangements might be considered an additional draw and might additionally facilitate slightly higher rental rates, albeit attached to reduced security of income for icentrum. It is understood that the leasehold arrangements under which BSPA own and operate Faraday Wharf contains a very tight user clause, which will need to be taken into account if icentrum is proposed to affect the management and uses of Faraday Wharf. Whilst an occupancy rate of 90% plus is generally aspired to, in present market conditions, with a few exceptions, this is a rate that is proving hard to sustain and 95% + extremely difficult to achieve on a regular basis due to the natural churn of tenants under short term licence arrangements which are typical of this sector. Analysis of Enterprise Centres which have opened within the West Midlands over the last five years suggests that reasonable assumptions as to occupancy levels at icentrum might be in the order of: 70

76 Year 1-30%; Year 2-60%; Year 3-75%; Year 4-80%; and Year 5 and onwards - 85%. Whilst specialist centres such as Zellig at the Custard Factory, Fazeley Studios and Keele University Science Park have all managed to exceed these suggested take-up rates, due to the present economic climate, for business planning purposes, unless a substantial pre-let is available, it is considered prudent to assume take-up rates as suggested. The proximity and interaction of Faraday Wharf will also influence take-up rates and this will need to be managed. The following table provides some suggestion as to how occupancy levels might be anticipated to grow, and the resultant rental income that might accordingly be generated. This assumes that an average rental level of 15 might be sought at the centre (a rate that has been indicated as being under consideration at present). Assuming a Service Charge of around 8.00 per ft², this would provide an overall average inclusive rental of 23 per ft², a rate that is understood to presently be under consideration: Table 7.1 Potential Rent Receipt Build-up. Years 1 to 5 POTENTIAL RENTAL RECEIPTS & ASSUMED TAKE UP RATES (INITIAL ICENTRUM PROPOSED RENT 15 PSF (IE 23 INCL 8 SC) Proportion Area (sq.ft.) Rental PSF YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 of Building 35% 58% 81% 89% 89% Occupancy Level: 50% 75% 95% 95% 95% Start Up & Incubation 20% 9, ,500 87, , , ,150 Occupancy Level: 30% 60% 85% 95% 95% Incubation 6mths+ 10% 4, ,900 37,800 53,550 59,850 59,850 Occupancy Level: 30% 50% 75% 85% 85% Est & Grow on 40% 18, , , , , ,800 Occupancy Level: 30% 50% 75% 85% 85% Anchor T's 10% 4, ,600 36,000 54,000 61,200 61,200 Communal (Mtg Rm & ev ents income) 20% 9,000 TOTAL 45,000 Ave , , , , ,000 Assumptions in the above, include the following: Start up and incubation space will be at less than market value. Grow on and Anchor Tenants will be charged assumed market value No account has been given to additional rental income that might be generated by the Communal Space and Meeting Rooms etc. Occupancy levels have been derived from figures as set out above and taking into account those numbers/comments set out in Table 7.2 below. VAT will and business rates might be payable. An absolutely all inclusive rental figure might therefore be assumed to be in the order of p ft² inclusive of VAT and 34 inclusive of business rates or around 227 per workstation. The above is indicative only, as those rental levels considered achievable will take into account many factors, including the quality/nature of the accommodation, size of rooms, design of spaces, including communal spaces, specifications including ICT, success in attracting anchor tenants etc. 71

77 It is considered that an immediate issue if average rentals were to be set at the level shown above, is that this appears to be slightly cheaper than Faraday Wharf, and icentrum will offer newer, more desirable space. Also, the Service Charge element might be anticipated to be greater, dependant upon the scope to derive additional income from potentially extended communal spaces. As outlined earlier, it is considered that an average base rental of up to around 20 per sq.ft. might be considered applicable, again taking into account those factors set out above. Whilst this higher rate would potentially set back take-up rates a little, this would most likely result in an overall uplift in total rental income achievable from the centre. In order to establish the likely capital market value of the centre, it would be usual to capitalise the rental through the application of an appropriate investment yield, this being the rate of return on the net rental income. By the very nature of the accommodation and operators of such centres, it is very rare that they should be sold on the open market and hence it is difficult to say with any certainty from comparable evidence what the market view of appropriate investment yields would be. From appraisals carried out on other similar schemes however, it is considered that the yield likely to be appropriate for icentrum would most likely fall within the range of 7.5-8% within the present market, where prime office yields in the City Centre currently lie in the region of 6%, the differential relating to the location, specialised nature of accommodation and short term nature of lettings, resulting in reduced security of income. Where any lettings policy restricts potential occupiers, this will take the yield to the upper level or even beyond the anticipated range. 8.4 Demand Profile Over the last nine years, UK Business Incubation (the international membership and best practice body) has measured the impact that incubators have on the local economy and workforce. The research proves that an incubator's client businesses provided an average of 167 jobs (full time equivalents) per incubator and are home to an average of 30 client businesses. Most (60%) incubators also operate outreach services, helping and advising companies outside the incubator. Those operating outreach activities support an average of 150 additional businesses. Across the sample, an average of 75% of client companies turnover up to 500,000, but only 1.5% had a turnover of > 5 million. Demand is difficult to predict precisely, but the characteristics of the local economy suggest that there is sufficient demand to support the icentrum proposals now and in the future at the scale suggested here. Indeed, the scale suggested here is in line with established best practice and mirrors the scale of centres which are already successfully trading. There is an increasing awareness of the benefits of operating in the supportive environment offered by innovation and incubation centres and this is generating demand for them around the country. More specifically, in Aston demand will be generated through a combination of: A general lack of existing Grade A office space that offers a supportive environment for high-tech, high growth SMEs which will deliver demand from SMEs operating out of premises they deem to be unsuitable to their growth aspirations. Increased demand for smaller units due to increased entrepreneurship and downsizing by existing firms. 72

78 Average annual take-up of office space in Birmingham reached 1 million ft² in 2008 prior to the downturn. Rental levels have shown some recovery during 2011 but are still below the 2008 high point. Grade A office space in Birmingham has about a 5½ year supply at present with only one-quarter being new stock which may be the first to be taken as the market recovers and the secondary space may then be more difficult to transact. Consequently, Birmingham requires more Grade A office space as the economy comes out of the downturn in the next year or two. The flexible occupancy terms of supportive environment will be unrivalled in Birmingham and will make the Centre an obvious destination choice for growth-oriented high-tech SMEs. There is nothing similar, or planned, which has a specific focus on high growth, high-tech SMEs and icentrum will provide something unique in the local, and regional, property market. However, the rental and pricing structure will need to be carefully considered as part of the business planning process to ensure viability as well as competitive positioning. Proximity to the city centre, West Coast Main Line, Birmingham International Airport and the national motorway network will also be an obvious attraction for business which depend on travel beyond the local area. The provision of expansion space in the Centre will be a factor in the decision making of SMEs which already have growth potential and plans. The catchment for the Centre is likely to be focused on the West Midlands region with emphasis within that on the West Midlands conurbation. Other points to be aware of which have a relationship with demand for icentrum include: The closest competition is likely to come from other space within the Birmingham Science Park Aston, including Faraday Wharf and ibic, as well as further afield, the Custard Factory and Fazeley Studios which are introducing a model with more communal space, dedicated Broadband and other support services. The Custard Factory is not focusing on high-tech, high growth start-ups, but could accommodate them if they chose to locate there. Fazeley Studios has already attracted Microsoft and other digital industries. There is approximately 75,000 ft² of serviced office accommodation with a ½ mile radius of the city centre and this could provide a lower cost alternative for some entrepreneurs. It will not provide access to support services and will not generate association and links with like-minded firms; but for the most price sensitive start-ups it may be an attractive proposition. As a consequence of the above two bullet points, there is a need for icentrum to clearly differentiate itself from the competition and reinforce the benefits of locating there as opposed to any alternative locations. Faraday Wharf has successfully attracted a number of digital and media-related businesses. Unfortunately, it has not been possible to easily identify each category of tenant as records are no longer kept in this regard. Enquiry numbers at Faraday Wharf are no longer collated although data relating to the year ending August 2010 is available and suggests that enquiries relating to predominantly ibic and Faraday Wharf have been raised for a total of around 480,000 ft² in average suite sizes of around 1,180 ft². Enquiry levels over the year averaged approximately 34 per month and it is understood that enquiries still arise at a similar rate. Consequently, the evidence reviewed and the research we have undertaken demonstrates that in broad terms there is likely to be sufficient demand for a Centre of this size targeted at high-tech SMEs. The extent and quality of the supportive environment, communal space and branding of icentrum will be 73

79 fundamental to attracting tenants, and a soft market testing exercise will be required to test potential rental levels that can be charged in future. In terms of assessing the origin of demand by stage of business the data in Table 7.2 highlights this. This is based on an assumption that the Centre will have a flexible layout. Table Origin of Demand by Stage of Business Type of SME Space Allocation Start-ups and incubation 20% (9,000 ft²) Incubation 6months+ 10% (4,500 ft²) Evidence of Demand - The e4f and oxygen programmes at Faraday Wharf are indicating strong demand that would fill this amount of space - Within the initial three years of icentrum being established we would anticipate this space being full and demand coming from: - ef4 sources - international sources - latent demand from within the West Midlands (graduates, recently redundant workers with skills and start-up capital - Discussion with tenants has revealed how attractive a supportive environment and proximity to like-minded businesses is to high-tech new starts and we anticipate high demand for this space - The supply of supported office space has increased and this has had a dampening effect on demand at individual centres. It will therefore be critical that icentrum can differentiate itself in the market place and become known as the prime location for high tech SMEs in Birmingham and the West Midlands. The flexible approach to space planning and the quality of communal areas as well as the unrivalled support infrastructure are all things that form the unique selling point for icentrum and have to be articulated well to drive demand - With a rapid flow of entrepreneurs and start-ups there will be a need for occupiers to move on after 6 months. A hybrid step may be required for some that are not quite ready to move to the established stage and pay market rent. This stage two incubation will have the role of ensuring the supported SMEs are viable propositions before they graduate to the innovation space and are exposed to higher rents - This space will have a symbiotic relationship with the start-up and incubation space. Demand for it will be driven by the former and knowing that this follow-on support is available to start-ups will drive up demand for the former. - This space will be full as a result of the success of the 74

80 Type of SME Space Allocation Established and grow-on 40% (18,000 ft²) Evidence of Demand space outlined above - At 45,000 ft², icentrum is midscale in terms of UK centres but near the top end of space provided by comparative centres in the West Midlands. Core services must be at least on par with competing locations and demand in this cohort is likely to be more price sensitive. Add-on features will play a role in driving demand which may come from: - companies graduating from the previous two types of space - national and international companies looking to expand into the West Midlands - established companies looking to downsize from existing premises - established companies looking to align themselves with the new digital cluster at icentrum and Digital Plaza - Given current uncertainty in the wider economy, this space will have to be marketed extremely well in order to tempt established businesses from their current locations. It will be providing space in the Grade A office market but for a specific sector (high-tech) and with an unrivalled wrap-around service. This should ensure it is differentiated from other Grade A space and can establish a niche in the market. - Graduate businesses from the incubation phases will begin to deliver a flow of tenants after 6 months and 12 months respectively. - This may prove the most difficult area to let in the initial three years as potential tenants wait and see how the offer pans out in reality. Over the longer-term there should be demand as the economy picks up and the product at icentrum establishes its place in the market but this may be from Year 2/3 onwards. - From our business survey it is notable that 56% of respondents said they would consider remaining on, or relocating to, BSPA and a further 24% said they may consider relocation, However, 71% of respondents said that competitive rents would be a factor in their decisionmaking process and therefore a determinant of demand for space from established companies. 75

81 Anchor tenants 10% (4,500 ft²) Communal 20% (9,000 ft²) - This fits with the aspirations for Digital Plaza and is not something that can be evidenced at this point. By anchor tenants we mean national and international companies that are clearly associated with the high-tech sector. - Anecdotally a number of blue chip companies have been mentioned to us (i.e. Cisco, Apple, E-on, Google) and any of these, and others like them, would be a fantastic acquisition for icentrum and Digital Plaza. Brand association and proximity would then further drive demand for icentrum and raise its market profile - This is the largest unknown quantity and not something that our research has been able to uncover any significant insights into - The consultations with Faraday Wharf tenants have confirmed the importance of communal space to the success of icentrum. It is also important in creating the centre as a destination which will drive further demand to it in future - Similarly, the communal space element is an integral factor in the success of places like Palo Alto and Tech Hub and will become an increasingly important dimension of centres like icentrum as we move through the next couple of decades. - Wrap-around support services and communal space are important features of demand and also provide scope for icentrum to carve out a market niche by surpassing what is currently on offer for high-tech businesses in the West Midlands. - Offering membership of icentrum to external companies is also a means of deriving value from the communal space while raising the profile of it 76

82 Annex One: Stakeholder Consultees A1

83 List of Consultees Organisation Birmingham and Solihull Local Enterprise Partnership Birmingham City Council Birmingham City Council Birmingham Science Park Aston (Business Innovation) Birmingham Science Park Aston (CEO) Birmingham Science Park Aston (e4f) Birmingham Science Park Aston (icentrum Project Manager) Birmingham Science Park Aston (Operations) Birmingham Science Park Aston (Property) Civico Daden Majestic 12 Maverick Soshi Games Studio Benito UK Broadband Individual Paul Heaven Suresh Patel Tara Verrell Gary Gould David Hardman Simon Jenner Hugo Russell Philip Lines Stephen Manners Daniel Cremin Soulla Stylianou Steve Lux, Alex Chudnovsky Chris Massey Kevin Corti Chris de Souza Darren Franchelay A2

84 Annex Two: Serviced Accommodation in Birmingham City Centre A3

85 Building Name/Address Business Centre, 1 Victoria Square, Birmingham, B1 1BD Operator: Regus Photo Description Space Available sq.m. This business centre is located in a landmark building, built 1985 at a prime address in the heart of Birmingham s central business district, with views across Victoria Square to the historic Town Hall. The available space comprises serviced office accommodation arranged over the 3rd, 5th, 6th, 7th & 8th floors ranging from 100 sq ft to 42,755 sq ft. Total sq.m. 19-3,972 3,991 (42,775 sq.ft.) Size Price Per Workspace from Rent Per Annum 149 Not Quoting Per sq.ft. Per Annum (derived) Occupancy Rates Awaiting Info Abigail (area manager ) Not Quotin g Service Charge Not Quoting 24 Hour Access 24 Hour Security Car Parking Disabled Facilities 7 Meeting Rooms/Conference Suites Passenger Lift(s) Shower Suspended Ceilings Air Conditioning, Reception Staff and support teams, Kitchen Areas Baskerville House, Centenary Square, Birmingham, West Midlands, B1 2ND Operator: TargetSpace Ltd NB 9 th floor (6,590 sq ft) available traditional lease 22 psf Nov 11 F/H sold Jan yield 8.3% Prominent landmark building, located in the heart of the city. With flexi space available from 200 to 7,000 sq ft, Fully accessible raised floors, Air conditioned though-out, 24 hour access, CCTV and manned reception Conference facilities and meeting rooms, On site cafe, Latest technology ICT (35,000 sq.ft.) 230 Not Quoting (derived) 72.5% Inclusi ve in Rent Inclusive in Rent NB various recent lettings on traditional lease at 22 psf 2011 A4

86 Building Name/Address Lonsdale House, 52 Blucher Street, Birmingham, B1 1QU Operator: Citibase Photo Description Space Available sq.m. This 1960 s centre provides over 60 office suites ranging from 100 sq ft to 4,000 sq ft. Car Parking Licences from 3 months NB various lettings reported at 10 psf 2006 Total sq.m (21,000 sq.ft.) Size Price Per Workspace from Rent Per Annum 200 Not Quoting Per sq.ft. Per Annum (derived) Occupancy Rates 62.5% Inclusi ve in Rent Service Charge Inclusive in Rent Centre City Tower Hill Street, Birmingham, B5 4UA Operator: Yses The Enterprise Suite comprises a contemporary Business Centre, Serviced Offices and Meeting Rooms on the 9th floor of Birmingham's iconic Centre City Tower. Workstation price is 225 a workstation pcm + vat. Phone calls to uk landline and mobile and internet are included in the rent NB Yses paying 12.50psf + sc 7 psf Dec ,500 sq.ft (derived) Awaiting Info Julie Preston A5

87 Building Name/Address Cornwall Buildings, Newhall Street, Birmingham, B3 3QR Photo Description Space Available sq.m. The available space, prominently positioned on the corner of Newhall Street and Cornwall Street in a grade II listed building has been extensively refurbished. Serviced office accommodation from 200 sq ft to 2,000 sq ft is situated on the first three floors. There are board room and other meeting rooms for customers to use. The third floor is let out on conventional terms giving customers in the serviced space the option to expand during their licence and take a full lease Total sq.m. Size Price Per Workspace from Rent Per Annum Not Quoting Per sq.ft. Per Annum (derived) Occupancy Rates GVA Diane Hewitt Inclusi ve in Rent Service Charge Inclusive in Rent An on site team provides customer service and there are a range of broadband packages to choose from. Aspect Court 4 8 Temple Row, Birmingham, West Midlands, B2 5HG Operator: Citibase 13 St Pauls Square, Birmingham, B3 1QX Fully furnished, flexible office suites offering advanced IT and telecoms supported by Category 5 cabling, 24hr access and security, meeting and conference rooms with audio-visual facilities and wide ranging business support services. The available space comprises serviced office accommodation from 200 sq ft to 5,000 sq ft within a terraced three-storey office building of traditional red brick construction with stone dressings. The property dates back to circa 1780 and is Grade II listed. (20,000 sq.ft.) (derived) 70% (5,000 sq.ft.) GVA Diane Hewitt Inclusi ve in Rent Inclusive in Rent It is located fronting St Pauls Square, close to the junction with Mary Ann Street. A6

88 Building Name/Address 35 St Pauls Square, Birmingham, B3 1QX Operator: City Spirit Ltd St Pauls Square, Birmingham, B3 1QX Operator: City Spirit Ltd Photo Description Space Available sq.m. The available space comprises serviced office accommodation available from 100 sq ft within a restored end terrace threestorey Georgian building located fronting St Pauls Square at Brook Street close to the corner of Caroline Street, off the A41 in Birmingham. Quality Serviced Offices, Business Centre and Conferencing facilities NB acquired by operator 2004 The property comprises Georgian listed building of traditional masonry construction, built circa Individual Fully Furnished Offices of 200-2,700 sq ft, Car Parking, Conference Facilities, Meeting Room(s) NB acquired by operator 2004 Total sq.m. Size (3,500 sq.ft.) Price Per Workspace from Rent Per Annum Per sq.ft. Per Annum Occupancy Rates 200 2, GVA Diane Hewitt Inclusi ve in Rent 12,000 sq.ft. Inclusi ve in Rent Service Charge Inclusive in Rent Inclusive in Rent Quayside Tower, Broad Street, Birmingham, B1 2HF Operator: Regus The available space comprises serviced office space over two floors 1 Passenger Lift(s) 11 Car Parking Spaces Closed Circuit TV Double Glazing Meeting Room(s) Raised Floors 1, (12,600 sq.ft.) POA Not Quoting Awaiting Info Abigail (area manager ) Not Quotin g Not Quoting A7

89 Building Name/Address Temple Row, Birmingham, B2 5LS Photo Description Space Available sq.m. Located in the commercial centre of Birmingham, in a prime position immediately adjacent Cathedral Square. 1,500 5,000 sq.ft. Total sq.m. (27,908 sq.ft.) Size Price Per Workspace from Rent Per Annum Per sq.ft. Per Annum (derived) Occupancy Rates Service Charge Operator: MWB Business Services Ltd Services include meeting/conference facilities and videoconferencing, 24 Hr Access, Aircon, Catering, Conferencing Facilities, Disabled Facilities, Fully Furnished, Lifts, Meeting Rooms, Reception, Secretarial Support, Showers Lionel Street, Birmingham, West Midlands, B3 1AP Livery Street, Birmingham, West Midlands, B3 2PB NB acquired by operator psf This centre comprises a five storey building, providing 4 floors of refurbished office accommodation with a ground floor reception area. Access to all floors is via a lift or stairs. On and off street parking, flexible lease lengths - 3 months to 10 yrs, pre-configured and supported telephone, internet and networking, air-conditioning in some suites, office furniture available, reception and phone answering service, professional, cost-effective meeting space-available from just one hour, administrative support-ad hoc or dedicated administrative assistance. Currently available: 547 sq ft - 8/9 man office, 409 sq ft - 5/6 man office and 270 sq ft - 2/3 man office. The centre comprises a 7 storey office building, providing high quality office accommodation with secure on site car parking. The centre has been comprehensively refurbished to offer flexible air conditioned office accommodation. 547 sq ft, 409 sq ft, 270 sq ft (derived) POA A8

90 Building Name/Address Three Brindley Place, Broad Street, Birmingham, B1 2JB Operator: Regus 1 Sutton Street, Birmingham, B1 1PE Photo Description Space Available sq.m. The available space comprises serviced offices located in Brindley Place, arranged over second and fifth floors. Space available from 200 sq ft - 5,000 sq ft., a thriving commercial area. This business centre offers fully serviced offices, on flexible terms, in a modern environment. Furnished and networked offices are complemented by a full range of services that include 24hr access, car parking, 24hr CCTV and ondemand meeting rooms as standard. 103 Car Parking Spaces The available space comprises various office accommodation over ground and first floor. 200 sq ft - 5,000 sq ft Total sq.m. Size Price Per Workspace from Rent Per Annum 3, On applicati on to the agents Per sq.ft. Per Annum (derived) Occupancy Rates Awaiting Info Abigail (area manager ) Inclusi ve in Rent (6,284 sq.ft.) 50 20, % Inclusi ve in Rent Service Charge Inclusive in Rent Inclusive in Rent Operator: First House Offices 24 Hour Access Air Conditioning Broadband Car Parking Closed Circuit TV Kitchen Facilities Manned Reception On site security Security Entry System Security System Recently refurbished and modernised fully furnished serviced offices based in the centre of Birmingham, with up to date ICT. Manned reception and 24 hour access. Mail service and receptionist services. A9

91 Building Name/Address Albert Street, Birmingham, B4 7UD Photo Description Space Available sq.m. The available space comprises serviced office accommodation from 164sq ft to 4,000sq ft Air Conditioning Car Parking Kitchen Facilities Newly Refurbished Prime Position Security System Total sq.m. Size Price Per Workspace from Rent Per Annum 387 POA See individu al floors for rents Per sq.ft. Per Annum Occupancy Rates Inclusi ve in Rent Service Charge Inclusive in Rent Colmore Plaza, Colmore Circus Queensway, Birmingham, B4 6AT Recently renovated centre with full disabled access, two lifts and shower facilities. Fully air conditioned, CAT 5 cabling throughout. The available space comprises serviced office accommodation up to 17,250sqft in a new landmark building. The Business Centre has automated pedestrian turnstiles leading to the building s hightech intelligent lifts. The offices are all fully furnished and equipped. The facilities and non-branded reception provide 1,603 1,603 POA On applicati on to the agents Inclusi ve in Rent Inclusive in Rent Closed Circuit TV Meeting Room(s) Reception WC's A range of office sizes benefiting from telecoms, IT infrastructure, air conditioning, 24-hour access and security, lifts to all floors and secure car parking. A10

92 Stephen Cox Technical Director Ecorys UK Ltd Vincent House, Quay Place Edward Street Birmingham B1 2RA Tel +44 (0)