Fort Halstead : Towards a. (Employment Opportunities) A Report by Regeneris Consulting

Transcription

1 Fort Halstead : Towards a Development Framework (Employment Opportunities) A Report by Regeneris Consulting

2 Armstrong (Kent) LLP Fort Halstead : Towards a Development Framework (Employment Opportunities) April 2012 (Updated with new Final Section August 2012) Regeneris Consulting Ltd 70 Cowcross Street London EC1M 6EJ

3 Contents 1. Introduction 1 2. The Current and Immediate Future Economic Role of Fort Halstead 3 3. Economic Profile of Sevenoaks 6 4. Existing Sevenoaks Employment Land Evidence and Related Research Other Employment Uses Assessing Market Need and Opportunity Conclusions & Short List Employment Opportunities Updated Employment Proposals - August

4 1. Introduction 1.1 In 2006, RREEF (the real estate investment arm of Deutsche Bank) formed a joint venture (Armstrong (Kent) LLP) with Hines that unconditionally purchased a long leasehold interest in the circa 135 hectare Fort Halstead site from QinetiQ 1. QinetiQ remains the freeholder of the site and also holds a long lease. RREEF has the principal interest in the Armstrong (Kent) LLP vehicle. 1.2 Hines, the Development Manager on behalf of Armstrong (Kent) LLP, had previously made submissions to Sevenoaks DC seeking the inclusion of the Fort Halstead site in the emerging Core Strategy for a mixed use scheme incorporating in the region of 1,000 dwellings. The Council, through the Core Strategy, rejected this option. 1.3 Following the announcement in 17 June 2011 by Dstl of its planned relocation from Fort Halstead to Portsdown West and Porton Down by 2017 there is now both a need and an opportunity to think strategically about the long term future role of Fort Halstead. With this in mind, CBRE has been appointed to work with the Council to look afresh at the long term future planning of Fort Halstead. CBRE has appointed a wider professional team to support and inform their work. The aim is to create a high level Development Framework to provide a vision for Fort Halstead s future. This Report 1.4 This report provides one of the initial pieces of evidence for CBRE in establishing the principal future opportunities for the site. It tests the site s capability to deliver future employment opportunities and has been authored by Regeneris Consulting with commercial input from CBRE. This commercial input is vital in ensuring that any proposals that emerge for Fort Halstead are deliverable and viable. The report is structured as follows: Section 2 explores the current economic role of Fort Halstead, in particular relating to the scale and nature of Dstl s and QinetiQ s current employment base. Section 3 provides a brief economic profile of Sevenoaks district, identifying key employment sectors and trends in employment change. Section 4 distils existing evidence relating to employment land in Sevenoaks as well as neighbouring areas and the implications for Fort Halstead. The focus here is on the conventional employment land categories of office, industrial and warehousing. Section 5 considers the potential for other employment uses on Fort Halstead, including the scope for leisure, tourism and retail employment on site. Section 6 provides a systematic appraisal of possible employment uses. Section 7 provides emerging conclusions and identifies a possible short list of employment options for Fort Halstead. 1 The total previously developed/developable area of the site is somewhat smaller at circa 41 hectares. Page 1

5 A New Concluding Section August The CBRE-led team has engaged in a wide programme of stakeholder consultation in the period from May 2012 onwards. One of the aims of the consultation programme has been to test the findings of this Employment Opportunities Report and to gather further views and opinions on possible employment uses for the site. 1.6 A new concluding section to this report has therefore been produced as of August The new section provides an overview of stakeholder responses on employment land issues and illustrates how the CBRE-led team has incorporated this feedback into a broad strategic masterplan for the site. Page 2

6 2. The Current and Immediate Future Economic Role of Fort Halstead Current on-site employment 2.1 Fort Halstead represents a key employment location within Sevenoaks district. At its peak the site employed around 4,000 people. Various reductions to this figure over the past few decades have brought the current employment on-site to around 1,200 people 2. The breakdown of onsite employment is understood to be as follows: 830 staff within Dstl. The occupational profile of research activities across the UK 3 suggest that the majority of employees (80%) at Dstl will be employed in higher level positions: Manager and Senior Officials, Professional Occupations and Associate Professional and Technical Occupations. The majority are also likely to be full time positions. Around 200 employees at QinetiQ, a private sector defence research organisation. As with Dstl it is likely that the majority of QinetiQ employees will be in higher level, full time positions. Around 150 other on-site employees. Many of these staff are employed by Serco on a range of site maintenance functions. The number also includes a reasonably significant on site security presence. 2.2 The site originally served as one of ring of forts protecting London in the latter part of the 1800s. It was first used as a significant employment site for government research during the Second World War with activity peaking in 1960s-70s. The presence of many of today s functions on site can be traced back to this period. Travel to work patterns 2.3 Fort Halstead draws in labour from a very wide catchment. Data provided to us suggests that only around 150 of Dstl s staffing quota (18%) live in the district of Sevenoaks (see Figure 2-1). 2.4 Assuming the same proportion of employees at QinetiQ and Serco 4 live in Sevenoaks as for Dstl, it is estimated that 210 employees on the Fort Halstead site live in the district in total. 2 This figure will be slightly less than 1,200 when converted to Full Time Equivalent employment, although we understand the majority of on-site posts to be full time. 3 Based on SIC/SOC data from ONS, Census Travel to work patterns for Serco staff may be slightly more localised given their occupational profile. Page 3

7 Figure 2-1 : Profile of Dstl Employees by Residential Postcode Source: Employee postcode data provided by Dstl Off-Site Employment in Sevenoaks 2.5 As with all major employers, Dstl, QinetiQ and Serco will have considerable corporate supply chains, predominantly focused around central government procurement schedules this yields what are known as indirect jobs. Staff will also spend their wages in the local economy known as induced jobs. By applying a combined indirect and induced industry multipliers for a district and economy the size of Sevenoaks (1.05 would be typical) to the employment at Fort Halstead we estimate that occupiers and their employees will support a maximum of 60 off site jobs in the district. 2.6 Dstl has provided some local corporate spend data spend, which amounts to just under 1m ( 900k) per annum with local suppliers. Utilising average turnover per employee data to this data would imply an additional 10 off-site jobs in the Sevenoaks economy. The variation in the two approaches is likely to be as a result of: Degree of accuracy of the estimated local spend from Dstl (it is likely that this data is only partial) The absence of QinetiQ and Serco corporate spend data The exclusion of employee expenditure (induced) effects. 2.7 It is unlikely that even when these additional categories are included the off-site employment estimate would exceed the figure derived from industry guidance (i.e. 60 jobs). The procurement patterns of major organisations like Dstl and QinetiQ and the wide travel to work patterns at the site will both serve to limit the degree of off-site activity locally. Page 4

8 Dstl Relocation 2.8 Dstl announced their relocation from Fort Halstead to Porton Down and Portsdown West in June The relocation is expected to be completed in 2017 and is likely to be phased. Related services provided by Serco/others will no longer be required on the site. As a result on site employment will decrease by around 1,000 jobs by At this time it is not possible to ascertain how many of the estimated 150 Dstl employees who live in Sevenoaks will relocate their homes to Porton Down and Portsdown West. It is likely that a proportion of the 150 current employees who live in Sevenoaks will remain living and/or working in the district The employment impacts on the local supply chain will depend on the exposure of individual suppliers to Dstl spend. For a small number Dstl spend will represent a high proportion of annual turnover and may lead to a re-evaluation of their continued operations. Others will be able to adjust through other client contracts. QinetiQ s Future Role on site 2.11 Our understanding is that QinetiQ propose to continue operations at Fort Halstead. All future on-site operations are likely to take place in two buildings: the existing X48 building and a new 3,300sqm office block. This will safeguard circa 200 jobs Associated open space and landscaping will be required by QinetiQ but the extent of this is not yet known The clear indication from QinetiQ is that their proposal to remain at Fort Halstead in the medium to longer term is based on the assumption that new neighbours will be secured for the site. They have no interest in the prospect of becoming the sole long term occupier of Fort Halstead. Vacated Premises on Site 2.14 Apart from building X48 (see above) all other buildings will be vacated after Dstl s departure and QinetiQ s on-site consolidation. A small proportion of these buildings have been constructed in the last 15 years but the majority of the accommodation pre-dates this period. Much of it is in the form of bespoke buildings designed for Dstl s operations. Our assessment is that very few, if any, of the premises to be vacated by Dstl and QinetiQ have any viable future for employment use The site has a Schedule Ancient Monument (the Fort) and a listed building (the Penny Building) which will be retained as part of any future re-use of the site. Page 5

9 3. Economic Profile of Sevenoaks 3.1 In 2010 Sevenoaks district housed around 42,900 jobs and 5,700 businesses. This equates to approximately 8% and 11% of all jobs and businesses in Kent respectively. Within the district, Sevenoaks Urban Area is the largest employment centre, whilst Swanley and Edenbridge also contain significant concentrations of employment. Away from the main settlements, important concentrations of employment have historically been found in the Major Developed Sites in the Green Belt, such as at Fort Halstead. Employment Change 3.2 Over the past decade, economic performance in Sevenoaks has largely mirrored region wide trends. Between 1999 and 2010 employment increased by around just 2% in total, equating to an average increase of around 70 jobs per annum in absolute terms. This rate of growth was lower than growth rates across Kent more generally. Jobs growth was witnessed in a variety of sectors; between 1999 and the sectors which grew most substantially were public administration (+1,800), construction (+1,000) and retail (+700). Between 2008 and 2010 the sectors which grew the most were employment agency activities 6 (+2,800) and cleaning and landscaping services to buildings (+900). 3.3 Year on year fluctuations are evident in the data, as is typically the case for relatively small economic areas. The most recent of these being a contraction in the employment base from 2008 to 2009, followed by growth in the period to It is likely that the district has experienced some further employment losses in the period since 2010 as a result of both national economic performance and the closure of the GSK site at the village of Leigh. 115 Figure 3-1 : Indexed Employment Change, (1999=100) Indexed Change (1991=100) Sevenoaks Kent South East England Note: Employment figures have been adjusted to take into account data methodological discontinuities in Source: Annual Employment Survey, Annual Business Inquiry, Business Register Employment Survey 5 Data for 1999 to 2008 is based on Annual Business Inquiry data. Data thereafter is based on the Business Register and Employment Survey which provides data from 2008 onwards. Individual sectors used within the two data sets are not compatible. 6 Employment agency activities refer to individuals employed through employment agencies who will be employed in a variety of sectors. Page 6

10 Important Sectors 3.4 The economy of Sevenoaks is relatively broad based; no individual sector is substantially over-represented in comparison with the national average. Many of the 49,300 jobs currently housed within Sevenoaks are those which would be expected to accompany a resident population of some 114,000, with significant volumes of employment in the retail and public and personal services sectors. Generally, however, levels of dependence on the public sector are relatively low. 3.5 Table 3-1 details those sectors of the Sevenoaks economy with over 500 employees. Table 3-1 : Sevenoaks Employment by Sector (Sectors with in excess of 500 staff), 2010 Sector 2 digit SIC Number of Employees % LQ Retail, except of motor vehicles and motorcycles 4, Education 4, Employment agency activities* 3, Food and beverage service activities 2, Wholesale trade, except of motor vehicles and motorcycles 2, Cleaning services to buildings and landscape activities 1, Construction of buildings 1, Specialised construction activities 1, Residential care activities 1, Human health activities 1, Scientific research and development 1, Sports activities and amusement and recreation activities 1, Real estate activities 1, Wholesale and retail trade and repair of motor vehicles Activities of head offices; management consultancy activities Social work activities without accommodation Legal and accounting activities Architectural and engineering activities and technical testing Manufacture of machinery and equipment n.e.c Public administration and defence; compulsory social security Other personal service activities Activities auxiliary to financial services and insurance activities Computer programming, consultancy and related activities Source: Business Register Employment Survey LQ = location quotient. A measure of concentration of employment relative to some benchmark location, in this case GB. An LQ in excess of 1.0 indicate a relative concentration of employment. * Employment agency activities - agency workers likely to spread across a range of sectors. Figures are rounded to the nearest 100 for data confidentiality. Page 7

11 3.6 Data suggests the district also has a large knowledge economy with around 7,500 jobs in Sevenoaks has one of the highest concentrations of jobs in knowledge rich sectors in Kent. Using Kent County Council s definition of the knowledge economy it is evident that the majority of these (1,300 or 17% with a Location Quotient of 6.5) are in scientific research and development, most of which are likely to be linked to operations at Fort Halstead 8. There are also notable concentrations of employment in head office and management consultancy activities (800), legal and accounting services (700), architectural and engineering activities (700), activities auxiliary to financial services and insurance activities (600) and computer programming and related activities (500). Such employment tends to be focused in smaller sized organisations. In 2008 around 40% of knowledge economy jobs were in businesses of 1 to 10 employees and a further 20% were in businesses of 11 to 49 employees. There were only around 20 knowledge economy businesses with 50 employees and over in the district. Important Employers 3.7 The district is also home to a number of major employers which play an important role in local economic performance. The largest employers in the district are spread across a range of sectors and activities as illustrated in Table 3-2 Table 3-2 : Top Employers, Sevenoaks District Organisation/ employer Total staff (not FTE) Sector Fort Halstead (dstl, QinetiQ, Others) 1,200 Public/ Private Sevenoaks Hospital 800 Public BT, London Road Private Asda, Swanley 550 Private SDC Offices, Sevenoaks Town 300 Public Sainsbury s, Sevenoaks Town 300 Private Sevenoaks School 300 Private Tesco, Riverhead 300 Private Lenta Business Space, Swanley 300 Private Source: Sevenoaks District Transport Study, 2008 Note: Original data source (2008 Sevenoaks District Transport Study) updated by Regeneris Consulting where necessary. Labour Market 3.8 Sevenoaks is a relatively open economic area, with the district experiencing relatively high levels of commuting, with around 28,400 people commuting out of the district on a daily basis and around 19,500 commuting into the district. Daily out commuting is influenced by the proximity of Sevenoaks to central London and the associated pull of occupational choice and higher salaries. In-commuting has historically been influenced by the presence of certain employers drawing on a sub-regional labour market such as at Fort Halstead, GSK and BT. 7 Redefining the Knowledge Economy, 2011, Kent County Council. Knowledge economy defined as incorporating a range of higher value added sectors including Computing Activities, Telecommunications, Media Activities, Research and Development, Business Services and Higher Education 8 A small number are also likely to be linked to activities at the GSK site at Leigh, downsized significantly before subsequent closure in Page 8

12 3.9 Average annual earnings for Sevenoaks residents (around 34,000 gross per annum) are higher than the regional average (around 28,800 gross per annum), whilst earnings for Sevenoaks workers (around 26,500 gross per annum) are below the regional average (around 27,500 per annum) Unemployment rates have been typically low. In the last decade unemployment has consistently remained below the regional average, although rates have increased since 2008 in the context of the economic downturn. Levels of economic inactivity are generally low and it is reported that local businesses face problems of recruiting and retaining staff (Sevenoaks Adopted Core Strategy, 2011). Page 9

13 4. Existing Sevenoaks Employment Land Evidence and Related Research 4.1 A large employment land evidence base has been compiled for Sevenoaks district since The evidence base relates to commercial activities which occupy space in offices (B1 which includes R&D laboratory uses and light industrial units), industrial facilities such as factories (B2) and distribution centres and warehouses (B8). These account for around 45% of all employment nationally 9. Later in the report we review supply and demand for those employment uses which do not come under the banner of conventional employment land analysis. 4.2 The portfolio of ELR documentation for Sevenoaks district is as follows: URS undertook an Employment Land Review (ELR) in which identified employment land requirements for 2005 to The URS projections are based on data from SEERA and Experian An addendum report was published in which revised or amended some of the employment areas identified in the 2007 report following the Core Strategy Draft for Submission Finally a document in 2011 looking at the long-term employment space projections for the district was produced 12. This document updates the 2007 ELR with Experian 2009 forecasts which capture, in part, the impact of the recession. B1 Market 4.3 The B1 market typically covers three different types of use: general office space such as HQs, serviced offices and business park offices (B1a); laboratory and R&D space (B1b) and light industrial space which may be found on a business park (B1c). 4.4 There is around 130,000sqm commercial B1 space within Sevenoaks district 13. This is low in comparison with similar areas across the South East which are also similarly located close to the M25 and Greater London (see Table 4-1). 9 GVA Grimley (June 2009) Planning for Prosperous Economies 10 URS (December 2007) Sevenoaks Employment Land Review, Final Report produced for Sevenoaks District Council 11 Sevenoaks District Council (February 2010) Employment Land Review Addendum Report URS Scott Wilson (September 2011) Long Term Employment Space Projections for Sevenoaks District, Final Report produced for Sevenoaks District Council 13 Department of Communities and Local Government (2008) Page 10

14 Table 4-1 B1 14 Floorspace in a Selection of Local Authority Districts Local Authority B1 Stock (thousand sqm) Crawley 390 Reigate and Banstead 300 Maidstone 200 Tonbridge and Malling 190 Mid Sussex 190 Medway 190 Tunbridge Wells 150 Sevenoaks 130 Ashford 110 Dartford 70 Tandridge 60 Source: CBRE from Department of Communities and Local Government Note: Figures are rounded to the nearest 10. Based on statistics provided by the VOA in 2008 using data collected for the 2005 revaluation. 4.5 Since 2000 there have been transactions totalling around 28,000sqm in Sevenoaks. This is split into 6,000sqm for transactions of 1,000sqm and above 15, and 22,000sqm for transactions below 1,000sqm. No individual year had transactions totalling more than 4,500sqm. 4.6 Compared to other locations in the M25 South East Quadrant Sevenoaks town centre office stock is small: it is only around half the size of that in West Malling (see Figure 4-1). Sevenoaks, and Sevenoaks town in particular, demonstrates a very localised B1 market with the majority of supply and demand relating to small units. There is no large scale out-oftown office space at present within the Sevenoaks market. 4.7 In the last five years, Sevenoaks accounted for less than 0.5% of B1 transactions over 1,000 sqm in key towns in the M25 South sub-region 16 (see Table 4.2). Sevenoaks accounted for around 1,000 sqm of B1 transactions compared to 48,000 sqm in Crawley, which accounted for 18% of the total. 14 The VOA splits commercial properties into offices, factories and warehouses. We have assumed B1, B2 and B8 uses respectively. CBRE splits commercial properties into offices and industrial (incorporating manufacturing and distribution). Similarly we have assumed B1, B2 (manufacturing) and B8 (distribution) respectively. 15 Transactions over 1,000sqm are based on data held in CBRE s database. Transactions of under 1,000sqm are sourced from CoStar. 16 The M25 South sub-region, as used by CBRE in their market analysis, spans from the Kent Coast in the North and East and stretches to the M3 in the West. Page 11

15 Figure 4-1 : Comparable Town Centre Office Stock 600, , ,000 sqm 300, , ,000 0 Bromley Redhill West Malling Sevenoaks Dartford Source: URS (2007) Sevenoaks Employment Land Review, Final Report for Sevenoaks District Council Table 4-2 Office Market Size Based on Units Over 1,00 sqm in Key Towns in the M25 South Sub Sqm % of M25 South Market Crawley 47, % Croydon 24, % Woking 23, % Weybridge 20, % Reigate / Redhill 18, % Guildford 17, % Wimbledon 16, % West Malling 15, % Kingston 13, % Leatherhead 12, % Other Towns 59, % Sevenoaks 1, % Total 271,000 Source: CBRE 4.8 At the end of 2011 there was 300,000sqm available B1 space in the M25 South sub-region. Available space in Sevenoaks town accounted for just one per cent of the total availability across the sub-region. The main locations in Sevenoaks with availability at the time of the 2007 ELR were Sevenoaks town (6,500sqm) and Westerham (1,000sqm). Page 12

16 Figure 4-2a - M25 Market Quadrants (Knight Frank) Source: Knight Frank. Map reproduced by Regeneris Consulting Figure 4-2b - M25 Market Sub-Regions (CBRE) Source: CBRE. Map reproduced by Regeneris Consulting Page 13

17 4.9 New space coming to the market in the town of Sevenoaks has been limited, with the majority of supply being second hand (over 80%) and lower grade space 17 (over 40%). The most significant impact on the Sevenoaks office market came from the BT Workstyle Building (now marketed as 160 London Road) which was completed in 2003 which offered 4,000sqm of office space. Around 3,000sqm of this space is currently available in three small units. There is also limited office accommodation in surrounding local markets suggesting that the wider area is not considered a key office location and as such does not experience significant supply and demand for office premises. At the time of the 2007 ELR there was an estimated 3,000sqm of pipeline development in Sevenoaks town. B1a General Office 4.10 The Annual Monitoring Report, produced as part of the Local Development Framework for Sevenoaks, indicates that between 2009 and 2011 there was a net increase of 100sqm of B1a office space in the district. This was most strongly influenced by an increase of almost 1,500sqm in These figures demonstrate further the localised nature of the Sevenoaks B1 office market. Table 4-3 : Sevenoaks District Change in B1a Employment Land Supply (Sqm) ,485 Source: Sevenoaks Districts Council s Local Development Framework AMR 2009, 2010, Demand in the M25 South sub-region has been predominantly to the west of the M23/A23 corridor. Croydon, Crawley, Regiate/Redhill and Weybridge account for over four-fifths of new availability in the sub-region. In West Kent, West Malling and Dartford dominate the office market and attract national occupiers. They have accounted for around 90,000sqm of take up since 2000, with the majority of take up taking place before Only 30,000sqm has been taken up in the last five years indicating a slowing in demand. This is reflected by negative rental growth across the M25 South sub-region. This is in contrast to modest growth in other areas such as the Thames Valley. Both West Malling and Dartford Crossways have capacity for further expansion if required Across the country it is evident that out-of-town business parks are currently seeing the effects of the recession and general downward shift in demand. Since 2007, there has been a downward trend in take up of space by occupiers. Though there has been a slight increase in take up in 2011, vacancy levels have continued to rise and were at a 16 year high at the end of the year (see Figure 4-3). Though space is demanded by some companies, the space released by others is greater. 17 CBRE split the office market into three categories: 1 newly completed space which will mostly be of grade A quality; 2 second hand modern units which pick up spill over demand for new builds and tend to be of a good quality with some grade A space; 3 second hand other which tends to be grade B space. It is this third category which is referenced here as lower grade space. Page 14

18 Figure 4-3 Business Park Take Up and Vacancy Rates All Regions Source: GVA (Spring 2012) Business Parks Review Serviced Offices/Start Up Units 4.13 Serviced offices provide flexible leasing arrangements for start up and small businesses and in some instances provide move-on space for growing organisations or temporary space for a one-off location-specific project team. Providers such as Regus provide equipped office space which can be leased on a permanent, part time or daily basis. The space leased by a business can be from one workstation upwards and so a serviced office often houses several small businesses. Providers tend to require single or multiple floors in larger buildings as opposed to whole buildings Both in town and out of town locations are sought by serviced office providers though out of town deals tend to be on established sites. Provision in Sevenoaks district tends to be focused in urban areas or adjacent to transport links. For example, at the Sevenoaks Business Centre which covers 3 buildings and at the Horizon House Business Centre at Swanley In 2010 there were around 174,000 serviced offices in the UK. Recent growth in demand (2% increase from ) has been more subdued than in previous years due to the impact of the recession on small and medium sized businesses. In the South East enquiry levels for serviced offices in Q decreased by 6% on Q levels. However, some larger serviced office providers in the UK have recently reported an increase in enquiries as companies seek flexibility and are less able to make freehold transactions due to tighter credit conditions. Indeed, the number of newly signed serviced office tenants in the South East increased by 75% between Q and Q and the average number of workstations per tenant increased from 2.8 to 5.0. Page 15

19 4.16 CBRE data for serviced office provider transactions 18 (such as Regus, Orega Business Centres and Easylet Offices) in the South East, suggests that there were 29 such transactions between January 2007 and March One of these was in Kent at Kings Hill in West Malling. There was a sudden fall in transactions between 2009 (7) and 2010 (2) which indicates the impact of the recession on the serviced office market (see Figure 4-4). Floorspace requirements ranged from 500sqm to 3,600sqm with the average size of transactions at 1,600 sqm. The largest was by Avanta Business Centres in 2007 for 3,600sqm in an out of town location in Harlington, Middlesex Provision of serviced offices in the UK is forecast to increase by between 3 and 5% per annum between 2010 and 2015 (an overall increase of 22%) Figure 4-4 -South East - Serviced Office Provider Transactions 0 Source: CBRE (up to end March) 4.18 The main locations for the B1 office market across the wider area are: King s Hill at West Malling has 70,000sqm of office space. The business park development is home to 200 companies and more than 5,000 employees in business property including space for international and national corporate as well as SMEs. There is consent for an additional 100,000sqm gross development, although we understand proposals may be emerging for additional residential uses on parts of this employment land allocation. Occupiers include Cabot Financial, Sterling Insurance and Barclays Bank. Crossways Business Park in Dartford is the largest mixed-use business park on the M25. The Business Park is comprised of nine different commercial areas plus leisure facilities. Companies include Barclays. It is anticipated that 900,000sqm of commercial space will be developed over the next 20 years. 18 As opposed to end user transactions as detailed in previous paragraphs. Page 16

20 Croydon - Croydon is a key office location. The town now has the most available space on the market, accounting for 26% of office space in the South M25 subregion. Croydon also accounts to 18% of new and early marketed office developments in the South M25 sub-region. Gatwick Diamond is a large area surrounding Gatwick and Crawley and up-to Reigate/Redhill. It is a key regional centre for major professional service companies including KPMG, PWC, Deloittes, BDO Stoy Hayward and Grant Thornton. Crawley accounted for the largest proportion of take up of any town in the M25 South subregion (18%). Crawley has the second largest quantum of available space on the market at the time of writing. The Thames Valley has been the focus of demand for office space in the South East in recent years, with just under two thirds of the office space acquired by occupiers falling in this area. In contrast the M25 South sub-region has only accounted for around 20% of take up in the South East There is also consent for office development of a considerable scale as part of the Ebbsfleet Valley development in Gravesham. Land Securities is seeking to deliver 560,000 sqm of office development as part of a mixed use scheme. The development will benefit from international transport links via the Eurostar. A number of other office developments at a smaller scale are in the pipeline in locations such as Ashford, Maidenhead, Reading and locations in outer London such as Chiswick Park. Figure 4-5 Key General Office (B1a) Locations in M25 South and Thames Valley Sub-Regions Page 17

21 B1b and B1c 4.20 Sectors requiring B1b and B1c employment space tend to be knowledge-rich science and technology based business and research based institutions. A range of helpful categorisations on what constitutes a science and technology based business have been provided by the likes of OECD and BIS 19. These tend to emphasise the importance of: Involvement in innovative activity involvement in the design, development and introduction of new products, processes and services. R&D intensity - either measured by expenditure on R&D or on the number of personnel involved in R&D. Intensive use of technology use of leading edge techniques, advanced equipment or having a rapid turnover of equipment. Leading-edge products and services products which display a technical sophistication and complexity that is at the leading edge of their field Sectors which tend to display these characteristics include, but are not limited to, parts of the advanced manufacturing and engineering sectors, defence, materials technology, environmental technologies, pharmaceuticals, precision instruments, healthcare technology and communications. For such activities, agglomeration and knowledge exchange with similar organisations is often important. Clustering is common as it can reinforce, and take advantage of, labour markets (particularly drawing on commuting patterns of higher skilled employees), bespoke and higher quality premises and proximity to a public or private sector research institution Clustering has been most common within the UKs family of circa 75 science and technology parks, the number of which grew rapidly throughout the last two decades underpinned by substantial public sector resource (all of the former Regional Development Agencies invested heavily in science parks). Public sector investment has been a feature of many science and technology park developments, largely because: The provision of resource intensive components such as incubator facilities which, although effective at growing innovative companies, require up front capital subsidy and sometimes revenue support because of the limited financial returns they generate for investors. The fast growing/moving nature of tenants can make short term leases the norm, and as such limit the attractiveness of the schemes to commercial investors. Restrictions on the type of tenant at some schemes can sometimes affect occupancy levels, and as such the attractiveness of the schemes to investors. The overall levels of risk attached to many schemes. 19 OECD = Organisation for Economic Co-operation and Development. BIS = UK Government Department for Business, Innovation & Skills. Page 18

22 4.23 Post 2007 UK science parks have felt the force of both the economic downturn and more recently the tightening of public sector resources. We have entered a period of almost unprecedented public sector austerity, and sources of public funding for science park development will prove few and far between. Data from the UK Science Parks Association (UKSPA) shows that employment levels and the number of tenant companies at UK science parks has declined post 2007 and points to a large number of shelved/delayed development schemes Historically science park build out rates have not been particularly rapid, even in a period of relatively buoyant national economic performance and the availability of public funding. A recent Regeneris Consulting survey of 30 UK science and technology parks shows the median build out rate for each UK science park was 2,300sqm per annum over the previous decade Outside of science and technology parks, the other major source of UK B1b and B1c employment comes in the form of large bespoke single user campus developments, many of which have been rationalised in recent years. For example, the UK s three major pharmaceutical companies (Pfizer, GSK and AstraZeneca) have all been rationalising their R&D operations and moving towards outsourcing to third party providers in recent years as patent expiries, regulatory demands and global pressure to reduce drug prices have impacted on the sector The current market for R&D and technology occupiers is considered to be highly competitive with an array of locations (see below) seeking to capture market share Research and development activities such as those undertaken at Fort Halstead and the ex- GSK site at Leigh (Powder Mills) fall within the B1b use class and as such a high proportion of the Sevenoaks B1 space falls in this category (40%). The volume of B1b and B1c space within Sevenoaks is due in the main to historical factors rather than any recent large scale demand for accommodation. This is demonstrated by the profile of commercial B1 buildings in the district 20, 80% of which is pre-1990s Sevenoaks Districts Council s Local Development Framework Annual Monitoring Report indicates that, over the last three years ( ) there has been a net loss of around 400sqm of B1b floorspace and a net gain of around 200sqm of B1c floorspace. These figures reflect the relative absence of any recent market activity. Table 4-4 Sevenoaks District Change in B1b and B1c Employment Land Supply (Sqm) B1b B1c B1b and B1c Total ,830 1, ,220 Source: Sevenoaks Districts Council s Local Development Framework Annual Monitoring Report 2009, 2010, Valuation Office Agency (March 2005), Age of Commercial and Industrial Stock: Local Authority Level 2004, Table 3.2 Total Floorspace by LAD and Age for Each Bulk Class 21 17% pre 1940; 30% ; 18% ; 17% ; 9% ; 2% ; and, 6% unknown age. Page 19

23 4.29 There are other locations across Kent and further afield which provide a focus for B1b and B1c markets and R&D intensive occupiers and which will provide the natural locations to which demand will flow. A selection of the main locations are detailed below: Discovery Park in Sandwich has been awarded Enterprise Zone (EZ) status. It covers circa 70 hectares of the Pfizer site 22 and around 280,000sqm of floorspace. Pfizer will continue to lease part of the site and retain around employees which may act as a draw to other R&D activities. The EZ will offer substantial space for other R&D occupiers as well as offices and other employment types. As an EZ, Discovery Park will be able to offer incentives such as tax breaks to occupiers which will be unavailable elsewhere. Kings Hill at West Malling provides mixed use space including B1a, b and c. The 70,000sqm of business property includes companies such as Genzyme Diagnostics and Kimberly-Clark. Kings Hill has consent for a further 100,000sqm of development. Kent Science Park in Sittingbourne is a 45,000 sqm high-specification, purpose built science park with premises for start up to mature technology companies 23. The site is home to around 60 companies with a focus on life sciences, high-tech engineering, environmental, ICT and medical technology. We understand there are expansion plans at Kent Science Park. The Gatwick Diamond includes several major employers within the R&D sector including healthcare technologies and ICT. Companies include Thales UK (aerospace and defence) and Ceres Power (fuel cell technology transfer). The main business location in the Gatwick Diamond is the Manor Royal Business Park in Crawley but plans have also been mooted for a new proposal to develop a new science park on 100 hectares of land near Gatwick (Gatwick Green) though this is dependent on the site being allocated as strategic employment land in the Council s revised development plan. Oxfordshire, Buckinghamshire, Surrey all have significant agglomerations of healthcare technology R&D activity. The largest proportion of research organisations in the old SEEDA area was in healthcare technology which accounted for 40% of all R&D in the region, much of which was clustered in these locations. Oxford and Surrey universities are known for their research excellence. Hertfordshire is a key R&D and light industry location. GSK has a presence in the county and a life sciences cluster facility, Stevenage Bioscience Catalyst, opened in February The Catalyst will focus on early stage drug discovery and development. Long term development plans suggest that the site may eventually offer 45,000 sqm with space for up to 100 companies. Watford Health Campus is a major regeneration project on a 27 ha site and has the potential for an enhanced role to support the life sciences sector. There are also a number of smaller sites focusing on green technology industries with growth plans including the Building Research Establishment which is co-located in St Albans district with thirty other 22 Pfizer s main operations on the site ended in Within the 45,000sqm of accommodation, there are some laboratory and office spaces currently available to let. Page 20

24 firms. The county is also home to EADS Astrium (satellites and aerospace) and MBDA (defence) in Stevenage. Essex also has notable a healthcare technologies and pharmaceutical sector with Harlow in particular having a concentration of employment in such activities including GSK, BUPA Home Healthcare and Clement Clark. Harlow Enterprise Zone will focus on medical technology, advanced manufacturing and other high tech activities on two sites covering more than 100 acres in total. Chesterford Research Park in Uttlesford has spin-out links with research institutes in Cambridge and provides space for small and niche R&D businesses involved in early stage research. Figure 4-6 Key B1b/c Locations in M25 South, Thames Valley and M25 North Sub-Regions Future Demand for B1 Uses 4.30 Demand for future B1 accommodation is set out in the various ELR documents. The 2007 Sevenoaks ELR, which was produced prior to the recession, indicates that demand for B1 office space was expected to grow in the period to It was estimated that around 4.2 hectares of office space would be required between 2006 and Conversely, the 2011 projections, which took into account data and therefore the initial impact of the recession, indicate that demand for office space will only grow by 0.2% per annum. This translates into no change in the requirement for B1 uses (0 hectares) according to the medium estimate, a minimal additional requirement (0.8 hectares) according to the high estimate and a reduction in requirement according to the low estimate (-0.1 hectares). Page 21

25 Table 4-5 Sevenoaks District B1 Employment Land 24 Demand Forecasts Low Estimate (ha) Medium Estimate High Estimate (ha) (ha) ELR Not provided (mid 4.3 point is 4.15) Long-term employment space projections 2011 Source: URS (2007) Sevenoaks Employment Land Review, Final Report for Sevenoaks District Council; URS (2011) Long Term Employment Space Projections for Sevenoaks District, Final Report for Sevenoaks District Council 4.31 Given the negligible quantities of B1 space likely to be required to 2026 it is likely that the majority of such development will take place on existing town centre and edge of centre gap sites. There also remains space available in the ex-bt building, 160 London Road. At the time of writing, only 1,000sqm of space at 160 London Road had been let, leaving 3,000sqm available to let over three floors. In addition we understand that as part of any redevelopment of the former GSK site at Leigh some (currently vacant) office space will be retained and planning permission exists for office space as part of the Dunton Green development. Industrial and Warehouse Uses 4.32 There is around 500,000sqm of industrial and warehouse space within Sevenoaks district 25. The local authority has just over half that of Crawley and less than half the quantum of Tonbridge and Malling and Medway. Table 4-6 Industrial and Warehouse Floorspace in a Selection of Local Authority Districts Local Authority Industrial and Warehouse Stock (thousand sqm) Tonbridge and Malling 1,150 Medway 1,000 Crawley 850 Maidstone 770 Ashford 680 Dartford 690 Sevenoaks 470 Tunbridge Wells 460 Mid Sussex 430 Reigate and Banstead 300 Tandridge 230 Source: CBRE from Department of Communities and Local Government Note: Figures are rounded to the nearest 10. Based on statistics provided by the VOA in 2008 using data collected for the 2005 revaluation Since 2003, average annual take up of industrial and warehouse properties was only 2,000sqm. The maximum annual total take up was just over 4,000sqm in 2006 and There were typically three or four transactions per annum in recent years. 24 The ELR splits commercial properties into offices, factories and warehouses. We have assumed B1, B2 and B8 uses respectively. 25 Department of Communities and Local Government (2008) Page 22

26 4.34 At present there is around 5,000sqm of industrial and warehouse space available in 14 properties in the district 26 (with an average of around 400sqm per property). This includes Vestry Trading Estate which is marketing a 2,000sqm trade counter space. B2 Industrial 4.35 The use of the term industrial in this report refers to the B2 use class which is defined as general industrial processes other than one falling within class B1. In several documents the term industrial also refers to warehouse uses. As far as possible we have separated out information pertaining to warehouse and distribution (B8) activities for inclusion in the subsequent sub-section There was a loss of around 2,500sqm of industrial floorspace across the district between 2009 and 2011 according to the Council s Annual Monitoring Report. Table 4-7 Sevenoaks District Change in B2 Employment Land Supply (Sqm) Total -2, , Source: Sevenoaks Districts Council s Local Development Framework Annual Monitoring Report 2009, 2010, In Sevenoaks town, industrial space is restricted primarily to a small number of trading estates (North Downs Business Park, Vestry Trading Estate, Sevenoaks Business Centre and Sevenoaks Enterprise Centre for example) with the remainder of industrial space in the district also located close to the town. At the time of the 2007 ELR the majority of availability was on the North Downs Business Park and Vestry Trading Estate. While there is a substantial supply of small industrial accommodation in the area there is limited larger accommodation and only 17 properties in Sevenoaks district are over 3,500 sqm. This reflects the fact that smaller industrial sites tend to be the most popular, particularly those with modern units Regional demand for small industrial units (e.g. up to 500 sqm), is high and accounts for over a quarter of such accommodation demanded. The ELR notes that the bulk of demand (for industrial premises) in the region is for smaller, modern units. At the time of the 2007 ELR there were around 300 small industrial premises (up to 500 sqm) in the Kent market. There have been a small number of successful speculative schemes with units for small and medium-sized local or regional companies in the region shortly after start up Localised markets have tended to struggle to attract national occupiers and speculative developments alone are unlikely to stimulate national demand; a number of factors need to be involved in order to attract national interest. B2 26 CoStar data provided by CBRE Page 23

27 4.40 At the time of the 2007 ELR there was a B2 development pipeline in the district of around 6,650 sqm across three sites: Vestry Road in Sevenoaks; Colour Processing Lab at Edenbridge; and The Teardrop at Swanley In addition to the existing supply in Sevenoaks, key industrial locations in the wider M25 South area include: Crossways Business Park in Dartford is the largest mixed-use business park on the M25. The Business Park is comprised of nine different commercial areas plus leisure facilities. Ashford is a particularly important location for manufacturing activities and is earmarked for substantial future development. It benefits from high speed rail links, low cost land and a large number of employment sites which have development capacity. Medway supports a range of industrial uses, particularly at Kings North which is a 66 hectare industrial focussed site. Shepway and in particular, Folkestone, is home to a number of national industrial companies including Eurotunnel and British Nuclear Group. Swale benefits from a number of industrial locations including the Eurolink industrial area. It has a strong industrial base and benefits from low land costs and good access to the transport network. Gatwick Diamond is a home to HQs in advanced manufacturing, environmental technologies and aviation. Companies include Exxon Mobile and Unilever. Key locations include Manor Royal Business Park in Crawley which neighbours Gatwick airport, Salfords Industrial Estate and Burgess Hill in West Sussex which has the potential for around 5-10 ha of industrial and warehouse development. The Thames Valley has seen development of large industrial units in excess of 20,000 sqm. Key industrial locations include Slough Trading Estate. Page 24