Chelmsford Economic and Property Market Analysis

Transcription

1 Chelmsford Economic and Property Market Analysis July 2005 DTZ Pieda Consulting One Curzon Street LONDON W1A 5PZ

2 CHELMSFORD ECONOMIC AND PROPERTY MARKET ANALYSIS Report by One Curzon Street LONDON W1A 5PZ Tel Fax: Also at Belfast, Birmingham, Bristol, Cardiff, Dublin, Edinburgh, Leeds, Reading & Manchester Ref: May, 20075

3 July 2005 CONTENTS EXECUTIVE SUMMARY... 5 BACKGROUND OFFICE MARKET OVERVIEW... 9 UK Office Market CHELMSFORD OFFICE MARKET Office Stock Take-up Office availability Key locations & completions Development trends Rent & Yields COMPETING CENTRES Basildon Brentwood Colchester Analysis CHELMSFORD ECONOMIC ANALYSIS Past Performance CURRENT PICTURE QUALITY OF LIFE & ACCESSIBILITY FACTORS Quality of Life Accessibility FUTURE POTENTIAL FOR CHELMSFORD AS AN OFFICE LOCATION SWOT Analysis Future Economic Prospects Future Office Market Prospects Developing Chelmsford s Office Market OFFICE MARKET REQUIREMENTS Headquarter and Regional Headquarter Functions Back-Office Functions MARKETING CHELMSFORD S OFFER FOR OFFICE OCCUPIERS Key aspects of Investment Attraction and Place Marketing Developing an Investment Attraction Strategy Summary... 82

4 10 CONCLUSION APPENDIX APPENDIX 1 Schedule of Recent Major Transactions APPENDIX 2 Schedule of Available Office Accommodation APPENDIX 3 Schedule of the Development Pipeline APPENDIX 4 Table of Sources 4

5 EXECUTIVE SUMMARY The quality and volume of the existing office stock in Chelmsford is reflective of its status as a sub-regional centre; the characteristics of the property market are heavily influenced by the structure of the local economy. The strong presence of the finance & business services sector and the public sector has created a healthy office market with stock levels of circa 185,800 sq m (2.0 million sq ft). Increased demand from firms including those wishing to relocate from central London and elsewhere in Essex, together with the availability of new stock helped to improve activity levels during Although not sustainable at this level, agents expect further increases in take up as a result of Chelmsford s strategic location within London s Commuter belt. Presently there is an estimated 260,100 sq m (2.8 million sq ft) of office accommodation in the Chelmsford development pipeline, with permission granted for nearly 32% 1 of that space. The highest top rent of circa 253 per sq m (NIA) 2 ( per sq ft NIA) is encouraging speculative development of sites. There is currently a lack of modern category A stock in a central location and it is likely that a number of existing companies will have unsatisfied existing requirements which could be met by the delivery of larger modern space in the West End area. The last two decades have seen strong economic growth in Chelmsford in terms of Gross Value Added. Output growth has been ahead of the regional and national benchmarks. The underlying industrial structure provides significant indicators to explain these performance figures and Chelmsford s current socio-economic position. A large proportion of Chelmsford s employment structure is characterised by employment in high value sectors such as producer services and knowledge based industries. Workforce skills and attainment levels within the town are high with an above average level of its workforce engaged in skilled occupations. Chelmsford s workforce has a greater level of skills attainment than Essex, with around 26 per cent of the workforce qualified to NVQ 4+ (degree level). Furthermore, Chelmsford has a particularly low proportion of the workforce without qualifications (12% compared to the GB average of 15%). In terms of location decisions for office occupancy, Chelmsford exhibits good connectivity in terms of rail, air and road links and scores considerably higher on the accessibility index than Essex as a whole or the South and East Essex sub-region. Proximity to London is a particularly good location factor for office-based businesses wishing to establish in Chelmsford. In order to grow the office market the quality of office accommodation would need to be high, reflecting the quality sought by higher end use users which operate within the region. Factors such as design, good broadband and ICT capabilities and accessibility are all likely to be important considerations of any new businesses. It is important to consider both sectoral and functional uses of any new office developments. In terms of sectors, Producer Services, Financial Services and Public Service are shown to be important to the Chelmsford economy. 1 PMA database 2 Net Internal Area 5

6 Assuming that these sectors continue to grow, and remain important to Chelmsford, office accommodation needs to be tuned towards their specific needs. Closely related to this is the importance of considering functional requirements of offices. Of the various office functions that exist, a preliminary assessment of Chelmsford characteristics suggest that Chelmsford will be in the market for: National Headquarters and Regional Headquarters High Value Back Office Support Indigenous companies looking to grow and expand. By focusing on these segments, Chelmsford is likely to make best use of positive characteristics such as good transport links, accessibility to London and the South East, access to skilled workforce and high skilled employment. Because these features are considered important to these higher value activities, companies considering locating in Chelmsford will be less price (rent) sensitive than those looking to relocate less skilled employment, such as lower value back office support, where competition will be high from other regions- outside the London belt. It is important that in the development of office accommodation issues of image and perception are not overlooked and that the strong basis for growth is appropriately communicated to potential inward investors. Attention should also be given to phasing of any proposed development so as not to flood the Chelmsford and wider regional market with similar product. In marketing Chelmsford as a prime office location, it is vitally important that the features of any development or opportunity are effectively communicated to the target market. Any local advantages must be seen through the eyes of the investor. Features are not the same as advantages and care should be taken not to mistake the two. Furthermore, the business case for investing must be conveyed in a way that it is clear to the individual investors, using appropriate language and building a relevant case. Clearly, there are wider factors that will impact the overall vibrancy of the office market that are beyond the control of the council. However, it remains important to consider the impact of these external factors so that future developments take advantage of opportunities provided and potential pressures from other developments. 6

7 BACKGROUND DTZ Pieda Consulting has been commissioned by Chelmsford Borough Council (CBC) to undertake an economic and property market analysis of office accommodation within Chelmsford. The market assessment is required by CBC and its consultants Buro Happold to inform the masterplanning process of Chelmsford Town Centre. This report considers not only the current appetite for land and buildings but also seeks to produce a quantitative and qualitative assessment of how far this may shift in the future. The report aims to establish and quantify the extent of market appetite for office accommodation within Chelmsford and to make projections about how the market could change, as a result of either the underlying economic drivers for the sub regional market or as a reaction to new "product" being made available within the town centre (or both). In order to deliver these objectives the market assessment includes a "top-down" and "bottomup" analysis. Although described and reported separately, the "top-down" and "bottom-up" analyses should be seen as a single output. It is the way in which these factors interact with each other that conditions the pace and extent of growth within Chelmsford and elsewhere. The "bottom-up" analysis focuses on supply and demand for office property in Chelmsford. In order to understand the current and likely future dynamics of the market we have prepared a systematic analysis of previous and forecast supply and take up for office uses. This has been prepared using our in-house databases as well as published information supplemented by additional survey work. This provides a quantitative basis against which more qualitative judgements can be made. Particular attention has been be paid to the current perceptions of Chelmsford held by occupiers, developers and investors and the extent to which it may be possible to lead the market to produce the outcomes sought by the proposed new development. Our study includes schedules of previous take-up but, more importantly, an assessment of how these historic demands will change and what needs to be done to achieve this shift. The "top down" economic analysis draws upon our unique economic tool Locus. Locus is an economic analysis and forecasting service which uses a wide range of variables to benchmark economic performance and explore key strengths and weaknesses including the presence of growth clusters. In addition to the specific geographical area of analysis, Locus in this instance has provided a comparison across the following benchmark areas: South and East Essex sub-region; Essex County; London; South East Region and GB. 7

8 Our report is structured as follows: Chapter One Chapter Two Chapter Three Chapter Four Chapter Five Chapter Six Chapter Seven Chapter Eight This chapter gives a brief current overview of the UK, and the subregional (Essex) office market. This chapter introduces the West End area. The chapter goes on to assess the Chelmsford office market historically to reflect the nature of take-up, availability and development in the location. Chapter three assesses the current position of the Chelmsford within the wider Essex office market. Brentwood, Basildon and Colchester are briefly reviewed. Chapter four commences the economic section of the report and examines Chelmsford s past performance, commenting on economic changes since the 1980s compared with the other benchmark areas. This chapter reviews Chelmsford s current economic structure as compared with the other benchmark areas. Chelmsford s quality of life indicators and accessibility factors are examined in this chapter. This chapter examines the future potential for the office market in Chelmsford and potential demand for high quality end users and the mechanisms and improvements which needs to be put in place to attract quality end users. This chapter concludes the report. 8

9 1 Office Market Overview UK Office Market As the outlook for financial and business services has become more positive over the last six months, so there has been a corresponding improvement in the UK office market. In the three months to the end of March, rental values increased by 0.7% on an annualised basis compared to a fall of 0.1% 3 in the previous three months. This rise represents the first quarter since December 2001 that the office sector has generated positive rental growth. The improvement was most noticeable in Central London where values increased by 1.7% on an annualized basis During the first quarter of 2005, the services sector expanded by 0.8%, marginally down from 0.9% recorded in the fourth quarter according to the preliminary estimates released by National Statistics. According to the latest CBI financial services survey, optimism amongst financial services rose during the first quarter of Companies are more optimistic about the overall business situation, with sentiment improving for the second successive survey. Looking ahead, both employment levels and business volumes are expected to improve significantly over the next three months. Moreover, firms are more confident about long term investment with spending on land and buildings anticipated to increase significantly over the next year During the six months to March take-up in the regional office market amounted to around 400,000 sq m (4.30 million sq ft) 4. Five of the regional cities saw rising levels of take-up: Nottingham, Manchester, Glasgow, Cardiff and Bristol. By contrast, take-up fell in Birmingham, Edinburgh, Leeds and Newcastle. The sixmonth period to the end of March 2005 saw the professional services remain as the dominant source of demand in the regional centres, accounting for just over a fifth of total take-up. Demand from the public sector and finance sectors increased to 16% and 15% respectively during the period. In contrast, take-up by corporate and the legal sectors during the last two quarters decreased Availability in the UK s 10 major regional markets fell from 1.52 million sq m (16.32 million sq ft) to 1.42 million sq m (15.25 million sq ft) over the six months to the end of March 2005, representing a decrease of 6.5%. Many of the cities experienced a fall in the volume of available office accommodation in the market In the next twelve months, there will be new office developments completed in a majority of the key regional cities, some of which are being built on a speculative basis. In the longer term, the development pipeline is expected to increase with a growing volume of commercial developments being proposed or having already obtained planning permission in both city centre and in out-of-town locations As the prospects for financial and business services are expected to improve, albeit moderately, there is a real possibility of positive rental growth across all sub-regions of Central London in the coming months. Similarly, overall prospects for the regional office market are reasonably positive, particularly in those areas that will benefit from the increased public sector demand as the government undertakes the relocation programme heralded by the Lyons report. Agents in most regional markets have reported high levels of inquiries from potential occupiers. 3 DTZ Research 4 DTZ Research 9

10 Sub- Regional Office Market: Essex Chelmsford Borough Council Historically occupiers have often over looked Essex as an office location. Occupier s perception of the county has been less favourable when compared to other locations on the western fringes of London, despite its proximity to Central London Maidenhead and Reading have overshadowed towns such as Chelmsford and Brentwood which are often associated with back-office and overflow space rather than corporate headquarters, although this is now changing. This was demonstrated by the decision of motor insurance group Ensign to relocate its main office from the City of London to Chelmsford. Agents hope more corporate occupiers will now follow suit and more move their headquarters to the town rather than just back office functions The media s stereotyping could have had a part to play in the occupiers perception of the county. However, with a raft of transport improvements planned including the expansion of Stansted Airport and Cross Rail, the county s image is changing and some companies that, in the past, would have confined their requirements to the City of London are now looking to the eastern fringes Coincidently City firms are beginning to realise the benefits of locating close to where their staff lives, which in the case of City workers is often Essex. This was demonstrated by the decision of motor insurance group Ensign to relocate its main office from the City of London to Chelmsford Town Centre According to agents vacancy levels do not tend to be as high in Essex as in other South East locations and rising rents in the City of London will work in favour of the Essex office market, as companies look for a cheaper alternative to central London locations Rental levels in Essex have historically lagged behind locations on the western fringes of London. However the office market in Essex has not suffered the same market volatility with high levels of availability and declining take-up experienced elsewhere County take-up in 2004 increased by approximately 170%, from circa 10,200 sq m (109,792 sq ft) to 27,870 sq m (300,000 sq ft) of this over half was considered to be second hand category space Availability in 2004 increased marginally from the 2003 figure, up from less than 102,200 sq m (1.1 million sq ft) to 139,350 sq m (1.15 million sq ft). Of this space, circa 80% was considered to be second hand space. However the amount of completed development space increased from circa 1,850 sq m (20,000 sq ft) to 4,650 sq m (50,000 sq ft) Chelmsford and Brentwood town centres are generally acknowledged as the dominating forces in Essex s office market, attracting higher rents and more development than elsewhere in the county. Currently prime rents are around 270 per sq m ( 25 per sq ft) for both towns Other towns in the county such as Harlow and Basildon have traditionally been perceived as industrial and distribution locations. Largely bereft of category A 10

11 offices 5, with demand being driven by local occupiers seeking freehold accommodation as an alternative to leasing. Prime rents in Harlow are around 194 per sq m ( 18 per sq ft) and Basildon achieves rents of 215 sq m ( 20 per sq ft). 5 Category A space is defined as high specification office space with under floor trunking systems and air conditioning. 11

12 2 Chelmsford office Market Chelmsford is the county town of Essex. The town is located approximately 48 km (30 miles) north east of London and rail connectivity means that Central London can be accessed within 35 minutes. Furthermore, the town has good road links and is close to the M25, six international airports can be accessed within a 75 minute drive from Chelmsford The town saw some large financial in-movers during the 1970s and 1980s as companies relocated from Central London. However, this has not continued during the 1990s and this area did not see a significant in-movement of IT firms The borough has a strong base of large employers including Britivic, Royal Insurance, Cable and Wireless Marine, M&G Investment and EBM Papst to name a few. In addition, the town has a number of key public sector employers, including Chelmsford Borough Council, Essex County Council and Essex Police Headquarters Office locations within Chelmsford include The West End which also accommodates other employment, services and transport uses. The area is situated between the western edge of the town centre and the residential area of West Chelmsford. It is a typical central fringe area where old industrial and residential property has given way to service uses and car parking serving the town centre. It is characterised by marginal specialist businesses, economic flux and a transitory population The West End offers a great opportunity based on strategic sites coming forward for redevelopment in the short and medium term. It is envisaged that 32,500 sq m (350,000 sq ft) of new office development could be released (including Coval Wells but excluding the APU site). In a market where the average level of take up is (78,000 sq ft) this equates to around 4.5 years worth of supply. However, if major pre-lets could be secured the market could absorb the space at a faster rate Out of town office locations include Hedgerows Business Park. Located 4 km (2.5 miles) to the east of the town centre adjacent to the A12. New development is taking place on the adjacent Chelmsford Business Park where the masterplan for the 16 hectare (40 acre) site and first phase of road and service infrastructure is in place. Several commissioned buildings completed for national and multi-national companies including, EBM-Papst (UK), GEZE UK Ltd, Clifford Thames Ltd and Lorne Stewart plc The Springfield area to the north-east of the town centre, alongside the A12, has emerged as the focus for out-of-town development, with potential for schemes concentrated close to Hedgerow Business Park. Springfield Business Park is a 26 hectare (65 acre) mixed use park situated Office Stock The commercial market in Chelmsford was estimated at 185,800 sq m (2.0 million sq ft) 6 of office stock at the end of Centres of a similar size in the east M25 6 Source ODPM/DTZ Research 12

13 quadrant, include Colchester and Basildon. In the wider East of England region Cambridge dominates with circa 696,800 sq m (7.5 million sq ft) of office stock. 13

14 Office Stock in Chelmsford & Surrounding Areas ,500,000 sq ft 2,000,000 1,500,000 1,000, ,000 0 Chelmsford Basildon Brentwood Colchester Source: ODPM/DTZ Research At the end of 2004 office stock approximately 12.6% - or 22,300 sq m (0.24 million sq ft) was completed since end 1999 and so can be considered new. Take-up In 2004, the total volume of office take-up increased by 197% from the 2003 figure of 3,344 sq m (36,000 sq ft) to 9,940 sq m (107,000 sq ft) 7, primarily due to a letting of 7,060 sq m (76,000 sq ft) to Ensign following the company s relocation from the City of London to Chelmsford town centre (Coval Wells). This is the largest volume of satisfied demand since 2000, during which M&G, Amlin and Clifford Thames each took over 1,858 sq m (20,000 sq ft). In such a small market, medium or large sized deals have a significant effect on the annual take-up total, which as a result can be volatile While short-term trends need to be treated with caution due to the lumpy nature of take up, it is worth highlighting how the Chelmsford market has fared over the last 6 months to Q Information on PMA s database suggests that take up may be picking up; recorded demand is 9,290 sq m (100,000 sq ft) or an increase of 600% over the previous 6-month period. The average trend for the wider regional South East office market over the same period is one of growth During the last three years, Chelmsford experienced year-on-year increases in office take-up and, in view of improvements to Stansted Airport, local agents expect this demand to continue. 7 Source: PMA, Streets Ahead, DTZ Research 14

15 Office Take-up in Chelmsford 2000-Q ,000 sq ft 140, , ,000 80,000 60,000 40,000 20, Q Source: PMA/Streetsahead/DTZ Research Since 2000, the finance sector accounted for almost half of total take-up. However, during 2004 demand from this sector increased to represent over 75% of office lettings. Over the last year, the public sector was particularly active in Chelmsford, accounting for 13% of take-up. The public sector has been particularly active in the town recently, In 2003/4, significant deals involved Essex Magistrates Court of 1,319 sq m (14,200 sq ft), Essex Strategic Health Authority of 1,152 sq m (12,400 sq ft) and Essex County Council 956 sq m (10,300sq ft) Analysing demand in Chelmsford by size band over the last five years to Q1 2005, the following statistics emerge. Around 72% of office letting involved units less than 2,322 sq m (25,000 sq ft) and a further fifth involved units from 4,645 9,290 sq m (50, ,000 sq ft) in size. A schedule of recent major transactions can be found in appendix The town centre continues to dominate take up in Chelmsford; the town has seen little out-of-town office development. By far the largest deal recently agreed involves insurance company Ensign - Limit taking 7,060 sq m (76,000 sq ft) in two recently completed buildings at Coval Wells in the town centre. Ensign is an existing Chelmsford occupier which recently merged with Limit and are consolidating and upgrading their office accommodation in the town. Such a large deal is rare in Chelmsford; aside from this exceptional letting, the majority of deals have been under 2,322 sq m (25,000 sq ft 1). Office availability At the end of the first quarter of 2005, available office floorspace was estimated at 29,357 sq m (316,000 sq ft), an availability ratio of 16%. Given the total volume of availability compared to the average annual take-up rate of 7,246 sq m (78,000 sq ft between 2000 and 2004, there is an estimated four years of office supply in the Chelmsford market. Even though some of this space may not be of a suitable category A specification for the occupiers that will be looking for space in the 15

16 market in the coming years, it can be assumed that at least some of it will. This means that, even without more space coming on stream in the short term, the office market has considerable capacity to absorb most additional demand, suggesting that the current availability levels are high According to agents space has let more rapidly in small scale speculative refurbishments and new developments in the town. Therefore, the majority of space available in the town centre comprises small office suites of outdated secondary accommodation in need of refurbishment. Appendix 2 illustrates a sample of current availability within Chelmsford Analysis of data from PMA has shown that availability in Chelmsford fell by 24% between end 2003 and end 2004, compared with a rise of 89% over the previous year. This can be attributed to the high level of refurbishment and development activity which has taken place in the market over recent years resulting in increased leasing activity. Key locations & completions Most office space in Chelmsford is located in the town centre. Chelmsford has a high proportion of pre-1980s space. Much is occupied by the public sector, such as the County Council, in large town centre buildings. The prognosis for the second hand stock is that the better configured units will be let to occupiers seeking keenly priced accommodation or flexible lease terms while the older larger units will come forward for redevelopment as prime rents increase. The market differentiates second hand by rental price with refurbished stock achieving values of circa 161 per sq m ( 15 per sq ft) The principal office core is concentrated to the north and west of the main retail area close to the railway station. Large office occupiers here include BDO Stoy Hayward, the Borough and County Councils, M&G Group and Royal & Sun Alliance Other office development is located in the Parkway/New London Road area. County Square on New London Road provides 7,060 sq m (78,000 sq ft) of Regency style buildings. Completed in 1991, it was the largest speculative scheme in Chelmsford. Opposite is Fenton House, Turnstone Estates'refurbishment of the 1970s former Royal London Insurance building which completed in To the west of the railway line is the Coval Wells office scheme. The 3,065 sq m (33,000 sq ft) first phase was completed in 2000 and let to M&G Group, and the second phase comprising two speculative buildings completed in Summer 2004 has now been let to Limit Chelmsford has seen little out-of-town office development. Hedgerows Business Park to the north-east of the town centre, close to the A12 at Springfield, can be considered as the first such development although the estate itself is small. Two office buildings (Swift and Osprey Houses) have recently completed here and have been taken by Essex Strategic Health Authority and Essex Magistrates Services. Other occupiers within the park include Essex TEC and The Learning & Skills Council. Close by is Chelmsford Business Park, where the 1,950 sq m (21,000 sq ft) Springfield Lyons House was completed in 2001 for the Clifford Thames Group. 16

17 Some small offices have also completed for the Stewart Lorne electrical engineering company, on this Park. 17

18 Development trends Over the last 20 years, office stock in Chelmsford has increased by 53%, with completions totalling some 83,600 sq m (0.9 million sq ft), 8 producing an average of 4,090 sq m (44,000 sq ft) p.a. There have been clear cyclical fluctuations. The last five years ( ) completions averaged a higher 4,550 sq m (49,000 sq ft pa). This follows the previous five year period ( ) average of 2,136 sq m (23,000 sq ft pa). It is highly significant that about two-thirds of all development took place in the town centre. However, the expansion of Stansted Airport is expected to prompt further business park development in the area as competition for town centre sites increases from other uses such as retail and residential. Office Completions in Chelmsford (000s sq ft) Source: PMA/DTZ Research Due to the robust demand for office space in the area, a majority of this accommodation has already been let. 1,625 sq m (17,500 sq ft) is expected to complete in 2005 at Chelmsford Business Park and Bishop Hall Lane. Speculative development in the Chelmsford office market is intrinsically linked to location. There is a clear locational bias in development in Chelmsford. Developer confidence demonstrates the strength of the occupier base and the town s proximity to the City of London. Although the town has not experienced a large volume of commercial development over the last five years, approximately 80% of schemes have been built on a speculative basis At present, there is an estimated 260,100 sq m (2.8 million sq ft) of office accommodation in the Chelmsford development pipeline with permission granted for over sq m (0.9 million sq ft) of space. The most significant of these is the Springfield Park, Colchester Road project to be developed by Frogmore Development and Dutch London Royal Insurance, which will release 41,800 sq m (450,000 sq ft) of accommodation onto Chelmsford s out-of-town office market. A schedule of the development pipeline can be found in Appendix Three. 8 Source: PMA DTZ Research 18

19 Rent & Yields Top rents in Chelmsford were reported to stand at 253 per sq m ( per sq ft) at end The rent was payable for space in the town centre. The top reported rent in the out of town market at end-2004 was a lower 215 per sq m ( per sq ft) Top rents in Chelmsford have decreased over the last year. At end-2004 top rents in Chelmsford were 6.0% below levels seen at end Over the same period, top rents on average across the South East regional office market have fallen by 1.0% 9. At the current quoted level, top rents in Chelmsford are 2% above the previous peak rent paid in Prime rents in Chelmsford increased rapidly between 1999 and 2001, reflecting very low levels of prime supply being chased by a number of occupiers; Chelmsford is a favoured M25 north-east location Insurance firm Limit recently took two buildings totalling 7,060 sq m (76,000) sq ft at the new Coval Wells development at 253 per sq m ( per sq ft), in line with the top headline rent that was reported as achievable Other lettings for more typical smaller office suites include Farr taking one floor at Fenton House at the reported top rent of 258 per sq m ( 24 per sq m) during More recently in 2004, small suites at the newly refurbished Greenwood House achieved lower rents of up to 210 per sq m ( per sq ft) In contrast, lower rents have been achieved at new schemes out of town. In particular, at Hedgerows Business Park, Essex Strategic Health Authority took Swift House at 215 per sq m ( 20 per sq ft) during 2003, whilst Essex Magistrates Services let the top two floors of Osprey House at 199 per sq m ( per sq ft) in At end-2004 prime yields in Chelmsford are reported to stand at 6.75%, according to data from PMA. At this level prime yields have reportedly moved in over the last 6 months. At current levels, yields in Chelmsford are below the Office PROMIS average of 6.90% Until February 2005, there had only been one small investment in the Chelmsford area since end This was in an out-of-town location, where Capita McLarens bought 334 sq m (3,600 sq ft) of space for 605,000 with a yield of 8.2% However, February has seen two uncharacteristically large deals go through in the town centre. The largest was the purchase of the category -A quality Faviell House and Buckenham House, located opposite one another at Coval Wells. This deal totalled 7,060 sq m (76,000 sq ft) and cost Canada Life 27 million in return for a 6.25% yield. Secondly, Insight Investment Management bought Fairbairn House, also located at Coval Wells for 10 million resulting in a yield of 6.4%. 9 source: PMA 19

20 July Competing Centres This section of the report assesses the current position of the Chelmsford office market by considering the wider Essex office centres of Brentwood, Basildon and Colchester. Basildon Basildon is located approximately 48 km (30 miles) east of central London, 88 km (55 miles) south west of Harwich and 19 km (12 miles) south of Chelmsford. Basildon benefits from good road communications with the A127 and A13 dual carriageway connecting London and the M25 some 13 km (8 miles) west of the town The town enjoys a direct link to London via Fenchurch Street with a fast journey time of approximately 35 minutes. Stansted and Gatwick airports are within 45 minutes and 60 minutes drive respectively Basildon has a strong technical and skilled workforce and a diverse manufacturing base with representation from the motor and electronics industries. Major occupiers include: Ford, First Aid Resources, York International, New Holland Trackforce and United Artists. Although not renowned as an office location Basildon supports an office stock of close to 278,708 sq m (3 million sq ft) It is worth highlighting the importance of the manufacturing and distribution sector. As a result, a high proportion of the office stock is associated with manufacturing and distribution accommodation There is no strong town centre office market and most new supply and demand has been focussed on out of town business parks, principally at Southfields and along the A217. Demand in the Basildon area is primarily from existing companies looking for additional or new space or relocations from within the Essex area. Many requirements are for mixed use where an occupier requires office space next to production space or a combination of the two According to local agents there is not much available space in the town centre. Much of what is available is dated and of moderate quality as there has been very little new build in recent years. The most active demand for town centre offices reportedly comes from A2 users who need to be close to their customers, such as solicitors, financial advisors/consultants etc., but these are usually relatively small requirements There is a perception/image problem with Basildon as an office centre which is largely a result of its industrial roots, as it is not perceived as an office location and the nature of the town centre, which is not seen as an obvious location to office users. Potential occupiers looking for office space in the North East quadrant of the M25 would most likely locate to Chelmsford or Brentwood, which are seen as more established office locations Some agents believe that if the right product was available on flexible enough terms then there would be demand, but first there needs to be substantial change to the attractiveness of the town centre and a shift in perceptions of the town as an office location. There is also an issue over on site car parking, which is very rare 10 Property week article December 2001

21 in the town centre and some occupiers have concerns over this not only regarding the convenience issue but also in terms of safety of staff It is difficult to ascertain any up to date statistics of the total supply of office space in the town centre, but according to the ODPM at the end of 2004 there was some 57,670 sq m (620,754 sq ft) of office space in Basildon town centre. This is based on ODPM s definition of areas of town centre activity Basildon has little category A space within a central location. Two large office buildings dominate the town centre. Trafford House to the south of the railway line a 1960s building occupied entirely by Ford and Commercial Union House. The remaining town centre stock is made up of smaller secondary office suites occupied by local professional businesses The main availability in the town centre is Commercial Union House, Eastgate Business Centre and Kelting House. Recently Northgate House has been removed from the available supply with its sale for conversion to residential. Agents believe that availability in the town centre is probably somewhere in the region of 10,000 sq m (107,693 sq ft) A potentially key scheme in the pipeline is the 37 ha (90 acres) Gardiners Lane South. The site has been recognised as a crucial element in fulfilling the aspirations of the Thames Gateway South Essex initiative to create a major hub for the area. The site is identified in the current Basildon Local Plan as a Comprehensive Development Area. Of the developable area, 13 ha is to be used for employment to include an innovation/business centre An outline planning application for the development is currently being finalised and is expected to be submitted by the end of the summer. The mixed-use scheme is to include: headquarters development; small business development starter units; and offices and light industry The development envisages creating up to 130,000 sq m (1.4 million sq ft) of business premises supporting as many as 6,000 sq m (71,000 sq ft) new jobs together with homes, shops, leisure facilities, ecology areas and public open space There is a planning application for two office blocks on Christopher Martin Road comprising a total area of 6,600 sq m (71,000 sq ft). This site is outside the town centre and the developer is Stockplace Investments Ltd. No decision has been made on this scheme To ascertain the level of demand for the office market in Basildon, we have undertaken an analysis from an EGi Town Centre Report which appears to illustrate a lack of activity in the Basildon office market. Based on the available information there is take up in Basildon was in the region of 1,194 sq m (12,852 sq ft) in However, discussions with agents suggest the market is more active than this The office market in Basildon is broadly split between dated town centre stock and more modern edge of town stock and this is reflected in rents. 21

22 With the exception of the sale of the Basilica to International Financial Data Services in 2001, there have been few major office deals in the town The prime offices are located outside the centre and have achieved rents as high as 204 per sq m ( 19 to 20 per sq ft) in This compares to 258 per sq m ( 24 per sq ft) in Chelmsford The Eastgate Business Centre featuring flexible terms and modern serviced facilities has asking rents of 269 per sq m ( 25 per sq ft). This is not a net rent but it includes serviced space (utilities, rates etc). It breaks back to a net rent of around 129 per sq m ( 12 per sq ft) On the outskirts of Basildon, Southfields Business Park has achieved rents of 193 to 205 per sq m ( 18 to 19 per sq ft) although mixed use schemes achieve more in the region of per sq m ( per sq ft) The centre of Basildon typically includes dated 1950/60s accommodation which achieves rents at a significant discount to modern stock outside the centre. These are typically in the region of 129 per sq m ( 12 per sq ft) As there are no significant developments due for completion over the next few years except for the proposed Gardiners Lane South scheme, this should help to maintain current rental levels In terms of future potential Basildon requires a radical change in perception/image if it is to become an obvious choice for office occupiers. This includes a change in the environmental quality of the town centre. DTZ is assisting the Basildon Renaissance Partnership in preparing a Development Framework for the town centre The supply of offices is, to a large extent, driven by the investment market and at present there is insufficient confidence in the market generally for speculative development. Given rental levels in Basildon, there is likely to be a limited supply coming on to the market until there is some confidence that something fairly dramatic is going to happen in the area which would make the prospect of rental growth a possibility. 22

23 Brentwood Brentwood is an established office location situated approximately 39 km (24 miles) to the north-east of central London and 19 km (12 miles) to the south-west of Chelmsford The town benefits from good road communications, with the A12 providing direct access to Junction 28 of the M25, some 3 km (2 miles) to the west. Regular and direct rail services are provided into London (Liverpool Street), with a fastest journey time of 30 minutes. Stansted Airport is easily accessible Major occupiers in the area include BT, Ford, Regus, Countryside Properties, NHS Trust and Countryside Assurance Office stock in Brentwood is mainly situated around the Kings Road / Myrtle Road area of the town centre close to the railway station or on established business parks on the periphery of the town centre. Current office stock in Brentwood is estimated to be circa 139,355 sq m (1.5 million sq ft) Brentwood along with Chelmsford are generally regarded as the most dominating office locations within this part of Essex. Historically Chelmsford has lagged behind the more established Brentwood, However, with a fast rail link to London Liverpool Street, Chelmsford is now attracting more interest Rental levels exceeded 270 per sq m ( 25 per sq ft) in Brentwood during the late 1980s early /1990s at the peak of the market in the previous development cycle. A number of new developments were completed in the town centre and at the nearby Warly Business Park. However, category A space has fallen back to around 247/ 258 per sq m ( 23/24 per sq ft), the same level as Chelmsford In terms of transactional data Jubilee House a refurbished 3,809 sq m (41,000 sq ft) building on Warley Business Park was let to Regus plc at per sq ft in late More recently in 2002 at Countryside Properties Stone Cross office development, document management company Oce UK signed a 16 year lease for 3,530 sq m (38,000 sq ft) of space at per sq m ( 23 per sq ft). This was the first speculative scheme for the town in ten years In 2003 Countyside Properties was involved in the years largest transaction. It sublet its former HQ, Juniper House on Warley Hill Business Park to David Wilson Homes. The lease ends in 2011 at a rent of ( 20 per sq ft) Recently the Brentwood office market has faced limited demand from major office occupiers. Demand from large cooperates has diminished and smaller transactions are more typical. The current stock availability is reflective of this, which tends to be of a second-hand nature Second-hand supply in the town increased in 2002 to circa 9,290 sq m (100,000 sq ft) largely as a result of International Financial Stat Systems (IFDS) move to Basildon and according to agents has remained at a similar level since. 11 Property Market Analysis May

24 Current availability includes the fourth floor of Romy House on Kings Road close to the town centre. Here agents Douglas Duff are marketing 241 sq m (2,600 sq ft) with a quoting rent of per sq m ( 15 per sq ft) Also available is Brentwood House where Kemsley Whiteley Ferris are marketing a number of floor plates from sq m (3,672 to 6,940 sq ft) with rents starting from sq m ( per sq ft) Development activity in Brentwood is limited. In 2003 Salmon Developments gained consent on a 6.08 hectare (15 acre) site just outside the town centre fronting the A127. Chep UK, a pallet manufacturing and repair facility who plan to remain on site until their lease expires in 2014 occupy the site. Proposals are for a 13,935 sq m (150,000 sq ft) business park comprising of five office buildings ranging from between 1,858 4,645 sq m (sq m 20,000 50,000 sq ft). 24

25 Colchester Colchester is located approximately 107 km (67 miles) north east of central London and 40 km (25 miles) north east of Chelmsford. Colchester enjoys good road communications, located at the intersection of the A12 and the A120, the latter providing a direct link to Stansted and the M11 motorway. The town benefits from a regular service to London with a journey time of approximately 50 minutes Take up of office accommodation is split 33% / 67% in favour of out of town business locations over town centre accommodation. Occupiers in the town centre tend to be local professional firms benefiting from a central location and more keenly priced accommodation than elsewhere in the county. There is a high degree of localised activity in the market as existing occupiers either expand or consolidate their operations. Therefore very few large transactions take place. In terms of transactions by size bands almost 75% of deals take place within the under 2,322 sq m (25,000 sq ft) band Colchester had an estimated office stock of circa 176,516 sq m (1.9 million sq ft) at end of Of this end 2004 approximately 5.2% or 9,290 sq m (100,000 sq ft) was completed since the end of 1999 and so can be considered new Take up in Colchester for 2004 was estimated to be around 4,000 sq m (43,000 sq ft) 12, take up in 2003 was around a similar level. However, availability fell 20% from 27,406 sq m (295,000 sq ft) in 2003 to 21,925 sq m (236,042 sq ft) In a small market like Colchester medium and large sized deals have a major effect on the total annual take up, which as a result can be unpredictable. The 2,712 sq m (29,200 sq ft) letting of unit 200 at The Crescent, Colchester Business Park by Essex County Council pushed up the 2004 total By sector the key driver of demand in Colchester over the last 5 years to quarter has been the public services sector, accounting for 42% of all take up. This is followed by Business Services at 40% The current highest quoting rents for category A office accommodation in the Colchester area are around 150 / 160 per sq m ( 14/5 per sq ft. In terms of recent rental transactions in Colchester, in agents Fenn Wright leased 1 4 Bank Passage to an undisclosed occupier. The tenant took 172 sq m (1,853 sq ft) of space at a rent equating to per sq m ( per sq ft) In January of this year RE Austin Ltd, an employment screening services company signed a new 5 year lease for 325 sq m (3,500 sq ft) of space at Midland House in the town centre. The rent equates to per sq m ( 8.50 per sq ft) Currently agents Whybrow are seeking occupiers for Oyster House, 9 East Hill on the outskirts of the town centre. The accommodation comprises a newly refurbished 1960/1970s office building available on a variety of floor sizes up to 1,150 sq m (12,400 sq ft), the agents are quoting 161 per sq m 15 per sq ft The same agents are also seeking occupiers for 410 sq m (4,420 sq ft) of space at Fairfax House on Causton Road. The accommodation available is more secondary 12 Source: PMA 13 Source PMA deals database 25

26 in nature and is reflected in the quoting price of per sq m ( 8.50 per sq ft). There is very little category A type accommodation currently available on the market Completions in 2004 was entirely based on the 3,809 sq m (41,000 sq ft) Royal London House scheme by Royal London Insurance. The development was a consolidation of their existing office building for a mixed-use development This year 2,200 sq m (24,000 sq ft) is expected to complete at the Westside Centre on London Road, a speculative out of town scheme by local developer Westside. In terms of the long term development pipeline nearly 100,000 sq m (1.07 million sq ft) of office accommodation is planned in out of town locations. Of which 70%, 69,027 sq m (743,000 sq ft) currently has planning permission The key planned schemes includes 22,993 sq m (247,500 sq ft) at Colchester Business Park being developed on a former BP site by Churchmanor Estates and Colchester Borough Council hectares (15 acres) at Severalls Hospital Site on the A12 for mixed use development and another 6.08 hectares (15 acres) at Essex University Science Park for research and development uses. 26

27 Analysis In assessing, the neighbouring competing centres of Brentwood and Colchester, it is apparent that the centres have a similar amount of office stock at 140, ,000 sq m ( million sq ft). However, Chelmsford and Brentwood lead the market in terms of rental values due in part to the accessibility to Central London and higher proportion of better quality stock Basildon has the largest amount of stock of the competing centres at circa 280,000 sq m (3 million sq ft), but about a third of this is thought to be associated with is large industrial base In essence all four markets are of a similar size and nature but market activity and rental levels suggest that office occupiers favour Chelmsford over the other locations. Recent developer activity and the development pipeline also indicates that Chelmsford is highly regarded by developers Within the Chelmsford market increased levels of development activity has lead to the delivery of good quality office product to meet occupiers needs. Historically the availability of well configured office product in the East Essex region had been a problem, largely due to its perception as a distribution location, with many developers hesitant to commit to speculative office schemes The success of the Coval Wells development has helped to maintain and grow Chelmsford s position as an office location within the region. The availability of good quality office space is crucial when firms are considering locations and often new accommodation is preferred. Therefore the presence of new available stock and timing is important in attracting occupier as is the accommodation is not available then the location will not be considered A key strength of Chelmsford, which helps it differentiate between the other locations is the presence of a educated skilled workforce. Employers need to be confident that in choosing a location they will be able to attract people with the right skills needed for their business. The economic analysis in chapter four illustrates that Chelmsford s workforce posses these skills and therefore the location attracts high value office employers To date Chelmsford has done well in attracting a greater volume of high-end businesses from Basildon as it is not a perceived industrial and distribution location with a strong manufacturing base unlike like Basildon. Chelmsford has better strategic access and shorter travelling times to Central London a key strength over Colchester for occupiers who need to be near the Capital. Although historically Chelmsford and Brentwood where the two dominating locations in the region, Chelmsford now has the edge over Brentwood due to the critical mass of occupiers choosing the location attracted by the range of new office product on offer and the town s skilled workforce In the medium to long term, Stratford City may pose as a future competitor to Chelmsford. The former Stratford Rail Lands around Stratford International lands area is being transformed with 13.5 million sq ft of mixed-use development proposed, including: 5 million sq ft of commercial development including landmark buildings 14 DTZ Research 27

28 1.5 million sq ft of new shopping, leisure and social facilities. 4,500 new homes and 1, 000 new residents. 30% of homes will be affordable 2,000 new hotel rooms A new 900 pupil secondary school, and a primary school A primary health care centre and an NHS walk-in centre 15,000 jobs in the construction phases A further 29,000-34,000 new, permanent jobs (up to 25,000 in financial and business services, 6,000 in retail and 3,000 in leisure, entertainment and hospitality) Construction is due to start in late 2006/early 2007, with the first phase of the development due for completion in late The entire development is scheduled to be complete by A host of infrastructure development and upgrades is also planned to support the development proposals including the completion of Channel Tunnel Rail Link (CTRL). In 2006, Stratford will have its own international station, connecting it directly with Paris and Brussels. The proposed Crossrail link would also assist more directly in East London's regeneration and improve Chelmsford s strategic link to East London, Central and West London. 28

29 4 Chelmsford Economic Analysis Chelmsford Borough Council This section examines the past performance and the current condition of Chelmsford s economy, which is benchmarked against five key areas. South and East Essex sub-region; Essex County; London; South East Region; and GB These benchmark areas have been chosen as they represent areas that are comparable to Chelmsford in terms of growth and future prospects. As it is known that Chelmsford out performs the East of England (which remains largely dominated by more traditional industries), the South East was chosen as a more suitable comparator. 29

30 July 2005 Past Performance According to the 2003 Mid-Year Population Estimates, Chelmsford has a population of 158,5000 people. Population change since 1981 is illustrated in Figure 4.1 below. As shown, Chelmsford has seen a greater rate of population change than the South East, South and East Essex Sub-region and has outpaced the population growth of Essex over the period. The greatest population growth was experienced in Chelmsford during the early 1980s, where the population increased by almost ten per cent. Towards the end of the Nineties, Chelmsford saw a drop in population, which bought the rate of growth closer in line to the county average. Chelmsford population growth continued to outpace the other benchmark areas. Figure 4.1 Population Change (Mid-year estimates, 1981=100) Source: Nomis The growth in population up to the late Eighties coincided with a dramatic increase in employment. From 1984 to a peak in 1989, Chelmsford saw a substantial increase in employment, increasing by almost 20 per cent. With the exception of London, this trend was mirrored in the other benchmarked regions, as shown in figure 4.2 over the page The recession of the early Nineties saw employment decrease throughout Britain. Whilst all regions saw a substantial fall in employment, the effect of the recession was particularly acute in Chelmsford. Having experienced dramatic employment growth, economic instability led to a sharp decrease, with employment falling to below 1981 levels by 1993.

31 Figure 4.2 Employment Change Source: Nomis/ABI Since 1996, Chelmsford has experienced relatively stable employment growth. Whilst the ABI data highlighted in figure 4.2 above shows that Chelmsford employment growth was lower than Essex as a whole, it closely followed South and East Essex Sub-region, and by 2002 employment in Chelmsford had increased beyond the sub-region and was abreast to the County average Despite the impact of the recession on employment during the early Nineties, Chelmsford has experienced growth in Gross Value Added (GVA is the sum of all the values added by all the various industries in an economy) since As illustrated in Figure 4.3 over the page, Chelmsford GVA growth was greater than South and East Essex Sub-Region but below the county average for much of the Nineties. Recently, Chelmsford has experienced a significant increase in the rate of GVA change, suggesting that Chelmsford has capitalised on the employment growth experienced The South East has seen particularly strong GVA growth from 1989, and the region is recognised as a key performing region outside of London. The diagram below illustrates that the differential between Chelmsford GVA growth and the South East GVA growth was significant during the Nineties. However, from 2001 there was a noticeable change in the rate of GVA growth in Chelmsford, which has narrowed the differential between the two areas. Chelmsford s rate of GVA growth remains below the South East level, but considerable progress has been made in closing the differential, in contrast to Essex as a whole and the South and East Essex Sub-region. 31

32 Figure 4.3 GVA Change (1989=100) Source: DTZ Locus The following diagram illustrates changes in the stock of VAT registered businesses in Chelmsford and benchmark regions. An increasing VAT stock illustrates that the increase in new businesses is greater than the closure of businesses and is a good indicator of economic health. The South East as a whole has a higher level of business formation than the GB average and is considered to be a useful comparator for Chelmsford. Figure 4.3 above shows the high level of growth enjoyed by the South East, which is significantly ahead of Chelmsford. However, Chelmsford has seen a greater level of growth in VAT stock than any of the other benchmark areas, suggesting that economic conditions are conducive to strong business formation. For strong business formations to have an impact on GVA, new businesses need to be focused in value added sectors of the economy, bringing more benefit to the area. 32

33 Figure 4.4 VAT Stock Change (1980=100) Source: Nomis 33

34 5 Current Picture This Chapter reviews Chelmsford s current economic structure compared with the other benchmark areas The broad industrial sector of Chelmsford reveals a high dependency on Consumer Services, Non-Market Services and Advance Business Services. Together, these accounted for three quarters of total employment in Figure 5.1 Chelmsford Broad Industrial Structure Employment 2002 Source: DTZ Locus, ABI Other broad industrial groups account for a relatively low level of total employment, construction accounts for the next largest proportion of employment, representing six per cent of the employment base Whilst figure 5.1 above provides a useful synopsis of Chelmsford s broad industrial structure, it is important to consider the comparative specialisms against the benchmark areas to illustrate Chelmsford s key employment strengths The broad relative industrial sector strengths are presented in figure 5.2 over the page. Each benchmark area is shown against the GB average of one. Therefore, sectors showing employment concentration above one can be counted as having a relative specialism in the sector. The higher the employment concentration, the greater the sector specialism As illustrated, Chelmsford has a high specialism in Advance Manufacturing and Construction, despite these sectors accounting for only three and six per cent of total employment respectively. Chelmsford also shows a specialism in Advanced Business Services and Non-Market Services, which in total account for approximately 50 per cent of total employment. 34

35 5.1.7 Unsurprisingly, Chelmsford has specialisms similar to those of the sub region of South and East Essex. The sub region has a slightly stronger focus on Tradition Manufacturing, although this remains below the GB average. Figure 5.2 Broad Industrial Structure Strengths 2002(Levels of sectoral specialisation, GB=1) Source: DTZ Locus, ABI Chelmsford s specialism in Advanced Business Services is in keeping with the county focus but significantly below London s specialism within this sector. Chelmsford s focus of employment is not dissimilar to the South East, confirming that this is a useful region by which to benchmark Chelmsford s economy Given Chelmsford s focus on Advanced Business Services, Consumer Services, Non-Market Service and Advanced Manufacturing, it is of little surprise that Chelmsford s occupational structure is focused on Managerial and Senior Officials, Professional, Associate Professional and Technical and Administrative and Secretarial professions. This is illustrated in Figure 5.3 over the page. 35

36 July 2005 Figure 5.3 Occupation Structure 2003 Source: LFS With the exception of professional occupations, Chelmsford s occupation structure is very similar to London s. The greater focus of professional occupations in London is partially explained by the greater employment focus in Advanced Business Services seen in the city The diagram (figure 5.4) Chelmsford Sector Trends helps to identify the relative strengths, growth and decline of industrial sectors in Chelmsford. The diagram is split into four quadrants. The quadrants on the left represent industry sectors in which Chelmsford has a relatively low specialism. The quadrants on the right represent industry sectors in which Chelmsford has above average specialism. In addition, the top quadrants, illustrate industry sectors that have experienced an increase in employment. The bottom two quadrants identify industry sectors that have experienced a decline in employment Each industry sector is identified by a bubble, and the size of the bubble illustrates the level of absolute employment in The sector that Chelmsford has a relative strength in terms of representation and that are growing in terms of employment ( top right quadrant) are: Construction: Employment in this sector has increased by around 50 per cent between Chelmsford has a relative specialism in this sector and a significant number are employed within it. Higher Education is the most specialised of all of Chelmsford s sectors and has experienced positive employment growth of around 50 per cent between 1997 and Similarly, Further and Adult Education sector has also experienced growth over the period and Chelmsford has a relative specialism within this sector.

37 The Financial Service sector has also shown positive employment growth of 30 per cent between , which is greater than the GB rate of growth of 10 per cent, and Chelmsford exhibits a relative specialism in the sector. Retail and Producer Service sectors are by far the most significant sector in terms of 2002 employment. Chelmsford has a relative specialism within these sectors, although less acute than education, construction or financial services. According to the Borough Council, Chelmsford is the premier town shopping area in Essex and has seen significant investment in over recent year The key top left sectors that Chelmsford does not yet have a comparative advantage but which are growing are: Food and Drink has shown the most significant increase in employment of all the sectors. However, employment in the sector is still relatively low. Tourism is also a relatively significant employer in Chelmsford, although sector specialism is relatively low. Primary and Secondary Education has also shown some significant employment growth, which is in keeping with the overall growth in the wider sector experienced in Chelmsford. Two sectors that have shown significant growth between are Other Mechanical Engineering and Miscellaneous Manufacturing. However, Chelmsford shows a low specialism in these sectors, and as a proportion of total employment, these sectors account for a low volume of total employment in Sectors in which Chelmsford has a relative high focus of employment include Public Services and Health. However, between 1997 and 2002, employment in these sectors has declined, by three and 15 per cent respectively. In Essex as a whole, employment in Health actually increased by 19 per cent over the period, ahead of the GB growth rate of six per cent. However, Chelmsford s focus of employment within the sector is in keeping with the GB average Within all the benchmark regions, employment in Public Services decreased between and the decline in Chelmsford was less pronounced than in the South East, Essex or London. However, total GB employment in the sector increased by three per cent, indicating a rebalance of employment within the sector nationally. Chelmsford continues to show a specialism within Public Service (bottom right quadrant). This can be partially explained by the existence of large public sector employers such as the Borough and County Councils and Essex Police headquarters, which are all located in the town High tech manufacturing is a sector that Chelmsford has significant specialism, with a relative high focus of employment in However, between the level of employment within this important sector has declined by over 20 per cent. However, it is worth noting that relative to the benchmark areas, Chelmsford faired relatively well. In GB as a whole, employment within hightech manufacturing declined by 25 per cent, with the South and East Sub-region experiencing a decline of around 45 per cent. 37

38 Figure 5.4 Chelmsford Sector Trends Basic Metals Building Materials Chemicals Construction Creative & Cultural Energy Environmental Technologies Extractive Financial Services Food & Drink Forest Products Further & Adult Education Glass & Ceramics Health Higher Education Land Based Life Sciences Metal Products Miscellaneous Manufacturing Other Consumer Services Other Mechanical Engineering Plastics & Rubber Primary & Secondary Education Producer Services Public Services Retail Social Economy Textiles & Clothing Tourism Transport? Hi-Tech Manufacturing Knowledge Source: DTZ Locus, ABI Welfare Wholesale 38

39 Business Structures are shown in the figure below. Chelmsford s business structure is very similar to the other benchmark regions. There is slightly greater focus on businesses employing between employees, similar to the GB average, and a marginally lower focus on SMEs employing between 1-10 employees. Chelmsford has a greater number of business employing over 200 employees than Essex, but in all instances, these account for a small proportion of total businesses. In examining the latest data from the ABI (2003), it is worth noting that this structure has not changed, with around 83% of total businesses (data units) employ between 1-10 employees. Figure 5.5 Size Structure of Business 2002 Source: ABI As shown in figure 5.6 over the page, Gross Value Added (GVA) per employee in Chelmsford is marginally greater than either the Sub-region or Essex as a whole, reflecting Chelmsford s Occupation Structure (figure 5.3) in which a greater proportion of employment is focused in managerial, professional and associate professional occupations and a greater focus on high value added sectors. Both London and the South East have a greater focus in these professions than Chelmsford and this is reflected in the higher level of GVA per employee achieved in the South East and London. 39

40 Figure 5.6 GVA per employee 2002 Source: ONS, DTZ Locus GVA per capita measures that value of the output produced by the resident population of a specific area rather than the resident workforce (as in figure 5.6 above). At 16,000, Chelmsford s GVA per capita is greater than the GB average. Both the South and East Essex Sub-region and Essex GVA per capita are below the GB average. Estimates of GVA per Capita are affected by commuting patterns, with the GVA per Capita of areas which have a high degree of incommuting being inflated by the production of those who work but do not live in the area, the opposite effect occurring in areas with high levels of out-commuting. Essex and Chelmsford may be affected by out-commuting to London, which may have a small positive impact on the London figure and reduce the Essex figures. The 2001 census showed that of the 75,000 that work in Chelmsford, over 60 per cent also live in Chelmsford. In addition, of the 80,000 economically active living in Chelmsford around 40 per cent out-commute to work. The level of outcommuting from Chelmsford is marginally greater than the level of in-commuting to Chelmsford, which would reduce Chelmsford s per capita GVA. 40

41 Figure 5.7 GVA per capita 2002 Source: ONS, DTZ Locus Central to the long term growth capacity and productivity of any economy is its level of workforce skills. Figure 5.8 illustrates the skills base of Chelmsford s workforce as compared to the benchmark regions. What is clear is that Chelmsford s workforce has a greater level of skills attainment than Essex, with around 26 per cent of the workforce qualified to NVQ 4+ (degree level). Furthermore, Chelmsford has a particularly low proportion of the workforce without qualifications (12% compared to the GB average of 15%). Chelmsford s skills base has strong similarities to the South East. 41

42 Figure 5.8 Workforce Skills 2002 Source: LFS Current educational attainment levels suggest the level of workforce skills in the Chelmsford economy is likely to remain high in the near future. Figure 5.9 below illustrates educational attainment at key stage 2, GCSE/GNVQ and GCE/A-level. Chelmsford and the South and East Essex Sub Region outperform all other benchmark areas in terms of overall levels of educational achievement. When coupled with favourable levels of workforce skills, this suggests that Chelmsford benefits from a robust overall skills base As previously discussed, Chelmsford also has a comparative specialism in both Higher Education and Further and Adult Education, which supports the strong skills base. Having a workforce base with strong skills will benefit Chelmsford over the longer term, providing the basis for continued increase in productivity. 42

43 Figure 5.9 School Performance Indicators 2003 Source: DfEE Despite the relatively strong skills level and high sector focus on advanced business services, finance and producer services, gross average weekly earning in Chelmsford are lower than all the other benchmark areas, as illustrated in figure 5.10 below. The difference in average wages between Chelmsford and the South East is considerable given the similarities in sector employment. Figure 5.10 Wages 2003(Average gross weekly earnings) Source: New Earnings Survey 43

44 Interestingly, having experienced faired relatively better than Essex as a whole in terms of employment levels, GVA growth and business stock, gross weekly earning are below the Essex county average and the sub-region of South and East Essex. It is feasible that the wage differential between Chelmsford and the surrounding area can partially explain high level of business formation and sectoral growth that has occurred, with companies taking advantage of the high skills set demonstrated by the workforce and relatively lower wage levels When examining the median annual income for Chelmsford, the reverse is true, as seen in figure 5.11 below. This would suggest that Chelmsford has a lower level of highly paid jobs than the other benchmark regions, which brings the average income down, whilst mid-range salaries are slightly above average. Figure 5.11 Incomes and Car Ownership (GB=100) Source: Inland revenue, Census If car ownership were taken as a proxy for relative wealth, the high level of households with 2+ cars would suggest that the low level of gross weekly earnings do not accurately represent the prosperity of Chelmsford. In 2001, around 80 per cent more households have two or more cars in Chelmsford as compared to the national average. The relatively high number of households with 2+ cars suggests a high level of economic activity within Chelmsford, particularly as the 2001 Census revealed that the main mode of transport to work in Chelmsford was by either car or van (see figure 5.1) As with GB as a whole, unemployment in Chelmsford has been falling since the end of the recession (early 1990s) and in 2003 stood at 1.3% (claimant count unemployment), below each of the benchmark regions and considerably lower than the GB average of 2.6 per cent. The claimant count unemployment rates are depicted in figure 5.12 over the page by the vertical bars, and the left axis. 44

45 Figure 5.12 Unemployment rate and Employment rate Source: Claimant Count, LFS Table 1.1 below presents the level of economic activity in Chelmsford as compared to GB and the South East. It is clear that a higher proportion of the working age population are economically active (either in employment or actively seeking employment) in Chelmsford than either the South East or GB. Chelmsford has a higher level of employment, with 80 per cent of all people in employment, of which 10,000 are in self-employment. The level of unemployment shown in the table below is higher than the claimant count figure of 1.3 per cent because of the different definitions used to calculate unemployment. To be counted under the claimant count definition, a person must be eligible for and be claiming job seekers allowance, which tends to underestimate the level of unemployment. However, both indicators illustrate the Chelmsford has a lower level of unemployment than the other benchmark regions. Table 1.1 Economic Activity (March 2003-February 2004) Chelmsford Chelmsford Chelmsford South East GB (numbers) (%) (%) (%) All people Economically 81, active In employment 79, Employees 68, Self employed 10, Unemployed 2, Source: Local Area Labour Force Survey (Mar 2003-Feb 2004) 45

46 Table 1.2 below highlights that of those which are classified as economically inactive, Chelmsford has a lower level of inactivity than either the South East or GB and the proportion of all people who are inactive and want a job is considerably lower than either the South East or GB averages Table 1.2 Economic Inactive (March 2003-February 2004) Chelmsford Chelmsford South East GB (numbers) (%) (%) (%) Economically 17, inactive Wanting a job 3, Not wanting a 14, job Source: Local Area Labour Force Survey (Mar 2003-Feb 2004) The combination of data sources suggest that there is limited capacity within Chelmsford s population to enhance the labour market significantly. Economic activity is relatively high, and of those that are economically inactive, the proportion that wants a job is relatively low. Furthermore, unemployment in Chelmsford is lower than all the benchmark areas This would suggest that for further employment to be generated in Chelmsford, the population would need to increase or that people would need to in-commute to work Furthermore, there is scope for Chelmsford to experience economic growth without increasing employment levels. Gains in productivity can be achieved by focusing employment on higher value-adding sectors, which would be supported by Chelmsford s strong skills base The potential to enhance GVA can be indicated by the degree of economic dynamism in the area. The rate of business formations is considered a good indicator of economic dynamism. As shown in figure 5.13 over the page, with exception of London, Chelmsford exhibited the highest level of business formations, VAT registrations as a percentage of total stock in 2002 stood at around 11 per cent, marginally higher than the county average. This suggests that the economic climate in Chelmsford is conducive to strong business formation levels. As previously discussed, VAT stock levels have shown strong growth since the early Nineties However, as shown in figure 5.13 over the page, whilst Chelmsford has strong business formation levels, the accompanying high level of self-employment relative to the other areas suggests a predominance of small-scale businesses within the area. In enhancing GVA within Chelmsford, new business formations in high-growth sectors would be desirable, with businesses forming, expanding and employing staff. 46

47 Figure 5.13 Business Formation Rate and Self-Employment Source: Nomis, LFS The following diagram, figure 5.14 below, shows the annual return on property investment in Chelmsford from As shown, whilst the recession impacted on both retail and office investment returns in the early Nineties, investment returns have remained positive over the last decade. Figure 5.14 Annual Return on Property Investment Chelmsford, Source: Investment Property Databank Ltd Furthermore, as compared to the UK average, investment returns have remained relatively close to the average level. Across industrial, office and retail, annual returns have fluctuated around the UK average. This suggests that the market is 47

48 relatively stable and that the positive returns from investment are obtained in Chelmsford. The market is not the most profitable as depicted by the periods where property returns were below the UK average in figure 5.15 below. However, there is no obvious reason why investors would be deterred from investing in the Chelmsford market if wider conditions were favourable. Figure 5.15 Annual Return on Property Investment Chelmsford Relative to UK, Source: Investment Property Databank Ltd Housing affordability in Chelmsford is relatively good and is similar to the county average, which may facilitate continued population growth in Chelmsford (assuming housing availability). House prices in Chelmsford are above those of Essex and South and East Essex Sub-region. The overall average price in Chelmsford is around 213,000 compared to the South and East Essex average of 200,000 and the Essex average of 194,000. As illustrated in figure 5.16 over the page, Chelmsford house prices are considerably lower than the London average of 275,000, and are also slightly below that of the South East 223,

49 Figure 5.16 Average House Prices 2004 Chelmsford Borough Council July 2005 Source: Land Registry In spite of the relatively high house prices, as shown in figure 5.17 below, affordability does not appear to be a major problem, as the house price to incomes ratio remains low compared to the regional and national averages and is similar to that of the South & East Essex Sub Region and Essex as a whole. Council Tax payments ( 987) are the second highest of all benchmark areas, behind the South and East Essex Sub Region ( ).

50 Figure 5.17 House Price/Incomes Ratio 2001 Source: regional Trends, Land Registry, Inland Revenue 50

51 6 Quality of Life & Accessibility Factors Chelmsford Borough Council This Chapter investigated the quality of life indicators and accessibility factors effecting Chelmsford. Quality of Life According to the Index of Multiple Deprivation, which is produced by the ODPM, Chelmsford s average score ranks the area in 320 th position (out of 354) showing very low levels of deprivation. Based on an income and employment rank, Chelmsford s position is less strong but remaining below average. Overall the area shows little evidence of significant deprivation. Figure 6.1 illustrates Chelmsford s performance across various indicators of deprivation. Across these indicators it is clear that Chelmsford has the lowest proportion of lone parents and income support recipients of all the benchmark areas. Whilst the proportion of people out of work experiencing long term unemployment is considerably higher than South and East Essex Sub Region, Essex County and the South East region, it should be noted that total unemployment within Chelmsford is lower than all of these benchmark areas. This means that the total number of people unemployed for over 12 months is quite low, despite long term unemployment representing a relatively high proportion of total unemployment. Figure 6.1 Deprivation Indicators Source: Regional Trends, DWP, Claimant Count Health indicators show that Chelmsford has the lowest Standard Mortality Ratio of the benchmark regions, which suggests a lower death rate than the benchmark regions. Figure 6.2 over the page shows Chelmsford s ranking in the Jarman Index. This is another index of deprivation. The average score is zero, with the scale ranging from minus 50 (not deprived) to plus 70 (most deprived). The score is used an area-based measure of additional workload or pressure on the services of GPs. A low score, as in Chelmsford s case, indicates low levels of deprivation and low relative demand for primary healthcare. 51

52 Figure 6.2 Health Source: ONS Crime in Chelmsford is lower than in any of the benchmark regions. Crime figures collected over the year 2002/2003 as shown in figure 6.3 over the page portrays Chelmsford as a relatively safe place to live. The level of violent crime is significantly lower in Chelmsford than in the surrounding South and East Essex Sub Region. In addition, recorded household burglaries and vehicle crime are approximately half the number reported in the South East and well below all other benchmark areas. Low crime figures supports the scope for Chelmsford to attract both workers and employers as secure working and living environment is an important consideration in location decisions of both parties. 52

53 Figure 6.3 Criminal Offences 2002/2003(Per 1,000 population) Source: Home Office Other considerations that come to play in the location decision of workers and employers include the attractiveness of the surrounding environment. Whilst Chelmsford lacks designated Areas of Outstanding Natural Beauty and National Parks, the surrounding are of South and East Essex sub-region does have such assets. Having assets within an accessible distance from Chelmsford is considered beneficial in attracting workers and employers to the area. Furthermore, the lack of designated AONBs and National Parks in Chelmsford means that the area may face fewer development constraints than the sub-region, providing greater potential for office and residential developments. 53

54 Figure 6.4 Areas of Outstanding Natural Beauty & National Parks Source: DTZ Locus 54

55 Accessibility In terms of mode of transport to work patterns Chelmsford shares a similar profile with the South and East Essex Sub Region and Essex as a whole. The dominant mode of transport is by car or van, although more people travel by train than in the South East and Great Britain. Travel by train accounts for less than half the levels found in London. Figure 6.5 Mode of Transport to Work 2001 Source: 2001 Census A high level of car ownership is visible in Chelmsford, which has the lowest proportion of urban population with no car as well as the highest proportion of ownership of 2 cars or above. Ownership of 1 car in urban Chelmsford is similar to levels found in the South and East Essex Sub Region and Essex as a whole, all of which are above the regional and national benchmarks and London. 55

56 Figure 6.6 Car Ownership in Rural/Urban Areas Source: 1991 Census Chelmsford s varied mode of transport to work profile, combined with a strong rating in DTZ Accessibility Index compared to the scores attained by the South East Essex Sub Region, Essex County, and Great Britain, indicate that Chelmsford would be an appealing location for office space, providing an attractive alternative to London as a location within the South. The Accessibility Index takes into consideration factors such as drive times and distances from motorway junctions, railway stations, ports, cities and major urban centres. As such, Chelmsford fairs better than Essex in general, but faces strong competition from both London and the South East, which score more highly in these factors. 56

57 Figure 6.7 DTZ Pieda Accessibility Index Source: DTZ Locus 57

58 7 Future Potential for Chelmsford as an Office Location This chapter examines the future potential for the office market in Chelmsford and potential demand for high quality end users and the mechanisms and improvements needed to put in place the attract high quality end users. SWOT Analysis The diagram below analysis the current status quo of Chelmsford by considering its Strengths, Weaknesses, Opportunities and Threats. Strengths Proximity to central London (workforce, employers and markets) Theatre with good evening parking (leisure and culture as important element of quality of life factors) Good employer base and employment opportunities (range of employers and sector activity) Proximity to potential customers in residential catchment area (local area population) Anglia Polytechnic University (and a specialism in the education sector) Relatively good accessibility with strong transport infrastructure- including rail, air and road) Transport interchange Opportunities Greater role for public transport Improve cycle/pedestrian movement avoiding Parkway Commuters spending power Theatre Hotel development potential Redevelopment of existing sites A desire amongst owners for development Vacant sites Council land ownership Government likely to support change Weaknesses Viaduct segregating parts of the town Main highways dominate the town centre environment (high level of car ownership and dependency) Poor pedestrian environment Poor image of shops Piecemeal development in the past Threats Tendency for developers to develop single use buildings only Role and function of Chelmsford as an office centre unclear Lack of Investment Lack of confidence from institutions (lack of will to invest) Lack of clear and shared vision Weak control over timing and type of development proposals Potential conflict between users residents, workers, people at leisure Short sighted property interests 58

59 Future Economic Prospects As discussed within this report, Chelmsford had made significant gains in GVA growth during the early part of this century. By 2003, the rate of GVA growth in Chelmsford, whilst lower than the South East average, was above London and significantly ahead of the South and East Essex Sub-region and Essex as a whole. As depicted in Figure below, this trend is projected to continue, with Chelmsford outpacing all of the benchmark regions with the exception of the South East. Figure 7.1 GVA Projections (2004=100) Looking at projected GVA growth in greater detail, figure 7.2 over the page shows that GVA growth is projected to remain above GB average from The rate of growth is projected to decline from 3.5 per cent in 2004 to a low of 2.3 per cent by 2008, there after the rate of annual GVA growth is projected to average 2.6 per cent. 15 GVA Projections are based on a combination of demand led macroeconomic assumptions of the UK growth prospects and supply-side considerations that apply to different regions. Part of the model focuses on each region s ability to attract key factors of production needed to grow (mobile skilled labour and investment capital). The model identifies three main drivers of growth need to attract these mobile factors. A range of proxy indicators is used to generate regional level forecasts. At a local level the, the regional growth forecast is apportioned to local districts based on a number of indicators. This is then projected forward under the assumption that the trend for the last few years will continue going forward. 59

60 Figure 7.2 GVA Growth Projections Population growth is also forecast to increase in Chelmsford by an annual rate of 0.4 per cent. This rate of growth is marginally lower than that forecast for the South East, but in keeping with the county as a whole Figure 7.3 Population Forecasts (2000=100) Given that population change in Chelmsford is forecast to closely match that of the county, the relative strength of GVA growth forecast for Chelmsford suggests 60

61 that the area will make further gains in productivity ahead of the county average, because GVA is projected to grow at a greater rate in Chelmsford than Essex as a whole, despite similarities in the rate of population growth In conclusion, the future economic prospects for Chelmsford is one of sustained growth, with the town set to continue the trend of out performing all of the benchmark areas, except the South East. Future Office Market Prospects The implications for future commercial developments at Chelmsford are based upon the existing market, demand for units is likely to be concentrated towards the smaller and mid sized unit sizes, mostly under 2,300 sq m (25,000 sq ft). The demand for larger units will depend upon two main factors: the potential pent-up demand from existing Chelmsford businesses for larger units and the success of Chelmsford in attracting larger companies from outside the area, especially from London There is currently a lack of modern category A type stock in a central location and it is likely that a number of existing companies will have unsatisfied existing requirements which could be met by the delivery of larger modern space in the town. However, due to the quality of the existing stock in the town centre, tenants have became used to paying relatively low rental values which reflect the quality and age of the existing buildings. Therefore the rental values which may be required to facilitate viable development of new office stock may be beyond what many local companies can afford. Part of the challenge of the delivery of new, quality business accommodation within Chelmsford will be to build upon the current rental levels We consider that the provision of a quality business product within Chelmsford help to attract greater levels of investment and new business start-ups, continuing from an already strong base. This growth in business development would be assisted if the market could offer competitively priced business space. Quality product at a cost discount to markets such as London and to a lesser extent Cambridge would boost the potential for Chelmsford In terms of the type of buildings which we consider would be most appropriate, we would recommend that at flexible strategy is adopted. A mix of serviced development sites as well as completed buildings of various sizes would offer the widest possible range of choice to companies In addition to the provision of completed buildings, the availability of serviced development parcels would also be appropriate. It likely that there will be demand for owner-occupier developments where businesses could benefit from land values at a discount to London. Again, we would recommend that a flexible strategy is adopted with regard to the types of businesses which are permitted and with regard to the sizes of the plots which are made available We envisage that the most appropriate office development in Chelmsford would include a range of business space within the B1 Use Class. High density office space would be best suited in a central location such as the West End benefiting form transport interchanges and the critical mass of business support services already in the area. Lower density pavilion style office development could take place on peripheral locations such as Chelmer Waterside to attract occupiers who do not need to be located centrally. The construction of these units could be 61

62 designed so as to allow the growth of businesses to enable them to take additional space when required or conversely release excess space inline with the performance of their business While the demand for modern office space may increase in the future, and developers such as Turnstone Estates and Churchmanor Estates are active in the town developers in general are cautious of developing in the county and often require a large pre-let to entice them to develop large speculative schemes. Therefore the piecemeal development, which has taken place in the past, may continue It is envisaged that 32,500 sq m (350,000 sq ft) of new office development could be realised in the West End area of Chelmsford. At current average take up levels of circa 7,246 sq m (78,000 sq ft) per annum this equates to around 4.5 years worth of supply for the whole of the Chelmsford. However, take up levels for 2004 was estimated to be in the region of 9,940 sq m (107,000 sq ft) due to the availability of new product. In 2000 take up in the town reached 13,285 sq m (143,000 sq ft). If the past is repeated together with the availability of new stock, the proposed 32,500 sq m (350,000 sq ft) would equate to 3.2 years and 2.4 years supply of stock, respectively Given the average levels of take up (7,246 sq m /78,000 sq ft) to guide office development over the next 15 years, potentially circa 102,000 sq m (1.1 million sq ft) of development could be realised within the Chelmsford area To accurately estimate the potential volume of office development Chelmsford could sustain an economic forecasting exercise would need to be undertaken based on employment trends across all sectors over the last 20 years. This would enable us to run a series of scenarios to estimate the number of potential jobs which could be created in the period. The job estimates could then be translated into estimates for new floor space based on English Partnerships employment density figures. 62

63 Developing Chelmsford s Office Market Chelmsford Borough Council It is important to identify the factors that make a business location attractive in order to judge the position of Chelmsford against these and therefore understand what needs to be done in order to develop the economic base of the town Locational requirements vary from industry to industry and from firm to firm, however, a general overview of the most commonly acknowledged locational factors are highlighted in this section. Broadly, the five main drivers of locational decision making are: Strategic Accessibility. Business Infrastructure. Workforce Skills. Quality of Life. Image. Strategic Accessibility The concept of strategic accessibility refers to the relative accessibility of an area to the major urban centres and international gateways in the UK and is of critical importance in explaining differences in regional, sub-regional and local economic performance. It is a function of both the location of the area and the quality of the transport infrastructure serving it A report published by the Department for Trade and Industry 16 highlighted the central importance of transport and communications infrastructure in investment decisions, The role of a modern and robust physical infrastructure, including the provision of facilities for companies and employees as well as good transport and communication links, is an important consideration for cluster managers When assessing the strategic accessibility of a location, investors will consider: The quality of transport infrastructure including road and rail linkages Good transport infrastructure has the potential to reduce transport costs, improve access to raw materials and improve access to skilled labour. Insufficient or inadequate transport infrastructure capacity can act as a brake on development. Whether there are good links to regional, national and international markets - Occupiers will often seek a 360 market radius to increase the catchment area, which can be a problem for coastal locations. Indigenous companies need to consider whether the local markets are growing and to what extent there is potential for expanding their customer/client base. The presence of appropriate technological infrastructure With the growing importance of IT within business and the growth of the Information and Communications Technology (ICT) sector, the level of technological connectivity (in particular high capacity broadband connections) is a key requirement. 16 A Practical Guide to Cluster Development 63

64 The existence of agglomeration economies Whether the transport infrastructure of an area can help in the development of these clusters of related activities and industries Chelmsford s level of strategic accessibility to major centres such as Cambridge and London is excellent. Journeys times to key sub-regional centres and business hubs are good. With a raft of transport improvements planned, including the potential new A120 northern by-pass route, A130 link road, the expansion of Stansted Airport the Crossrail project the town s strategic accessibility is set to improve. However, to enable the success of any planned new development and the marketability of new accommodation, consideration should be given to local infrastructure which would be required to sustain new proposals. 64

65 Business Infrastructure Business infrastructure comprises both physical and non-physical elements. Taken together, these elements form the necessary supporting conditions for companies to trade and develop. The physical elements relate to the availability and quality of land and premises and also the presence of business support services such as accountancy, marketing and legal firms. The non-physical elements relate to the presence of business networks and relationship systems to generate formal and informal flows of knowledge and information Specific considerations of investors when assessing a location s business infrastructure include: Availability of suitable sites and premises and the potential to expand within the area Occupancy costs (rent, rates and service charges) are important factors, although generally less important to the service sector and office occupiers than to industrial businesses. Office occupiers are more concerned with image, accessibility, communications and clustering with other office occupiers. There must also be sufficient space of the required standards for companies to expand operations. Availability of Business Services These services include the presence of accounting, marketing and legal firms to service the needs of the local business base. Also included within this category are facilities such as suppliers, conference facilities, courier services and 3 & 4 star hotels. Availability and quality of the business support networks in an area Formal and informal business networks are very important to facilitate access to knowledge and information in an area and ultimately they can help support collective learning and more competitive performance. University/FE linkages and collaborations The extent of commercial collaborations between Further and Higher Education institutions will be an important consideration of knowledge-based sectors in particular, but link-ups to develop commercial spin-outs and research and development activity are relevant to the growth and development of all industries. Inward investment support and advice - Organisations responsible for inward investment support and advice are often the first people to come into contact with prospective investors and therefore form a vital part in developing the image of the area Chelmsford s current business infrastructure provision is adequate for its existing purposes. However, to continue to encourage new investors into the area and offer existing businesses the opportunity to expand and diversify some thought should be given to new initiatives. The developing profile of Anglia Polytechnic University is assisting in raising the skills base of the town and improving linkages with industry. 65

66 Workforce Skills Chelmsford Borough Council A fundamental factor influencing investment decisions concerns whether businesses believe that they will have access to a labour force that meets their requirements. Key issues will relate to the quality, quantity and cost of the local labour force in any given location. Access to the labour market is also linked to the transport infrastructure, should there be a need for staff to commute in from other areas The labour market is a central consideration for both inward investors and existing businesses alike. Both types of investor will need to know that there is an appropriately skilled workforce, available in the required quantity, at a cost that the company believes is acceptable. For existing businesses planning to expand their activities, it will be important for them to understand if the existing workforce will have the capacity to adjust to new activities, or whether it will be necessary to search for suitably qualified workforce outside the area, or whether complete relocation to a more suitable area is necessary The socio-economic analysis of Chelmsford undertaken in Chapter four of this study highlighted some key issues relevant to the town s labour market. In short, Chelmsford has a relatively highly skilled population, engaged in high value advanced business services and finance sectors and occupiers seeking to locate here have a valuable resource to tap into. Clearly, it is important that the needs of potential new occupiers can be met by the skills of the working population. If Chelmsford wishes to attract occupiers from specific sectors, and assessment of their skills requirements would be needed, together with an assessment of skills base within Chelmsford. However, in general terms, Chelmsford does exhibit a relatively high level of skills attainment amongst the working population, which would be an attractive feature to many potential occupiers. Quality of Life Employees are considered the principal assets in knowledge based businesses/activities and therefore significant emphasis is placed on requirements of employees in business location and investment decisions. Central to this factor is persuading senior management that a location is both the right place to conduct its business and the right place from which either to recruit employees or re-settle existing staff The living environment contains a mix of objective and subjective factors, but broadly investors consider the following elements: The character/environment of the area Housing supply and cost house price to income ratio; quality of housing; supply of housing Quality of local schools The local crime rate Retail facilities on offer Cultural/Entertainment provision Quality of life Chelmsford scores highly in the elements identified above and therefore is regarded as an attractive location with a relatively high quality of life. 66

67 Image Whilst image is not a tangible entity, the perception and reputation of an area is of central importance within the minds of both inward investors and existing companies within a location. Although essentially a subjective concept, there are many examples of locations which are synonymous with a particular industry or sector, and whilst that image or perception may or may not be wholly accurate it still acts as an important factor driving companies to consider the location With the emergence of business clusters and priority sectors in specific areas, there is an opportunity for locational specialisation in certain industries. For example, a location may accommodate a large technology cluster and thus be perceived as being a mini Silicon Valley. It is often the case that people associate a place with certain sectors/clusters through knowledge that some leading or large companies are located there Image is also an important factor driving reinvestment by companies already established in an area. When considering an investment decision, companies will want to believe that they are in the right place to operate their businesses. Whilst there are many objective considerations behind this decision (such as availability, suitability and cost of workforce, space to expand their operations etc.), the company will need to feel that they are operating in a location that promotes the image of a business and entrepreneurial culture A report by the Department for Trade and Industry 17 highlighted the importance of image in developing the clusters and higher value added activities in a location, One activity that does stand out as being significantly more important in attracting cluster related inward investment is the development of a positive image for an area through marketing and promotion. Regions that become known for certain clusters are more likely to attract inward investors that are related to that cluster than those that are not known. The development of a brand or an image for an area can thus be a crucial part of any cluster development strategy Existing perceptions of Chelmsford are difficult to gauge without the benefit of a full business survey, covering both existing businesses and those considering locating in Chelmsford, in order to understand their perceptions of Chelmsford as a place to do business. However, it is possible through analysis of the business structure in the town and the patterns of investment/reinvestment to suggest that Chelmsford has a relevantly strong external image as a business location. The evidence of Chelmsford s relative prosperity compared to the benckmark regions supports this view. However, to attract additional businesses and investment above those all ready located in Chelmsford it may be important to build on the existing profile of the town within Essex, the East of England and London s Commuter Belt to raise the wider awareness and profile of the town To summarise, Chelmsford demonstrates all the locational requirements conducive to attracting high quality office occupiers. The town is well located within the London arch and is easily accessible by road and rail and air. A developed business infrastructure is in place providing support to a number of high quality firms, together with the availability of suitable accommodation and potential to expand within the area. The area has a relatively highly skilled population engaged in advance business sectors. Chelmsford scores highly in the quality of life index and have a strong external image within the County. 17 DTI A Practical Guide to Cluster Development

68 8 Office Market Requirements Sector Requirements of Office Accommodation Chelmsford Borough Council There are many features that appear important in securing a thriving office market environment. Whilst clearly there are some generic features that are important to all office users, which have been covered within this report, there are also sector specific requirements that are important to understand In order to answer key questions about the scale and location of office development it is important to consider what features are important to which sectors and to match this to any wider policy direction on sector growth The policy direction of sector development is influenced by a number of factors. These include: Aspirations of Chelmsford for future growth aspirational city or county city? Local Area Development Framework Chelmsford Master Plan and Action Plan Regional Economic Strategy Regional Spatial Strategy Business Infrastructure Skills Infrastructure/ Skills level It is clear that these will have a bearing on the sector growth strategy adopted by Chelmsford, particularly in complement to wider growth strategies driven by the EEDA and partner organisations and a focus on some key urban regions, such as Cambridge In assessing the office requirements specific to this study, we have used the economic data on Sector Trends (figure 5.4) contained within this report and focused on the needs of office users within the identified key sectors This assumes that Chelmsford future sector focus will be based on: Sectors in which Chelmsford has a specialism Sector that are important employers Sectors that have shown a growth in employment The assessment assumes that Chelmsford will wish to continue focusing on these sectors and features such as the skills base of the population and wider business infrastructure (e.g. business support mechanisms) are in place to meet their requirements However, this does not take into considerations: Regional growth sector priorities 68

69 Growth sector focus of competing locations (e.g. Cambridge, Braintree, Basildon) Future growth prospects of these sectors Clearly, these are important considerations for Chelmsford and there is a need to assess the future growth prospects of Chelmsford against activity that will clearly have an impact on it. However, it is understood that the detailed sector growth assessment falls outside the scope of this study. 69

70 The following diagram is a repeat of Figure 5.4 in the report, but scaled to show the central area in greater detail. Chelmsford Sector Trends? Basic Metals Building Materials Chemicals Construction Creative & Cultural Energy Environmental Technologies Extractive Financial Services Food & Drink Forest Products Further & Adult Education Glass & Ceramics Health Higher Education Hi-Tech Manufacturing Knowledge Land Based Life Sciences Metal Products Miscellaneous Manufacturing Other Consumer Services Other Mechanical Engineering Plastics & Rubber Primary & Secondary Education Producer Services Public Services Retail Social Economy Textiles & Clothing Tourism Transport Welfare Wholesale 70

71 The key sectors in which Chelmsford exhibited a specialism in include: Table xx Specialist Sectors Sector Change in Employment ( ) Concentration of Employment 2002 Office Requirement Producer Services 40% increase 10,000 Yes Retail 17% increase 9,000 No Public Services -3% decrease 5,000 Some Extractive -17% Small No Financial Service 30% increase 6,000 Yes Construction 50% increase 4,000 No Further and Adult 50% increase 1,000 No Education Higher Education 50% increase 2,000 No Other Consumer Services 20% increase 6,000 No From the assessment of the key sectors in which Chelmsford exhibits a specialism, Producer Services, Financial Services and Public Service all represent sectors that have office requirements and are important to the Chelmsford economy The following table identifies the business activities that make up these broad sectors. From work undertaken by DTZ in other regions, common location criteria for these sectors have been highlighted. This provides an overview of the features that have been shown to be important to firms operating within these sectors. A brief assessment of factors that related more specifically to Chelmsford s situation has been included to provide a local context to the locational requirements of sectors. Key office market 71

72 Sector Business Activity (SIC description) Location Requirements Chelmsford specific additions. Financial Accessibility by rail and road with good Services car parking facilities Producer Services Central banking Other monetary intermediation Financial leasing Other credit granting Other financial intermediation Life insurance Pension funding Non-life insurance Administration of financial markets Security broking and fund management Activ. auxil. to fin. intermediation nec Activ. auxil. to insur./pension funding Accounting/book-keeping activities etc Courier activities Telecommunications Development and selling of real estate Buying and selling of own real estate Letting of own property Real estate agencies Management of real estate Renting of construction equipment Site environment and image important ICT connectivity vital Quality of life issues can influence staff and directors location decision Demand for town centre offices High quality office space both out of town and town centre prestigious sites Modern space and larger units for back office relocations These companies tend to be client focused and therefore accessibility is very important. Good access to staff, markets and customers are likely requirements.. People working across a number of these business types tend to travel during the day and would need good access to both rail and road. Many require a strong profile (such as legal firms, real estate and architects) and Due to Chelmsford s proximity and strong links to London, Chelmsford provides a good location for a number of London s back office operations. This particular market requires larger, flexible modern offices than those activities with a more town-centre focus. Good access for staff would be important considerations, together with excellent ICT connectivity and modern designs. The high employment requirement of these companies means that access to suitably skilled staff, with competitive wage costs is also important. Companies operating across this sector would require a mixture of office accommodation both in location terms and scale. Flexibility is likely to be important. Image is important and this market may benefit from linkages with wider marketing/branding activity for Chelmsford.

73 Sector Business Activity (SIC description) Location Requirements Chelmsford specific additions. Renting of office machinery and equip. firms, real estate and architects) and prestigious addresses. Image can be a very Renting: other machinery important feature. and equip. nec Legal activities These companies would require a mixture Market research/public of town centre and business park opinion polling accommodation, depending on the nature Business/management of their activity. consultancy activity. Management activities: These companies are often seen to cluster holding companies around each other, both complementary Architectural/engineering and competitively. activities Clearly, ICT connectivity, flexible office Technical testing and space are important issues and would be analysis expected as given. Labour recruitment etc Investigation and security Some car parking facilities would be activities needed, but possibly less of a consideration Industrial cleaning than for large back office operations of the Packaging activities financial services. Secretarial and translation activities Other business activities Public service General public service activities Regulation: education agencies etc Regulation: more efficient business Supporting service activities Foreign affairs These are public sector activities. Many involve a significant staffing complement and therefore issues such as access for staff is considered important. Proximity to rail links may be important depending on the travelling habits of staff, alternatively road links could be a key feature. Closeness to other amenities may be an important consideration (e.g. restaurants. Cafés, green spaces). Chelmsford has a strong focus on public service activity. However, between employment in this sector has decreased and it is unclear whether further office capacity is required to meet future demand. 73

74 Sector Business Activity (SIC description) Location Requirements Chelmsford specific additions. Defence activities Strong ICT connectivity is also an Justice and judicial activities important feature together with modern Public security/law/order flexible space. activities Fire service activities For those with public facing roles, Compulsory social security accessibility by numerous modes of activities transport is important and proximity to urban conurbation areas, allowing the Other SMEs New Enterprises Start-Up companies public to access them with relative ease. These companies often require fairly specific office accommodation. Key features normally identified for incubators, managed workspaces and business parks include: Flexible accommodations 24 Hrs access Communal areas Easy in and easy out lease agreements Short term tenancy agreements Move on (grow on) space. Good ICT capabilities Low rents Car parking SMEs and new enterprises are considered important features of a growing and dynamic economy. Studies have shown that suitable accommodation availability is a key issue for this sector of the economy. Issues such as long term tenancy agreements can act as a barrier to these companies. This problem is considered particularly acute in the SME market as it is often stated that they have a high capacity to change and grow and need accommodation that reflects this, without the penalties of breaking lease agreements. Source: DTZ In the allocation of office space, it would be important to consider this sector within a wider development and assess their specific needs. 74

75 The implications of wider developments also need to be considered, particularly in addressing the quality of life issues that can influence location decisions. Quality of local amenities access to public areas, cultural entitlement, environment, housing quality and quality of local services can be very important to some companies, particularly those who need to attract staff to an area or entertain clients and should not be over looked A company s location decision is based on a number of factors. There is clearly a balance between wants and needs and rent/cost implications of meeting these. The closer that Chelmsford can market the features of office developments to the specific sector it wishes to attract the better, particularly if accommodation is priced competitively at any target markets In addition, within any given sector, office based activity will have a range of functions. The function of an office will have a great bearing on the type of office accommodation required by a firm considering investment and location in any given area Given the importance of functional features, the following sub-section discusses the various needs of offices by functions. This fully complements the assessment by sector and is important in considering wider complementary features of an area, particularly those related to work force size and skills level. Functional Requirement of Office Accommodation Chelmsford has a strong offer for office based activities and it is in an enviable position to attract extension projects from London and the South East With regards to attracting office-based activities, it is important to distinguish between the various types of office-based investment projects. Office requirements are influenced by the sector in which they operate. In this sense, Chelmsford should focus on those sectors that have growth potential, are suitable for this skills base of the area and add value to the local economy, which has been discussed in the previous section. However, in promoting Chelmsford s offer to business occupiers it is important to consider and communicate the functional offer. This is because within any given sector that Chelmsford wishes to attract, there will be significant variation in the functions of different offices.. There are several segmentations of this horizontal market. Projects are likely to be: Headquarters (HQ) and Regional Headquarters (RHQ) projects High Value Back-Office projects Lower Value Back Office (often outsourced business activities and business process outsourcing (BPO)) projects Shared Service Centres and Call Centres Generic office-based activities (usually indigenous SME activities) Each of these types of projects have unique drivers and firms will look for different key location factors. As such an assessment of Chelmsford s ability to contest these and compete for projects should be undertaken to identify which markets and segments Chelmsford can, and should, target for investment There are varying levels of mobility amongst these projects and as such the rationale for public sector intervention varies depending upon the projects in question. For example,

76 there is often an economic development case for public sector intervention in the provision of office accommodation for SMEs and start up accommodation in an area. However, because these types of project are not particularly foot loose, there is only a limited case for seeking to attract these from an inward investment perspective. Furthermore, the cost of attracting these from outside the region is likely to outweigh the economic benefit of doing so The following provides a short analysis of each type of project and Chelmsford s standing in relation to them. Importantly, for most projects Chelmsford will be seen as part of: a wider UK proposition a wider London/ South East proposition As such, certain key location factors are beyond Chelmsford s control to influence. For example, a company seeking an office location, outside but close to London may be influenced and drawn because of the size of the UK market, the macro and micro economic stability of the nation, and a need to be close to London Therefore, for most office-based projects, it is important to consider Chelmsford as part of the wider UK/London/South East proposition because it: Helps identify the type of projects where Chelmsford has a competitive offer; Helps identify the source of most investment and thus targets for investment; and Helps focus Chelmsford s investment activities on those aspects of the business proposition that are most likely to be of key importance to investors (at this level of the decision making process) and also those aspects most under the control and influence of Chelmsford. Headquarter and Regional Headquarter Functions Headquarters (HQ) and regional headquarters (RHQ) projects require high quality office space to varying levels of specification and scale. The requirements, and Chelmsford s ability to attract these projects will vary according to whether the firm is a multi-national, a large UK firm or a regional or sub-regional variant of either. To generalise, Chelmsford is likely to be in the market for, and able to contest, regional and national headquarters projects of large and medium sized UK-owned or based firms. Large multinationals are more inclined to locate in key business centres such as London, Edinburgh or in cities such as Manchester depending on their unique circumstance Companies seeking HQ and RHQ locations seek: Macro and micro economic stability Favourable taxation and business rates Market size and market access Presence of other firms (like businesses, upstream and downstream) 76

77 Prestige of location (esp for HQ operations) Skilled staff Transport connectivity ICT connectivity etc Prestige offices Cost competitiveness Chelmsford Borough Council Aspects of most importance to decision making in relation to Chelmsford are thus: Access to large London and South East markets Workforce availability and quality; Presence of other businesses; Transport and ICT connectivity; Office availability; and Within this context, cost competitiveness Chelmsford, positioned correctly as part of the wider regional offer thus has an excellent proposition if it can get the property, transport and staff aspects right For HQ and RHQ projects, killer factors (ie those that can make or break a project), especially for locations such as Chelmsford, are generally property or staff related. Companies seeking offices want good quality office space that is ready for occupation. Similarly a good supply of staff and a demonstrated pool of potential workers are also key. Hence the importance of local universities and colleges. Back-Office Functions For back office projects companies look for similar factors to HQs and RHQs but the issue of cost competitiveness takes on greater precedence. Having a large workforce with the right skills mix is a core requirement so marketing on the basis of cost competitiveness within the London/ South East market, the ease of travel to headquarters (most likely in London) and the large labour pool is key. Using travel to work times to extend the labour pool size is an effective way of extending the size of the labour catchment. The presence of like businesses is also important since most firms are reluctant first movers- they like to locate in tried and tested locations The fact that Chelmsford is a London satellite is a strong advantage. Back office projects can be extremely footloose and companies are increasingly comfortable with having back office activities serviced and delivered remotely either under the company s direct control or through outsourced contracts. Being able to demonstrate the security, management or other advantages of being close to HQ control will be important to secure projects that could otherwise be located in Manchester, Glasgow, Dublin or Bangalore. 77

78 For this reason, Chelmsford would be advised to target higher-value activities (i.e. better paying and more complex) with projects requiring higher level of technical skills or education attainment. The higher the value of the back office activity or the higher the degree of skill involved means that a company will be more likely to require a closer oversight of its activities and would thus prefer to keep it close to its HQ Office availability and the ability to offer a ladder of property options is extremely important for back office projects. Skills and connectivity factors are also vital. Shared Service Call Centres Shared services projects and contact centre projects are more cost driven and more mobile again. Companies undertaking these activities are also even more likely to locate in tried and tested locations, with a cost competitive workforce that has an existing pool of trained workers. Workforce turnover is generally higher in these activities and training is expensive so having a workforce with experience is a major advantage. However, over time this advantage can erode a location s attractiveness if too many firms are competing for the same workers. This is occurring to a certain extent in locations such as Glasgow Cost competitiveness, existing business presence and an experienced workforce are of key importance to these projects. Summary There are a number of important features which influence a company s location decision. These features vary in importance depending on the sector and function in which a company operated and clearly consideration needs to be given to both There are some sectors and functions in which Chelmsford has a particular advantage. For example, proximity to London is clearly an important element of Chelmsford s offering to many companies In communicating the clear advantages that Chelmsford can offer certain companies it is clearly important to identify the features that are of interest to certain sectors and certain functions. Tailored communication to targeted markets is considered far more effective than general marketing aimed at meeting everyone s needs and specifications The following section identifies key aspects of investment attraction and place marketing that would be important in communicating the benefits of Chelmsford as a quality office location to targeted markets. 78

79 9 Marketing Chelmsford s Offer for Office Occupiers Key aspects of Investment Attraction and Place Marketing Sound place marketing revolves around marrying a location s assets and capabilities against market needs. To identify market segments for investment, attract firms and target the right investors, an investment attraction agency needs to: fully understand it s local advantages for potential investors, through the eyes of those investors; and to covey to these potential investors the business case for investing, in a way that makes sense to the individual investor Although this sounds simple, there a several common mistakes made in location marketing. These are: Mistaking local features for advantages. An investor wants to know how local assets translate into business profitability for them. A vibrant community means nothing but high levels of students and graduates means a sustainable, potentially cost-competitive workforce. However, even this is not enough. The link between graduates or other attributes and business performance needs to be spelled out, not inferred. The other common mistake is to fail to see your location through the eyes of an investor. This means taking a pragmatic look at your location and evaluating it from an investor s perspective. For example, you may believe that your local road service is adequate but if the investor needs to convey large amounts of product frequently to other locations, the local infrastructure may not be good enough. Similarly your infrastructure may not be as good as that 100 miles away. For this reason it is important to see your location in relation to alternative locations. For this reason location benchmarking of competitor and comparator locations is often undertaken. An ability to speak the language of the boardroom is an advantage. There is often too much focus on the qualitative advantages of a location in respect to the business case put forward to investors- at the expense of the cost story. Qualitative factors are important and for investments in services, research and other value-led activities it can be key. However, all businesses are in the business of making money and have to operate on a profitable basis. For this reason, an ability to convey or at least understand the cost implications or the bottom line story of a location is important. Even if a location is high cost, this is not to say it is not a profitable business destination. Having the ability to understand and convey the specific financial aspects of your location will increase the sophistication of your business case and will help you engage in a more credible manner with an investor. It is critical that any marketing strategy is directed towards the end-user and not towards corporate or political goals. Marketing material should have a clear business focus and not a generic promotional angle. It should certainly not be a means by which to triumph organisational or political achievements. Similarly, generic marketing and generic marketing channels will not reach the investment decision makers. It is unlikely that a prospective investor will see or change their behaviour as a result of a generic marketing brochure. Getting the right message to

80 the right client is extremely difficult and it is here that many agencies waste resources and ultimately fail in their marketing efforts. Importantly, in the UK as with most developed economies, the bulk of investment derives from re-investment and extension projects. As such a large proportion of an agency s resources, especially at the regional, sub regional and local levels should be to support existing businesses and existing investors. If local businesses can grow in an area, they are not only a good advertisement for the economy but are also the most likely source of new investment projects. Finally, one of the most, if not the most important element in any inward investment strategy is the pursuit and development of organisational excellence. This is key to attracting and servicing international and local investors. Agencies need to be able to the instil confidence in investors that they have the capacity to deliver a good climate for business and that the agency can supply the support they need in order to grow. Developing an Investment Attraction Strategy Best practice place marketing stipulates that a location should develop a targeted offer to potential investors. The offer needs to be based on a sound assessment of locational advantages for various types of business activities and functions or on sectoral strengths and advantages To develop an inward investment strategy, a location needs to work through a process similar to that outlined below: 80

81 Investment Attraction Strategy Development Understand the product Understand the market Supply & Demand Analysis SWOT & Benchmarking Market segmentation and selection Proposition development Marketing channels and relationship development Source:DTZ Pieda Defining the product The location is the product that you are hoping to sell. As such it is important to get a fix on what are the selling features of the product. This will help select areas of competitive and comparative advantage and enable you to identify target markets. A location audit is often undertaken at this stage to identify sectoral and other strengths as they relate to various types of business activities. Too many agencies lack a deep understanding of local capability, which not only leads to poorly focussed targeting strategies but also an inability to adapt to changing industry trends and a failure to engage effectively with potential investors Understanding the target markets We define this as the capacity to understand the dynamics of the investment and sectoral markets in which an economy, and by extension the agency, operates. It is important to both gauge the demand for your product and the factors influencing levels of demand. An assessment of investment demand and growth in sectors and target markets of interest is often undertaken at this stage. Understanding the market also extends to the identification of key decision makers within target markets Identifying the match between supply and demand a SWOT analysis is undertaken which assesses the location against factors influencing investment in target sectors and markets. It is at this stage that the assessment investment drivers and the key location factors (those things that a company seeks when considering a location) is compared against the local assets. An understanding of the strengths and weaknesses of a location through the eyes of the investor is developed. From this, a location selects 81

82 markets in which it can compete for investment and markets where it makes economic sense to do so. For various reasons, a location may decide not to seek to attract further investment in areas where it does have advantages but will prioritise other markets. For example a location may decide not to pursue certain types of business activities. These may be activities that use too much land, do not create enough or the right kinds of jobs or where it is felt there is no market failure or where the economic benefit from such investments does not justify expenditures Developing a business case as mentioned before, this is the proposition that is taken to the market. It is designed to demonstrate how investment in the location will create value for the firm. The business case must reflect the investors needs, their key location factors and the hierarchy of these needs and it must be presented in a way that speaks the language of the boardroom so that it is convincing to decision makers Taking the business case to market a location also needs to consider how to get its business case to investment decision makers and to use appropriate marketing channels to reach these decision makers. Activities range from branding strategies, advertising, PR, intermediary strategies, leveraging industry networks and events. Nothing, however can compare to relationship development and one to one communication with potential investors and influencers in the target market. Similarly, investment pipelines are often long and depending on the location s current standing, development of a reputation for certain types of business activities can be a lengthy process and one which requires long-term customer relationship development (CRM). Summary There are a number of factors that influence the attractiveness Chelmsford s office market to potential occupiers. These include factors that can be and are influenced by the activity of Chelmsford Borough Council and the regional development agency and those which are influenced by wider activity beyond the control of the borough council Throughout this report, we have shown that Chelmsford is in a relatively strong position in terms of the office market offering and potential office market offering. Economic indicators have shown that the Chelmsford economy is performing well in comparison to key benchmark regions and that the office market is currently active The future prospects of Chelmsford will be influenced by a number of factors beyond the control of the town. However, assuming that the market remains relatively stable and that there are no negative shocks from wider policy activity, the prospects for Chelmsford office market remain strong In promoting and developing Chelmsford as a key office market it is vitally important that a full understanding of the features important to various users are effectively is gained. This will influence the location and scale of office development to target specific market users Secondly, any benefits of locating in Chelmsford need to be communicated in an appropriate language to potential investors. This needs to be targeted and well thought through. A dump all of features risks missing the target audience and failure to attract the right type of occupiers to provide the right type of jobs in the town. 82

83 10 Conclusion GVA projections detailed in figure 7.1 show that Chelmsford will continue to experience strong growth in the future. This report has shown that Chelmsford has a strong base to support future growth. Indicators show that both current and future skills levels in Chelmsford are strong, which provide foundations for further growth. Strong GVA growth and new business formation levels illustrate that the economic conditions are conducive to growth. High employment rates and low levels of unemployment further support this. Whilst a tight labour market could cause upward wage pressures, average gross weekly earnings data does not provide evidence of this at present and census data has shown that there is a net out flow of workers from Chelmsford. An increase in employment opportunities within the town would reduce the need to outcommute and would not place undue pressure on wages An increase emphasis on higher paid employment opportunities may have an overall effect of increasing average earning in Chelmsford as a greater proportion of the work force earn higher incomes. However, this is not the same as increasing wage pressures as it would not increase the incomes of those who continue to be employed in lower wage occupation (i.e. it should not cause a rate of change in wages across all levelspushing wages upwards) Both sectoral employment concentration and occupation data illustrate that the skills set in Chelmsford supports activity within the service sector. Sectors such as financial services have seen considerable growth between and Chelmsford exhibits a relative specialism within such industries With regards to quality of life factors, the key indicators show that Chelmsford is a good location for both businesses and their employees. Crime rates are low, health rates are good, housing affordability is significantly greater than either London or the South East In terms of location decisions for office occupancy, Chelmsford exhibits good connectivity in terms of rail, air and road links and scores considerably higher on the Accessibility Index than Essex as a whole or South and East Essex sub-region. Proximity to London is a particularly good location factor for office-based businesses wishing to establish in Chelmsford. The town is within 30 minutes of Central London by rail. However, there is a high level of car ownership, which suggests that Chelmsford has or will suffer congestion problems unless suitable consideration is given to transport issues, this may need to be further examined The indicators examined within this report point to a favourable business climate within Chelmsford that would aid further business formation and economic growth. The climate appears conducive to attracting interest from businesses wishing to locate in suitable office accommodation. Chelmsford exhibits a high rate of business formations and there may be capacity to enhance the productivity and growth of these indigenous new enterprises. The data indicates that Business Support should be focused on helping these companies grow and develop, adding further value to economy Areas that have not been covered within this study that may impact on the attractiveness of Chelmsford as a business location include softer quality of life indicators such as the attractiveness of the area, the cultural capital of the town (including leisure attractions) and so forth. These quality of life factors can impact on a 83

84 businesses location decision, as they impact the willingness of employees to live and work in an area Furthermore, as Chelmsford would wish to attract high growth businesses that add greater value to the economy, the quality of office accommodation would need to be high, reflecting higher end use users. Factors such as design, good broadband and ICT capabilities and accessibility are all likely to be important considerations of any new businesses It is important that in the development of Chelmsford that issues of image and perception are not overlooked, and that the strong basis for growth is appropriately communicated to potential inward investors Chelmsford like other centres in Essex is increasingly becoming a more attractive alternative to Docklands and the City in terms of cost which interest from city firms looking to move away from the capital. There has also been an increase in demand for disaster-recovery space and requirements for back-office functions and Chelmsford is strategically located within the London commuter belt, with an able workforce to capture some of these requirements The availability of competitively priced high quality accommodation, in the right location should attract high quality end users to locate in Chelmsford. 84

85 Appendix 1 Schedule of Recent Major Transactions Date Address Type Lesse/Purchaser Area (Sq m) Jan-05 Faviell House & Buckenham House, Coval Wells Jan-05 Fairbairn House, Coval Wells Investment Sale Investment Sale Price Rent (per Sq m) Yield (%) Lessee: QBE International Insurance Limited, Purchaser: Canada Life Limited 7,153 27M Lessee: M & G LIMITED 2, M Jan New Street, Chelmsford Lease N/A 75 N/A N/A Nov-04 Marlborough House, Victoria Road South, Chelmsford Assignment Lessee: Clydesdale Bank plc 368 N/A N/A N/A Jun-04 Hodgson House, Rainsford Road, Chelmsford Investment Sale Purchaser: Overseas Client 1, M Aug-04 Bush House, 294 Ongar Road, Chelmsford Lease N/A 86 N/A N/A Mar-05 Broomfield Food Centre, Main Road, Chelmsford Apr-05 Fenton House, New London Road, Chelmsford May-05 Greenwood House, New London Road, Chelmsford Lease N/A 37 N/A N/A Investment Sale Lessee: Med-Tel Limited, Lessee: NIG, Lessee: Farr Plc 2, M Lease Lessee: Kennedys 1,487 N/A N/A Feb-05 Greenwood House, New London Road, Chelmsford Lease Lessee: Private 184 N/A N/A

86 Date Address Type Lesse/Purchaser Area (Sq m) Nov New London Road, Chelmsford Price Rent (per Sq m) Lease N/A 251 N/A N/A Chelmsford Borough Council Yield (%) Nov-04 Greenwood House, New London Road Lease Lessee: Allianz Cornhill Insurance plc 523 N/A N/A Nov-04 Greenwood House, New London Road, Chelmsford, Essex Nov-04 Greenwood House, New London Road, Chelmsford Lease Lessee: Gadsby Wicks 330 N/A N/A Lease Lessee: Handelsbanken 171 N/A N/A Feb Moulsham Street, Chelmsford Feb Moulsham Street, Chelmsford Feb Moulsham Street, Chelmsford Lease Lessee: Security & Standards Ltd Lease Lessee: LONDON SCOTTISH BANK plc Lease Lessee: Newell Properties Developments Ltd 57 N/A N/A 85 N/A N/A 54 N/A N/A Jan-05 Fenton House, New London Road Jan-04 Northgate House, Dairy Road, Chelmsford Oct-04 Industrial Buildings, Beehive Lane, Chelmsford Lease Lessee: Medtel Ltd 448 N/A N/A Investment Sale Purchaser: Capita McLarens Plc M Lease N/A 101 N/A N/A 86

87 Appendix 2 Schedule of Available Office Accommodation Date Address Type Agents Area (Sq ft ) Area (Sq m) Rental Asking Price May-05 Cater House 49/50 High Street, Chelmsford To Let Bidwells Property Consultants, Taylor & Company 6, Jun-05 Jun-05 Jun-05 Jun-05 Jun-05 Jun-05 May-05 May-05 May Broomfield Road Chelmsford Investment Kemsley Whiteley & Ferris 1, M Phoenix House New Street, Chelmsford Investment Kemsley Whiteley & Ferris 1, M Regency House Victoria Road, Chelmsford Investment Kemsley Whiteley & Ferris 4, M 78 Broomfield Road, Chelmsford Investment Kemsley Whiteley & Ferris 2, M Broomfield Business Centre Broomfield Road Investment Kemsley Whiteley & Ferris 2, M Broomfield Road, Chelmsford To Let Robert Dewar Associates Broomfield Road, Chelmsford To Let Robert Dewar Associates Broomfield Road, Chelmsford To Let Robert Dewar Associates Broomfield Road, Chelmsford To Let Robert Dewar Associates May Broomfield Road Chelmsford To Let Robert Dewar Associates May-05 May-05 Unit 6 Hoffmanns Way, Chelmsford For Sale Glenny 4, M Threadneedle House Market Road To Let Everett Newlyn 10,

88 Date Address Type Agents Area (Sq ft ) Area (Sq m) Rental Asking Price May-05 Tindal Square Chelmsford To Let Everett Newlyn 1, May-05 Apr-05 Apr-05 Apr-05 Apr-05 Apr-05 Apr-05 Apr-05 Apr-05 Apr-05 Apr-05 Apr-05 Apr-05 Cater House, Cater House High Street To Let Strutt & Parker 9, Cater House High Street, Chelmsford To Let Kemsley Whiteley & Ferris 9, East Saxon House 27 Duke Street To Let Kemsley Whiteley & Ferris 3, a/11b Broomfield Road To Let Kemsley Whiteley & Ferris 1, New Street Chelmsford To Let Kemsley Whiteley & Ferris 1, Gainsford House New Street To Let Taylor & Co 5, Ground Floor Steeple House Church Lane To Let Taylor & Co Gainsford House New Street To Let Taylor & Co 5, One Legg Street, Chelmsford To Let Taylor & Co 13, Townfield House Townfield Street To Let Taylor & Co 3, East Saxon House 27 Duke Street To Let Taylor & Co 3, Railway Street Chelmsford Assignment Taylor & Co 1, Eastwood House Glebe Road To Let Taylor & Co 18,

89 Date Address Type Agents Area (Sq ft ) Area (Sq m) Rental Asking Price Apr-05 Apr-05 Apr-05 Apr-05 Apr-05 Apr-05 East Saxon House 27 Duke Street To Let Taylor & Co 30, th and 8th floors, Cater House High Street To Let Bidwells Property Consultants 6, Broomfield Road Chelmsford To Let Elwell Taylor Chartered Surveyors 1, Rainsford Road, Chelmsford To Let Kemsley Whiteley & Ferris 4, The Waterhouse Business Centre 2 Cromar Way, Chelmsford To Let Capital Enterprise Centres 1, Berkeley Square 3-5 Rainsford Road, Chelmsford To Let Kemsley Whiteley & Ferris 6,

90 APPENDIX 3 Schedule of the Development Pipeline Scheme Location Developer Size sq m Size sq ft Details Springfield Park, Colchester Rd Out of town Frogmore Devts/Royal London Insurance 41, ,000 B1/B2/B8 scheme on remaining 30 acre site Chelmsford Business Park, Colchester Rd Out of town Churchmanor Estates 12, ,500 Office/high tech development APU Site, Duke St Town centre Countryside Properties 8,361 90,000 Mixed-use Scheme Chelmsford Business Park, Colchester Rd Clarendon House (Priory Pl), Parkway Out of town Churchmanor Estates 7,023 75,600 B1/B8 development Town centre Turnstone Estates 4,636 49,900 Vacant site Writtle Rd Out of town Fairview New Homes 3,196 34,400 Office development Crosslyn House, Colchester Rd Out of town Crosslyn Props 1,914 20,600 Part replacement, part spec offices High St/ Waterloo Lane Town centre Barclays Prop Holdings 1,774 19,100 Office development Ph2, Hamilton Centre, Rodney Way Out of town Silvermist Props 1,189 12,800 Remainder of high tech scheme Regina House, Regina Rd Town centre Rippon Estates 1,236 13,300 Beaulieu Pk, Colchester Rd Out of town Countryside Propos 174,188 1,875,000 Mixed scheme to provide B1 development & residential 90

91 Borough Council Appendix 4 Table of Sources Figure Source 4.1 Population NOMIS 4.2 Employment Change NOMIS/ABI 4.3 GVA Change DTZ Locus 4.4 VAT stock NOMIS 5.1 Chelmsford Broad Industrial Structure DTZ Locus, ABI 5.2Broad Industrial Stucture Strengths DTZ Locus, ABI 5.3 Occupation Structure LFS 5.4 Chelmsford Sector Trends ABI, DTZ Locus 5.5 Size and Structure ABI 5.6 GVA per employee ONS, DTZ Locus 5.7 GVA per capita ONS, DTZ Locus 5.8 Workforce Skills LFS 3.9 School perform DfEE 5.10 Wages New Earnings Survey 5.11 Income and Car Ownership Inland Revenue, Census 5.12 Unemployment rate and Emplo rate Claimant Count, LFS 5.13 Business Formation Rate NOMIS, LFS 5.14 Annual return property Investment Property Databank 5.15 Annual return on property investment Investment Property Databank relative to GB 5.16 Average House Prices Land Registry 5.17 House price/income ratio Regional Trends, Land Registry, Inland Revenue 6.1 Deprivation index Regional Trends, DWP, Claimant Count 6.2 Health ONS 6.3 Crime Offences Home Office 6.4 AONBs DTZ Locus 6.5 Mode of Transport 2001 Census 6.6 Car Ownership 1991 Census 6.7 Accessibility Index DTZ Locus