Leicestershire Office Market 1990's and Now
18th May 2007
Fundamentally there is now greater demand coming through for offices than there was in the 1990s as the UK economy continues shifting towards the service sector. Ten plus years ago, the office market in Leicester was comparatively slow and this was evident by the shortage of quality property available compared to the better choices available today. As a result of growing demand in the office sector there are now more schemes coming out of the ground. Rents for prime accommodation have risen at significant levels over recent years, and it is not surprising that investors are amongst numbers adding to demand.
Leicestershire has had a hard time adapting to the large losses in manufacturing which historically have contributed towards the local economy. The ongoing regeneration is helping the city, and the office sector is playing an important role in filling the gap.
On the whole, there are more starter size units being built in this area of the Midlands ie those up to 2,000 square feet – which cater for office occupiers employing between four to 12 members of staff. This obviously covers a large range of occupiers so they have been built in all types of county locations, including market towns like Lutterworth, Loughborough and Market Harborough. Most are built in response to demand, many for expanding local businesses and developers work closely with the local economic officers.
There have also been a substantial amount of larger office developments springing up – most notably at locations like the Meridian, Grove Park, Castle Donnington, and Coalville, so there has been more development across the board.
In terms of occupier requirements, the provision of car parking is still a key factor. Planners may be pushing environmental issues, and legislation for new builds may be changing in this regard, but it's government-driven, rather than consumer-driven. The occupiers themselves don't see this as a main factor when taking on office units. For example, new schemes with rows of bicycle racks still come a poor second to those with more parking spaces, and energy efficiency is regarded as an extra bonus rather than a decision-maker. The Midlands attracts many businesses because of its central location, so good commuter links, be it by road or rail, are still key to office occupiers. Some of the rail links that existed 10 years ago are no longer there so having access to motorways is important, and improvements to the road links over the past decade have increased the attraction for the outlying office parks with easy access to these. Again, this gives them the edge on some of the city centre locations, which have fewer parking facilities and take longer to access because of the inevitable traffic congestion.
Prestige is also important for many purchasers of starter units. Being in an attractive new office park with plots of one to two acres helps them establish a certain image for their company, and we're seeing a lot of demand for these kind of units as a result.
Compared to 10 years ago, there is now a much stronger emphasis on freehold than leasehold, particularly when bought through company pension schemes. Business professionals increasingly want to own the building they are working in. Money/finance is also far more readily available and the property sector has provided good investment returns over this period.
One of the first new office parks to come out of the ground at Lutterworth in 1990 was almost completely occupied by IT-based companies. It was the time of technological advances and many of the new firms springing up wanted to be on the new office park. Once certain facilities were installed for these companies, they subsequently held a new appeal for other types of business and you now have a wide cross section of occupiers.
In the 1990s, there was still a strong leaning towards town and city centre locations, but nowadays the office environment has divided into two markets – the out-of-town and the city centre. IT-based companies were the first to change the trend, with accountancy firms, solicitors' practices, financial consultancies and estate agencies swiftly following the out-of-town migration. Professional areas like New Walk in Leicester are still attractive to businesses, but they're not quite the 'must have' they were 10 years ago.