City needs a space race

19/10/2011

The recent sale of One Humber Quays to C Spencer Ltd, has left Hull with only two grade-A office spaces ready for immediate occupation – Two Humber Quays and Brewery House.

This amounts to just 28,700sq ft of free space.

These buildings, being marketed by Hull property firms, PPH Commercial and Garness Jones, have attracted strong interest.

If deals are agreed, it will leave the city centre without any readily available top quality space.

Nick Pearce, partner at PPH Commercial, said developers were not willing to risk speculative development in the current market.

He said: "When we had a downturn in the market in the late 1980s and early 1990s, a similar problem existed with the lack of quality space being available and this then resulted in tenants looking at bespoke office space on a design and build basis.

"Landlords then were, however, prepared to consider carrying out speculative schemes such as Wilberforce Court when at least 50 per cent was pre-let. The situation in today's market is slightly different in that the bank funding is restricted for schemes of this nature and it will need strong cash-rich development companies to undertake speculative development at present, despite clear demand."

There are currently two sites in Baker Street and Spencer Street that have been granted planning consents for new office buildings, but property experts say it is unlikely these will be completed on a 100 per cent speculative basis.

Property agents warn the city centre needs more top-quality offices space as certain companies will not settle for anything less.

Dave Garness, managing director of Garness Jones, said: "Grade-A enquiries are relatively sparce, but when they do come along they very rarely will accept anything less than Grade A.

"There are not a lot of options other than design and build, and that can take 12 to 18 months, which for most people is too long.

"The city needs that availability because there is a risk without it these companies will go elsewhere."

Mr Pearce said: "In normal circumstances, developers would look at alternative options, such as refurbishment of existing space, but with rates liability and ongoing running costs as well as tight lending criterias, this is unlikely to occur and some of the older buildings, particularly in Hull city centre, will struggle to attract new occupiers.

"Will this lack of supply hinder the regions growth? Time will tell."

Mr Garness believes the Government could boost grade-A office development by reducing or scrapping empty business rates.

He said: "It is partly down to less bank lending, but what is more important is that developers recognise there's still a lower level of demand so as soon as they build something they will have holding costs and empty rates payments.

"That is a hindrance to people developing especially grade-A offices which will have the highest rates."