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JLL examines key drivers of success on the region's business parks

JLL publishes its latest UK report on business parks

Birmingham 3rd October 2014 - As global real estate advisor JLL publishes its latest UK report on business parks, Jon Carmalt, director of office agency at its Birmingham base in Church Street, examines what the future has in store for the local market.

"I'd say overall the outlook is looking pretty healthy," says Jon. "Demand has greatly improved in Birmingham and the M42 corridor over the past 12 months and with supply now limited, the existing business parks should continue to prosper, particularly as there are no signs of any speculative development on the horizon.

"Incentives are definitely reducing and rents too have generally recovered, more rapidly on out-of-town sites due to the supply scarcity than in the city centre, which is taking a little longer to reach pre-recession rates."

Nearly 200,000 sq ft of deals were completed in the first 6 months of the year on the region's M42 business parks.  Four lettings so far this year have been in excess of 20,000 sq ft and  include the largest office letting to have been achieved at Birmingham Business Park since 2008, totalling 36,000 sq ft.

The regional figures paint a positive picture, but according to JLL's research and that of the British Council for Offices, demand for business parks as a whole is expected to decrease in the future as more people gravitate to the cities.

"I think we're lucky in this region and will probably buck that trend," says Jon "We don't see much cross-over between city centre office requirements and those for out-of-town. The business parks tend to attract a certain type of occupier who want larger floorplates and need to be able to access its customers via the airport, by motorway or train."

Whilst car parking is still a priority at the moment, going forward public transport links will be far more important due to changing demographics, the planning regime, sustainability and global accessibility.

"Certainly connectivity is a key driver for success," adds Jon "And being near to existing or planned public transport provision will also prove attractive to occupiers and investors going forward.

"Again we perform relatively well in this area, aided of course by UK Central (UKC) which has master planned the infrastructure assets to 2040.  This is essential to future proof regional growth."

The Hub is at the epicentre of UKC and includes Birmingham Business Park, the NEC, the expanding international Birmingham Airport, Birmingham International Train Station and the M42 motorway.

"The now operating extension of the airport is certainly going to make a difference and regular shuttle buses running to and from the business parks, makes access easy.  There is also the proposed HS2 Birmingham Interchange station, which will allow London to be accessed within 40 minutes in 2026.  You couldn't ask for better transport links on your doorstep really."

Creating environments that offer a sense of place and fluidity between work, home and recreation is seen as another key driver for business parks and although some parks have struggled to retain leisure operations or retailers on site, many do strive to offer a setting in which people can walk, relax and perhaps enjoy a run or bike ride at lunchtimes.

"Birmingham Business Park is a prime example of this," adds Jon. "It's set in 148 acres of mature and pleasant landscaping.  Blythe Valley Park has an established nature trail and gym facility for employees to enjoy as an added incentive for occupiers."

The bottom line for most companies, however, is productivity.  The cost of human capital accounts for a significant proportion of organisational costs with the result that productivity is rising up the corporate agenda.  Offices need to support an occupiers corporate identify and provide their employees with a place they are happy in.  Having a high quality building in the right location creates a positive image for potential new recruits, investors and partners. 

"Recruiting and retaining top talent is a key priority for occupiers and all the more so as the economy recovers and the labour market tightens," reports Jon.

"Given reported shortages of staff in high-skill sectors, we can expect occupiers to increasingly demand high quality, modern, flexible space to boost their attractiveness to workers, allowing for more flexible modes of working including hot-desking, utilising break- out areas and working from home or in public shared spaces.

Business parks can compete to provide all of these attributes as Jon states, "The larger footplates potentially available provide greater flexibility to assist in communication and collaboration. Also, the lower property and operating costs mean companies have more money to invest in promoting and improving working practices."

JLL predicts that as people work more flexibly and the office becomes an environment to meet colleagues and exchange ideas rather than a 9-5 workspace, business parks with good accessibility may benefit as 'touchdown' points.

With a lack of grade A space on the horizon in the city centre, you could argue that some companies may head to the business parks to achieve their goals and certainly if they go down the 'design & build' route their ambitions can be delivered more quickly than in the city centre. However in this region in particular, the dynamics are such that companies will rarely transfer between the city centre and out-of-town.

"I think it’s the infrastructure and geography of Birmingham and the M42 corridor that sets our business parks apart.  They are of sufficient scale, in close proximity to a skilled labour source, are already home to clusters of expertise and have excellent and improving transport links which will ensure their longevity.   Solid income returns and lower capital values make them of interest to investors too as witnessed by Canmoor's purchase of Birmingham Business Park at the end of last year."

So the outlook is clear, business parks are pretty well placed in this region at present, but like all offices, landlords have to continue to work harder to attract occupiers and provide the environment their staff are looking for.