The Subplot | Sheffield’s office plan, buying Manchester deals, Crewe shunt
Welcome to The Subplot, your regular slice of commentary on the business and property market from across the North of England and North Wales.
- Sheffield’s New Plan: get ready for artisans, craftspeople and 24 acres of new offices
- Elevator pitch: your weekly rundown of who and what is going up, and who is heading the other way
SHEFFIELD’S NEW PLAN
The art of city centre thinking
Sheffield artist Pete McKee has just become the first tenant announced for Sheffield’s listed Leah’s Yard development, the first of what could be a long list of makers and creatives ahead of a summer 2024 opening. The project is the centrepiece of the £480m Heart of the City plan by Sheffield City Council and developer Queensberry.
Sheffield city centre is about to see a lot more, if a newly approved plan gets the government’s green light.
Along with Bethel Chapel and Cambridge Street Collective, Leah’s Yard provides what Queensbery calls a “cultural anchor” for a city centre that’s in the midst of change. A bustling public courtyard surrounded by small boutique shops, and first and second floors host to around 20 independent working studios. It sounds fab.
But there’s this
Heart of the City plan has been a long time coming (since the 1990s, in fact). It was smart thinking to swerve big retail and go for a more granular mix including a substantial crop of new office buildings: 372,000 sq ft is under construction or in the immediate pipeline. But it’s just the start. Behind this sits the bigger picture provided by the draft Sheffield Plan, the city’s development framework until 2039. A final batch of amendments was agreed in September – you can read an awful lot about it on the council website – and the next stage is a public examination by a government-appointed inspector.
A warning here: the city council is in an interesting political space, with Labour and Lib Dems roughly equal and the Greens holding the balance of power. The plan only got approved thanks to heroic abstentions by a lot of Lib Dems and a handful of Labour members. The final version is nicely summed up by the preface, which shows exactly how touchy this is. Green Belt will be protected (except for a release at Norton Aerodrome), urban land preferred, and the expression “20 minute neighbourhoods” was changed to remove “20 minute.”
Green Belt saved
The plan promises 35,000 new homes in an “outdoor city” and 410 acres of consented or anticipated employment land. It is an interesting sign of changing times that the advanced manufacturing district is now the innovation district – much less specific. The full plan with tracking changes visible can be found on the council website.
Lots of offices
The city centre is going to be interesting: the plan proposed 29 acres a year of employment land over the entire city, of which seven acres will be for offices, much of that accumulating in the city centre where 24 acres is released over the plan period (policy SP1 if you’re reading along). Which is a lot.
Sites to watch
So what’s in store for the city centre. Sites SV01 and SV02 are worth keeping an eye on, not least because they’re opposite the station and you can’t help stumbling into them. SV01 is 1.5ha of buildings at Cross Turner Street, and the 0.5ha plot next door at Midland Station, Cross Turner Street, is SV02. Both are listed as office-focused strategic employment sites, although as recent analysis suggests getting them developed might prove slow work, due to biodiversity rules.
A third smaller site next door is also slated for offices – at Harmer Lane and Sheaf Street. Offices are also listed forthcoming on a plot of about two-thirds of an acre at Carver Street and Carver Lane.
There’s also ambition to add 18,000 to the city centre’s 28,000 population. Neepsend (2,700 units) and Furnace Hill get priority with catalyst sites identified.
Numbers to watch
Ambitious? Definitely. The latest figures show an office market which potters along quite nicely. Take-up in Q2 was just over 80,000 sq ft, a healthy figure at the upper boundary of quarterly take-up which dips down to 40,000 sq ft when it’s quiet. Total Grade A availability was 300,000 sq ft, according to Knight Frank, with 372,000 sq ft more due to be delivered by 2025. At mid-year top rents were predicted to creep up from the high-twenties to £30/sq ft by the end of the year – we’ll soon see if that was borne out. If it gets close, the new Sheffield Plan could have legs.
Who’s going up, and who is going down this week
Office landlords are buying deals with some eye-catchingly expensive incentives, while developing marginal town centre sites shows no signs of getting any easier. Doors closing.
HS2 stops at Crewe
Is this the first actual, authentic, real estate casualty of the decision to scrap HS2’s Crewe and Manchester leg? The decision to pull the rug from under plans for a cinema-led leisure development at Crewe’s Royal Arcade site has been touted as such, in part. But the truth is sadder.
No tide is high enough for some schemes, and the first gust of bad economic weather is enough to sink them. Crewe’s Royal Arcade is a case in point. Between 2007 and 2009 the big Crewe story was a Debenhams-anchored 450,000 sq ft shopping centre, Delamere Place. Modus was preferred developer, then Ciref took a leading role, then the show was off because reasons. A long gap follows until Cheshire East Council bought the town’s 26-unit Arcade in 2015 for £6m, and independent plans for a big cinema were floated.
Empire Cinemas signed in 2018 for an 800-seat venue, but fell into administration in July this year.
No surprise that the £48m cinema-led scheme is no longer considered viable and on Tuesday next week the council is likely to deliver the coup de grace. Councillors have been told the cinema has to go if the site is to stand a chance, and that a smaller alternative focused on housing, or offices, or a hotel might be viable one day.
What killed the Royal Arcade plan wasn’t HS2 – it was 2023.
Buying office deals
Another chance to shake the winter snow globe of Northern office markets. This week the seasonal picture is provided by Devono, a consultancy which acts exclusively for occupiers (not landlords), so its H1 2023 analysis of the top five regional markets promises a fresh perspective. The big take-away was about incentives, something occupiers like to talk about, but landlords don’t so much.
What we learn is that the Grade A office market’s apparent success needs to be taken with a pinch of salt. The headline numbers conceal a lot of behind-the-scenes bartering which an unkind person might call buying deals. Not new – it’s always gone on – but the addiction is now getting serious, and net effective rents diverging even further from the glamorous headline figures.
Devono reckons that on a 10-year Manchester prime lease you could get 28 months rent-free, the most generous of any of the five big markets. That’s an awful, awful lot of rental foregone by landlords if the top rent is the £40/sq ft it suggests. In Leeds the figure is 24 months, still a lot, but closer to the norm. Bristol is the outlier at 18 months – and thus, we can conclude, a more genuinely functional market. Remember, 28 months rent-free on 10 years means that bouncy tail-wagging £40/sq ft rent is, for the first 10 years, effectively a more sheepish £31/sq ft.
The good news is that Devono guesses we’ve passed peak working-from-home (a point made last week by new US arrival in the Northern office market, Trammell Crow Company). Devono quotes data showing average office occupancy still low at 36%, but steadily up on the same periods in 2021 and 2022.
Get in touch with David Thame: [email protected]