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Office News
A year on from the implementation of the Workplace Parking Levy JAMES HARTLEY assesses the impact it has had on the Nottinghamshire office market.
Work continues apace on the expansion of Nottingham’s tram network. May be you see it as an incredible feat of civil engineering and a welcome, £570m boost to the local economy. Or maybe, if you’re a commuter or a hard-pressed shopkeeper in Beeston, you think road closures are a headache you could do without.
Shopkeepers aren’t the only businesses who’ve felt the impact of this enormous project. Around a year ago, bills started landing on the doormats of city businesses demanding payment of yet another tax: the Workplace Parking Levy. The levy, which you have to cough up for if your business has more than 10 parking spaces, is one of the ways business is paying for the project. There have been plenty of grumbles from companies about the cost, which couldn’t have come at a worse time. But what effect has it really had on the office market in the city?
On the face of it, very little. According to figures from the Nottingham Office Forum the amount of space transacted in 2012 was pretty much the same as 2011. But I don’t think there’s a single commercial property agent out there who would argue that it has had no impact – and there’s another story underneath these apparently reassuring numbers.
In particular, I’d point to the ‘leakage’ of businesses from the city into Rushcliffe, which has been best-placed to benefit from the impact of the WPL. Last year, FHP alone let more than 20,000 sq ft of space to companies moving out of the city from prestige locations like the NG2 Business Park and Castlebridge Office Village. Let’s be clear – these parks are fundamentally strong locations which major occupiers looking for a city address are always going to favour. But for us to see this scale of activity outside the city raises professional alarm bells.
You can also argue that the quality of the space they are moving to in Rushcliffe is an attraction in itself. But we know from the conversations we’ve had with companies who have made the move that the levy DID play a part in their decision. They have been able to move into locations like The Point, Wheatcroft Business Park, Apex Court and Ruddington Fields, not pay the WPL, and still have the city on their doorstep.
On top of that, there have been other deals where companies already based in places like West Bridgford or Ruddington where they have been unwilling to relocate from south of the river. This has led to 4,500 sq ft and 1,500 sq ft lettings at Grove House in West Bridgford town centre and similar-size deals at Ergo House on Ruddington Fields Business Park. I’m pretty sure that one of the reasons these businesses decided not to cross Trent Bridge was the prospect of paying the levy.
More explicitly, I’ve had instructions from clients wanting me to find space for them to specifically “prioritise options outside the levy”. On one of these searches, the client considered moving from Junction 26 of the M1 to Junction 27. Perhaps it’s just coincidence, but FHP concluded 34,000 sq ft worth of deals at Junction 27 last year in two transactions (though a lack of this kind of space in the city must also have played a part).
Nevertheless, an historic lack of activity in this area does suggest footloose companies are now willing to move further afield from Nottingham than they might have done before so that they can get the premises they want without paying an extra tax on location. One firm we have been involved with moved from Lenton to Pride Park in Derby partly because they were keen to avoid an extra levy at a time when they have been trying to reduce costs.
When you stand back from individual deals and look at activity levels in Nottingham city centre, the transactions are happening and the interest is holding firm. But over the past 12 months there has been a real lull in activity involving premises between 5,000 sq ft and 20,000 sq ft – previously the mainstay of the market. This could be due to the subdued economy, but I also think that it is businesses who occupy premises like these are the ones who’ve been hit the hardest by the WPL: they are more likely to incur the cost through parking spaces, but probably find these marginal costs much harder to swallow because of their size.
A year on from the introduction of the WPL, where does this leave us? There is much to admire in having an efficient, reliable mass transit system – it’s certainly brought jobs to the area during the construction phase. The WPL is not going to go away, and it seems to me that the City Council is set on it as an income generator. So it’s a fact of life.
What looks like it’s also a fact of life is that locations on the fringe of the WPL area with good quality property now find themselves in a much more favourable position. My view is that the immediate impact on demand within the WPL zone will ease because of the quality of the stock in the area, improving public transport and, unfortunately, the harsh reality of reduced rents and asking prices.
Right now, businesses remain unhappy about the WPL. The sentiment we pick up is that it is another reason for existing occupiers in the city to feel unloved by the City Council. One day business may come to appreciate the tram network. For now, it is a financial burden which brings no return. And it couldn’t have come at a worse time.