It may have been the setting for The Office, the ground-breaking television sitcom, but the business park was no laughing matter in the years leading up to the millennium.
This was one of the hottest asset classes in the property sector in the 1980s and 1990s, making fortunes for savvy developers who were ahead of a change in workplace trends — a transformation linked on one hand with the rise in suburban living and car ownership and on the other with the arrival of American technology companies wanting to emulate the offices they had at home.
Yet booms, in property as in everything else, rarely last. The dotcom crash and a focus on city centre regeneration under New Labour put the asset class on the “at risk” register as the likes of Microsoft, Intel, Dell and Cisco suddenly no longer needed all the office space they had acquired in the Thames Valley. Though vacancy rates did recover, the rise of home working during the pandemic has put some out-of-town business parks at risk of obsolescence once again.
“If workers go into the office, they’re probably going to want to have some kind of value-add to their experience of making that journey to an outside business park,” Zachary Gauge, director of European real estate research at UBS, said. “When it’s just a bland office and a desk, why bother? If you’re going into London, Paris, Munich, Berlin, you’re obviously getting additional value for that journey, not just going into the office. You can then go out for lunch, dinner, meet friends.”
Supporters of park life point to the ability to maintain social distances more easily, something that has become key during the pandemic, but a reliance on cars for transport may deter companies with strict environmental targets. “The trends away from car ownership and occupiers and landlords moving towards environmental, social and governance products and funds will heavily impact any office park that is predominantly dependent upon cars for access,” Gauge said.
Before Covid-19, business parks had been recovering from an oversupply of space dating back to the 1980s. A change to planning rules in 1987, allowing the switch between light industrial and office space, whetted developers’ appetite so successfully that by 1988 there were 450 business parks in the UK, with an average of four new projects announced every week, according to the British Council for Offices.
“A lot of US tech [companies] wanted the same [out-of-town offices] as they had over there,” Andy Martin, former senior partner at Strutt & Parker, which advised some of the biggest business park investors at that time, said. “Then, gradually, what we saw was centralisation — urbanisation — happening.
“I think that was the time when people started to think maybe that strategy had had its day. The idea took off so much that the market got saturated and it took some time for that to go.”
Stockley Park, Britain’s first American-style business park, was built on a rubbish dump near Heathrow airport in the 1980s and made a huge profit for the consortium behind it, including Lord Rothschild, Sir Stuart Lipton and Elliott Bernerd, when they sold it five years later. Today under fragmented ownership, its tenants include Apple, Canon, Marks & Spencer and Toshiba, as well as more than 300,000 sq ft of advertised vacant space. Prologis, the US investor, is converting a former GlaxoSmithKline office into warehouses.
Rental income at Croxley Park, an office estate in Watford, Hertfordshire, that is set in 75 acres of parkland and is home to Smith & Nephew and Kodak, is expected to halve as a result of Covid-19. Watford borough council, which acquired a 40-year long leasehold of Croxley Park from Columbia Threadneedle in 2019, said that its annual rental expectation of £1.5 million had been revised down to £700,000.
BP, which occupies the Sunbury business park in Surrey, owned by Spelthorne borough council, has told its UK staff to expect to work from home for at least two days a week after the pandemic in a move that raises the prospect of a reduction in the size of its lease commitment when it comes up for renewal.
John Knight, head of national investment at Carter Jonas, a property consultant, said: “There’s been an acceleration of the flight to quality in the past year. As a result, there are a few outdated business parks that will continue to struggle.” He expects the best-quality business parks, including Winnersh Triangle in Reading, home to Hewlett Packard Enterprise and Hollister, and Farnborough Business Park in Hampshire, with Time Inc and Gama Aviation on site, to attract tenants from weaker parks. Both estates are owned by Frasers Property, of Singapore.
“Tenants may relocate from other business parks to be in those locations because they offer quality amenity, a collaborative work environment and in their own right are now established commercial destinations that people choose to be on,” Knight said.
Chiswick Park in west London, a 12-building estate built by Stanhope, has set the bar for the evolution of the out-of-town business park. The developer said that the masterplan design by Lord Rogers of Riverside, the architect, had taken “the best of the business park and town centre office models and merged them into a new product”, one focused around the idea that everyone should enjoy work. Each building faces the park’s “inner garden”, featuring a lake, waterfall and events space. The park, which is home to the UK headquarters of 29 companies, including Mitsubishi, Ericsson and Regus, includes a gym, restaurants and a changing array of pop-up traders and street-food vendors — a world away from David Brent, Wernham Hogg and the small-screen version of working life in Slough.
While many recent business park sales around the country have been at a discount to quoting price, international investors are chasing any parks let to life sciences companies. A collection of properties on Cambridge Science Park was marketed with a guide price of about £60 million and was sold for close to £100 million this year after fierce bidding.
“The business park in its original form died 15 years ago in some respects,” Knight said. “Since then, you’ve had winners and losers. The most successful parks are the ones in single ownership as large estates. That has enabled owners to spend more on amenity, to focus on what tenants want and create a more collaborative working environment.”