AUTUMN 2016
ISSUE ELEVEN
WWW.GERALDEVE.COM
The Regeneration Game
Growing Places
A Tale of Three Cities
Berkeley Group’s Tony Pidgley
talks policy, regeneration
and Brexit
Mark Dixon provides an
insight into Regus’ global
expansion plans
A look at the New York,
Los Angeles and Atlanta
real estate markets
CONTENTS
AUTUMN 2016
PRIME LOGISTICS
The definitive guide to the UK’s
Q3 2016 Bulletin
distribution property market
02
06
04
NEWS UPDATE
Catch up with the latest
news and developments
at Gerald Eve.
FAITH, HOPE
& CHARITY
08
12
14
QUARTERLY SUMMARY
•
•
•
•
•
•
For more information please contact
Richard Ludlow
+44 (0) 7836 766167
[email protected]
d
– largest quarterly volume on recor
13.8 million sq ft taken-up in Q3
ft
sq
million
Amazon commit to 3.4
ear average
effect’, take-up still above five-y
Even discounting this ‘Amazon
rate to 6.6%
bility
availa
ses
increa
y
suppl
Addition of new speculative
r speculative funding weakens
However, funds' appetite for furthe
investor sentiment remains strong
Volumes traded down 27%, but
GROWING
PLACES
Mark Dixon, founder and CEO of
Regus, outlines his ambitious expansion
plans and prospects for the sector
as a whole.
18
A TALE OF THREE CITIES
ENGAGE speaks to transatlantic
colleagues at Lee & Associates for
their views on the USA’s most exciting
real estate markets in 2016.
SPACE
RACE
THE
REGENERATION
GAME
ENGAGE talks to
Berkeley Homes
chairman Tony
Pidgley CBE to
get his take on
the marketplace.
THE
MANCUNIAN
WAY
Manchester’s
renaissance has
been one of the
UK’s standout
regional success
stories. ENGAGE
asks whether its
winning streak
can continue.
17
REGUS’ RATES RIDDLE
How do you manage the rates payments
for nearly 300 Regus locations throughout
the UK? Gerald Eve partner Steve Hile
gives ENGAGE the inside track.
20
MARKET
FACTS
01
EDITOR’S NOTE
ENGAGE catches
up with Gerald Eve’s
managing partner,
Simon Rees.
ENGAGE takes a look at
how changing times are
impacting on third sector organisations’
property portfolios.
ENGAGE
ISSUE ELEVEN
As we approach the end of 2016 the property
sector, like the rest of the UK, finds itself in a
state of flux. The Brexit vote and election of
Donald Trump as US President have altered the
economic and political outlook in ways that are
yet to be understood, and every business is coming
to terms with the implications of these events.
But while there remains uncertainty, there are
also some measures of optimism to be found.
Six months on from the referendum, the more
lurid predictions of an immediate downturn have
failed to materialise. The falling pound has
effectively given overseas investors a 20% discount
on UK property, and Gerald Eve’s involvement in
major investment deals – including Wells Fargo’s
City office acquisition, and Goldman Sachs’
purchase of the Alecta portfolio – is testament
to the continuing interest.
As Tony Pidgley says himself in an interview
(page eight), the public mood is one of ‘getting on
with it’ now the decision has been made, but that
Government policy needs to back this up. The
recent High Court ruling that an act of parliament
is required before triggering article 50 has created
some uncertainty in this regard and will inevitably
cause further delays to an already lengthy process.
In the meantime, business needs to make sure its
voice is heard and that its needs are represented
in any ongoing negotiations.
For Gerald Eve itself, 2016 has been a
transformational year. Following record financial
results for the year ending 5th April 2016, the
acquisition of key transactional teams and
personnel represents a step change in the firm’s
capabilities, and is already paying dividends in
terms of client offer and performance in the
second half of 2016.
While we cannot predict what is around the
corner, and there will undoubtedly be tricky times
ahead, Gerald Eve’s partner-led approach and
strategic advice will continue to offer a real point
of difference in the marketplace, helping clients
navigate the challenges to come.
Simon Prichard
Senior Partner, Gerald Eve
[email protected]
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02
ENGAGE
ISSUE ELEVEN
NEWS UPDATE
AUTUMN 2016
NEWS UPDATE
AUTUMN 2016
NEWS
UPDATE
LANDMARKS LEFT REELING
BY RATES REVALUATION
Many of England’s best-known landmarks,
offices, shops, attractions and infrastructure
are facing massive rises in their business
rates from April 2017. Analysis by Gerald
Eve has revealed the extent of the increases
being faced following the publication of
updated rateable values in September.
The worst-hit include:
GREEN LIGHT FOR DE NIRO
COVENT GARDEN HOTEL
WELLS FARGO ACQUIRES CITY
OFFICE BUILDING
Capital & Counties, advised by Gerald Eve, has secured
planning permission to develop a luxury boutique hotel
in London’s Covent Garden with Hollywood actor
Robert De Niro.
Gerald Eve has advised developer HB Reavis on the forward sale of
its 33 Central office scheme in the City of London to US bank Wells
Fargo. The sale is one of the square mile’s largest single-office deals
of 2016 and a significant vote of confidence in the City’s property
market and financial sector prospects following the referendum vote
to leave the EU.
The Wellington Hotel will be developed with BD Hotels
and will feature 83 bedrooms, luxury spa facilities, two
restaurants and a members’ club, focused around a
central courtyard conservatory. It will be operated by
De Niro, Ira Drukier and Richard Born, who previously
collaborated on The Greenwich Hotel in Tribeca, New
York. Work will start in 2017, with The Wellington Hotel
due to open its doors in 2019.
Wells Fargo has bought the 227,000 sq ft building – which is
currently under construction – for occupation in Q3 2018 when work
completes, allowing it to consolidate its UK team into a single location.
33 Central is HB Reavis’ first London development, which it had
originally intended to retain and lease but opted to sell to Wells Fargo
following initial leasing discussions with the bank.
STOP PRESS
GERALD EVE CLAIMS
CITY TOP SPOT
LEE & ASSOCIATES JUMPS
TO SECOND IN BROKERAGE
RANKINGS
Lee & Associates, Gerald Eve’s
North American alliance partner, has
been placed second in the 2016
US brokerage rankings compiled by
Commercial Property Executive / Multi
Housing News. The 2016 ranking –
based on a variety of factors including
firm performance, investment sales,
leasing activity and multi-year growth
– represent a significant jump from the
firm’s 11th place in 2015. Jeff Rinkov,
CEO of Lee & Associates, said: “We
view this as an acknowledgment of our
growing international platform and we
look forward to continued growth and
success, supported by best of class
client services, executed by an incredibly
talented group of brokers.”
Gerald Eve has topped EGi’s
league table of City leasing
agents for Q3 2016, advising on
disposals totalling 245,000 sq ft
during the period. The firm’s
lettings during the quarter –
including advising HB Reavis
on the sale of 33 Central to
Wells Fargo – saw its market
share reach over 35%.
• London attractions: The O2 up
142%, Tower of London up 90%
and the London Eye up 70%
• Leicester City paying the price of
Premiership success with a 264%
increase at the King Power Stadium
• West End retailers Harrods, Hamleys,
John Lewis and Selfridges all facing
increases over 50%
• Channel Tunnel rail link on track for
77% surge
• Bank of England to print more cash
to meet its 61% increase
ENGAGE
ISSUE ELEVEN
03
GERALD EVE ADVISES UOL ON £230M HOLBORN BUY
Singaporean investor UOL, in a joint
venture with UIC and advised by Gerald
Eve, has acquired a 340,000 sq ft mixeduse island site in Holborn from a private
overseas investor and EQT for around
£230m. UOL, which is listed on the
Singaporean exchange, has exchanged
to buy the building at a 5.9% net
initial yield.
120 Holborn comprises a 2.6 acre island
site with a nine-storey office building let
to tenants including Whitbread Group,
Trainline.com and Secret Escapes and
ground floor retail facing Holborn Circus,
Hatton Garden, Leather Lane and Greville
Street along with further offices at 100
Hatton Gardens, and residential units.
In May, advised by Gerald Eve, the Group
agreed to buy nearby office and retail
building at 110 High Holborn for £98.75m
from UBS Central London Office Value
Added Fund.
Jerry Schurder, head of business rates at
Gerald Eve, said: “For these firms, whose
values have doubled or even trebled, it is
clear that the business rate has reached
unacceptable and unsustainable levels.”
SUPPORTING LANDAID
Gerald Eve has marked its continued
support of LandAid with a series of
recent fundraising events. From sporting
events which included a table football
tournament and the LandAid 10k run,
to a book sale and staff breakfast on
LandAid Day itself, the firm has really
got into the fundraising spirit. A special
mention goes to everyone who took part
in the London to Brighton Bike Ride in
September, where participants raised in
excess of £2,000 for the charity.
Gerald Eve is a foundation partner of
LandAid, the property industry charity
that helps protect young people on the
streets and tackle the root cause of
homelessness.
GERALD EVE BUILDS FOR FUTURE
WITH 2016 GRADUATE INTAKE
Following a year of significant growth, which saw the acquisition of new transactional
teams and an increase in headcount to 460, Gerald Eve is planning for further
growth with an intake of 19 people to its 2016 graduate training scheme, this year
including two apprentices. The new graduates will be based in a number of the firm’s
network of offices including London, Manchester, Birmingham and Leeds.
Simon Rees, managing partner at Gerald Eve, said: “Although we have grown our
headcount significantly during the past year, we remain well aware of the continued
need to invest in emerging talent. As such, our well-respected graduate training
scheme remains central to our growth plans.”
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04
ENGAGE
ISSUE ELEVEN
INTERVIEW
AUTUMN 2016
INTERVIEW
AUTUMN 2016
SPACE RACE
S
Explaining the growth, Rees says: “When
we first moved into Welbeck Street in
2010, we did so on the basis of our
growth projections for the next five years.
However, our actual growth has rapidly
exceeded these expectations and we
found ourselves stretched for space
sooner that we’d anticipated.”
Although Rees happily concedes that this
is a nice problem to have, he began to
explore options for more space at the
beginning of the year. A number of options
were considered, including introducing
more flexible working. “The feedback we
have had is that our people generally like
having their own space working alongside
their colleagues. So the key for us was to
create a modern work environment, giving
people flexibility around how they work
when they are in the office. Enhanced IT
systems and new collaborative work
and meeting areas have allowed us to
achieve this.”
Having reached the conclusion that more
space was required, Gerald Eve became
aware of some additional floor space soon
to become available within its existing
Welbeck Street building. “Even though it
was more space than we needed at the
time, the opportunity was too good to
pass over and we began discussions with
the landlord.”
At the same time, in an entirely
unconnected move, a significant business
opportunity presented itself in the form
of the most significant M&A activity in the
partnership’s history. As part of ongoing
restructuring within Deloitte Real Estate,
Gerald Eve was presented with the
opportunity to acquire several of its
transactional teams.
“The whole Deloitte Real Estate transaction
was the product of serendipitous timing as
much as anything else. If we hadn’t already
set the ball rolling for the acquisition of new
space, we would certainly have faced a
challenge in terms of creating the room
to accommodate the new teams.”
Now that some time has passed since
acquiring Deloitte Real Estate’s City and
West End leasing, lease advisory, lease
exit and capital markets teams, Rees and
his partnership have had the opportunity
to reflect on the move.
“So far, I think we can all be confident in
saying our expansion has been a success
in all respects. Within a short time, I began
to hear our new colleagues referring to
Gerald Eve as ‘we’ rather than ‘you’, which
immediately reassured me that they had
bought into this firm and our culture. This,
coupled with the fact, that all but one of
those teams’ clients has transferred across
with them and that significant deals have
already been done, tells us all that this was
a good move for all parties concerned.”
Rees is quick to credit both existing and
new teams for this success. “As much
as I’m delighted that we, as a partnership,
moved quickly and decisively to bring
05
So far, I think we can all
be confident in saying the
move has been a success.
Within fewer than three
months, I began to hear
the new joiners referring
to Gerald Eve as ‘we’
rather than ‘you’, which
immediately reassured
me that they had bought
into this firm and into
our culture.
ENGAGE SPEAKS TO GERALD EVE’S
MANAGING PARTNER, SIMON REES,
ABOUT ACCOMMODATING THE FIRM’S
RECENT GROWTH.
imon Rees is in a relaxed mode
when we meet in the new hub
and café area of Gerald Eve’s
West End office, which has been
newly installed following the firm’s
recent expansion within the Welbeck
Street building.
ENGAGE
ISSUE ELEVEN
these teams on board, the credit for
any subsequent success must go to
the wider firm. The integration has been
so smooth because of the nature of the
people involved and the enthusiasm
of existing teams to welcome their new
colleagues – we have definitely struck
the right balance.”
In addition to Gerald Eve’s ongoing organic
growth, the arrival of the new teams has
helped push the headcount up from 396
to 460 within the last year alone, bringing
with it new challenges. “Clearly, my role
has changed and evolved along with the
whole firm over recent years. While
there are new challenges presented by
a growing business, we are also facing
some exciting opportunities, so I view
my glass as very much half-full.”
With the recent acquisition still front of
mind and enjoying a honeymoon period,
can we expect to see more corporate
activity from Gerald Eve? “It’s fair to say
that we are always looking to secure
individuals, teams, or businesses that
we think would be a good addition and
strengthen our offering to clients. It is
very much down to the right fit.”
“We are also conscious we can only do so
much in one go. We have already proved
that we can move swiftly when the need
arises but, for the time being, our priority
is to ensure the long-term success of our
existing teams.”
For further information please contact
Simon Rees on +44 (0)20 7333 6256
or email [email protected]
Photography: George Brooks
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06
ENGAGE
ISSUE ELEVEN
FEATURE
AUTUMN 2016
FEATURE
AUTUMN 2016
ENGAGE
ISSUE ELEVEN
07
FAITH, HOPE
& CHARITY
AS THIRD SECTOR ORGANISATIONS
ADDRESS SHIFTING PRIORITIES,
ENGAGE TAKES A LOOK AT HOW
CHANGING TIMES ARE IMPACTING
ON THEIR PROPERTY PORTFOLIOS.
C
harity, as the saying goes, begins at home. But for
many third sector organisations the phrase has
acquired a second, more literal meaning. Religious
orders, charities and other social enterprises are
responding to changing circumstances – and it is the homes
and other properties within their portfolios that are increasingly
under the microscope.
The portfolios – assembled piecemeal over a number of years
through investments, donations and legacies – are either
occupied by the organisations themselves or held as an
income-generating asset. They are invariably a vital cog in the
work of the charities, and central to their ongoing success.
But for many in the third sector, the sands are shifting.
As organisations adapt their activities, and changing
socio-economic factors make previously essential locations
unnecessary, property requirements are also in a state of flux.
Real estate holdings are being re-assessed, identifying how
they can best meet future needs and continue to support the
enterprises that own them.
Illustration: Thomas Humeau
To complicate matters further, regulations laid down by the
Charities Act must be adhered to, and the ethics policies of
each organisation need to be honoured. Richard Moir, head
of Gerald Eve’s alternative markets team, says the unique
combination of factors make it a particularly tricky field
to navigate.
“The third sector requires an understanding and empathy
that contrasts with what’s needed in the private and public
sectors. Specific technical knowledge is essential, including
an understanding of charitable purposes and the intricacies
of charity law, but this has to be implemented alongside
strategic real estate advice. And while there are clearly distinct
requirements, there are lessons to be learned from both the
‘for profit’ and public service providers that can be transferred
across to the third sector.”
The Charities Act
Founded 170 years ago, the Society of the Holy Child Jesus
is an international congregation of religious women within the
Catholic Church. Originally a teaching order, the Society
branched out into different ministries in the 1970s and today
has members in the UK, Ireland, France, the Americas and
West Africa.
It is the owner of a slightly eclectic property portfolio that
is typical of many religious orders and the third sector in
general. Residential property is held as living quarters wherever
their members are located, but the holdings also include a
small conference centre in Oxford – occupied and run by the
Society itself – and a nursing home in Harrogate, financed by the
order, where sisters are cared for in their retirement. Sister Monica
Matthews has been province leader of the Society for just over
five years. A geography teacher when she joined the Society, it is
now her role to oversee the management of the order’s finances,
and ensure it is able to provide for the sisters and support them
in their work.
charities and other social enterprises. But the non-commercial
nature of these organisations can make such shifts difficult to
enact, and that in itself requires specialist expertise.
“Gerald Eve has been the Society’s
property advisor for a long time, and that
is important to us as it means there’s
a trusting relationship there. We have
a similar experience with our solicitors,
with whom Gerald Eve worked very well.”
“One of the things that has been characteristic of us, as with
many congregations in the last few years, is falling numbers,”
she says. “In my time as province leader we’ve gone from
112 members in the European part of the Society to 77 and this
has really changed our property needs. As well as falling overall
numbers, our members are getting older, and this has implications Sister Monica continues: “One of the things we valued most
about Gerald Eve was how empathetic they were to our situation
for the types of property we need to meet our requirements.
and understood our requirements and needs. They were people
I trusted, who walked us through the whole process, and were
“This was particularly the case in London. We had a house on
patient, waiting for the right deals for us to come along. They
Cavendish Square and one on Holland Park Avenue, but both
didn’t push us into one course of action, but equally helped us
were in need of updating to make them suitable for us, and we
to understand what need to happen and why. The property world
didn’t have enough London-based sisters to occupy both. We
is a bit outside our comfort zone, but Gerald Eve made it as easy
spoke with Gerald Eve and they investigated the options for us.
In the end, we decided to sell both of these properties – for which and worry-free for us as it could be.”
Gerald Eve got us a very good price for both – and reinvest in a
new property in Brook Green, West London that is much better
For further information please contact
suited to our needs.This also enabled us to release funds for our
Richard Moir on +44 (0)20 7333 6281
various works in this part of the Society and elsewhere.”
or email [email protected]
The changes made to the Society’s property holdings are
indicative of adjustments being made by many religious orders,
William Ray on +44 (0)20 7333 6201
or email [email protected]
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08
ENGAGE
ISSUE ELEVEN
FEATURE
AUTUMN 2016
FEATURE
AUTUMN 2016
THE
REGENERATION
GAME
WITH BERKELEY GROUP CELEBRATING
ITS 40TH ANNIVERSARY, ENGAGE SAT
DOWN WITH FOUNDER AND CHAIRMAN
TONY PIDGLEY CBE TO GET HIS
TAKE ON THE MARKETPLACE.
Y
The focus is understandable, with the
challenges currently facing homebuyers
and housebuilders well-documented.
Pidgley has earned a reputation not only
as one of the sector’s leading voices, but
crucially as someone who actually puts
ideas into practice, and the first target in
his sights is the case-by-case negotiation
of affordable housing provision.
It is something Pidgley freely admits is
driven by both social and business
considerations.
“All our major regeneration projects have
30% affordable, and that proportion
works, it allows a community to establish
itself. You need that balance between
the various sections of society for a
community to be successful, but above or
below 30% affordable it starts to become
out of kilter and works against integration.
You see it with the council estates of the
60s and 70s – they wouldn’t be pulling
them down if they worked.”
“We have to address the key workers
of this country,” he says. “It’s no good
nurses living an hour away when you’re
having a heart attack. We need a simple
rule. Any site over, say, 1,000 units has
to be 30% affordable. Housebuilders
will know where they stand and land
prices will drop accordingly.”
Housing aspiration
The ‘major regeneration projects’ Pidgley
talks of include some of London’s
highest-profile schemes – Royal Arsenal
Riverside in Woolwich; Kidbrooke Village
in Greenwich; Woodberry Down in
Finsbury Park – and are perhaps where
most people first encounter Berkeley.
These previously failing areas have been
transformed in recent years, establishing
new communities, with density increased
as a quid pro quo.
The bureaucracy surrounding
development clearly irks – “It’s only right
and proper that planning should be
democratic and open, but once
permission is granted just leave the
builders to get on with it” – but the
proposed 30% rule is also driven by
Berkeley’s experience with major
regeneration schemes across London.
“We have a very simple view of
regeneration,” says Pidgley. “There’s a lot
of estates that have been allowed to slip
into deprivation, but to be a success
places need hope and aspiration. The
schemes we’ve undertaken now include
facilities such as doctors’ surgeries,
cinemas and schools and are places
where people want to live.
Photography of Tony Pidgley: George Brooks
09
All our major regeneration
projects have 30%
affordable, and that
proportion works, it
allows a community to
establish itself. You need
that balance between
the various sections of
society for a community
to be successful...
Woodberry Down, Finsbury Park
ou don’t have to spend much
time with Tony Pidgley to spot
the subjects that he’s passionate
about. Over the course of a
freewheeling conversation it is the themes
of affordability, community and how to
build more homes that he keeps returning
to, revealing the importance he places on
such issues.
ENGAGE
ISSUE ELEVEN
But that can only be paid for if the density
is increased.
“Take Kidbrooke, somewhere that used
to be a no-go area but has now been
transformed. Yes, the number of homes
has gone up from 2,000 to 5,500, but
that increased density has paid for local
infrastructure, sports facilities, parkland.
These places are now thriving, and I
challenge your readers to go and see
them. They’re successful communities,
creating aspiration without differentiating
between the types of tenure.
“Housebuilding should be a force for
good, and its potential to transform needs
to be recognised.”
As part of the ongoing search for what
he refers to as ‘additionality’ – in short,
building more homes – Pidgley has
recently unveiled the Urban House,
the culmination of ten years of work by
Berkeley to develop a modular house
that reduces build times, increases
density and, as a result, makes formerly
unworkable sites viable.
“There’s a skills shortage in this country,
we’ve never trained enough apprentices,
and as a result something that took me
20 weeks to build in 1976 now takes
40 weeks. By manufacturing offsite, the
Urban House is quicker and cheaper to
build, at a greater density, which not only
makes it more affordable but also brings
sites that were otherwise unviable into play.
Continued >
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10
ENGAGE
ISSUE ELEVEN
FEATURE
AUTUMN 2016
FEATURE
AUTUMN 2016
Kidbrooke Village, Greenwich
11
Royal Arsenal Riverside, Woolwich
It’s been supported by local authorities,
and, crucially, sold well at a test site
so the public has given it the thumbs
up too.”
There’s also an urgent
need to keep the economy
growing. It’s too early to
tell what the fallout from
Brexit will be, but it’s
created uncertainty so
why not overcome that by
getting started on major
infrastructure projects?
ENGAGE
ISSUE ELEVEN
Pidgley’s experience has led him to seats
on Lord Heseltine’s Estate Regeneration
Advisory Panel and the Thames Estuary
2050 Growth Commission. “Lord
Heseltine has been good on community
work,” says Pidgley, “as can be seen
from what he’s achieved in Liverpool
and Docklands. If you’re successful at
creating homes and placemaking, as
Berkeley is, then it’s incumbent upon
you to share your skillbase and expertise.
I’m happy to do so.”
Public policy
The two panel positions have given
Pidgley an insight into public policy
surrounding regeneration and
housebuilding. When talk turns to
what the Government could do to help
housebuilders, his response is clear:
less red tape; foster the wider economy;
and reform stamp duty.
“Central Government, local authorities,
the Mayor of London – they need to
understand housing as a force for good,
and reduce red tape to allow this happen.
Planning should be debated, but needs
to be viewed in the context of the
housing crisis we’re in. We need more
homes and they need to be affordable,
so make the planning decisions quickly
and let the housebuilders get cracking.
“There’s also an urgent need to keep
the economy growing. It’s too early to
tell what the fallout from Brexit will be,
but it’s created uncertainty so why not
overcome that by getting started on
major infrastructure projects? A new
London runway, Crossrail 2, HS2 – let’s
get building. The public mood seems
to be one of getting on with it now
a decision has been made, but the
Government needs to back this up.
“For what it’s worth, I’ve been very
encouraged by Theresa May so far.
The swiftness with which the UK
managed to get a credible Government
in place following the post-Brexit chaos
just underlines how stable the country
is and will encourage inward investment.
We have some certainty back, and the
messages the Prime Minister is putting
out there give me confidence as
a businessman to look ahead to
future projects.”
So what about stamp duty, the bête noire
of the housebuilders? Pidgley pauses to
make sure he uses exactly the right words.
“Stamp duty has clogged up the market,
not just for new builds but existing homes
too. This is stifling mobility and is, in a
word, unfair.
“Transaction taxes have never been good
for the UK economy, and reform would
be a clear signal from the Chancellor that
he is backing the property market. It
would be a great boost to the country’s
feelgood factor.”
But that’s not to say he views all property
taxes with such antipathy. “One thing
they should do is look at an extra council
tax band or two for second homes,”
he says. “I’m fortunate, I have a very
nice house in Windsor and that’s close
enough to commute. But if I decided to
get a flat in London, it’s a luxury and
should be put in a band that charges
enough to make me have to decide
whether I’m prepared to pay for it.
Charge the super rich £100,000 a year
for their London homes – they can afford
it – and give it to the local authorities to
invest in key worker housing.”
sense and energy, then anyone can.
That would be my advice to anyone:
apply common sense, work hard,
do your job to the best of your ability.
Oh, and be decent and polite. Say
‘please’ and ‘thank you’. I’m not soft
or a pushover, but it’s the easiest thing
to have manners.
A word to the wise
It has been 40 years since Berkeley was
established, and as is often the way with
anniversaries the milestone has prompted
some reflection.
“What’s made it is the application of
common sense and the following of our
instincts. We try to do decent things and
follow a code of conduct. Do we always
get it right? No. But we try, and I think
that’s important. It’s been tremendous
building Berkeley, it really has. We’ve
had a lot of fun.”
Asked about what advice the 2016
Pidgley would give to his 1976
counterpart, he touches on the approach
that has served him, and Berkeley, well.
“I like people who aspire to do things.
If I, uneducated, can build this company
through nothing more than common
“When we started, did I believe it would
get to this size? No. Am I proud of it?
Yes. Is it a fantastic business? Yes.
For further information please contact
Hugh Bullock on +44 (0)20 7333 6302
or email [email protected]
WWW.GERALDEVE.COM
12
ENGAGE
ISSUE ELEVEN
THE MANCUNIAN WAY
MANCHESTER’S
RENAISSANCE HAS BEEN
ONE OF THE UK’S
STANDOUT REGIONAL
SUCCESS STORIES. BUT
WITH THE CITY AT A
CROSSROADS, ENGAGE
ASKS WHETHER ITS
WINNING STREAK CAN
CONTINUE.
million increasingly skilled and affluent
people live in Greater Manchester – and
the population is growing, attracted
by jobs and renowned cultural attractions.
Its universities are world class, driving
research and innovation.
H
Walsh is right to be optimistic about
Manchester’s continuing appeal as an
investment destination, but concerns
remain that the political imperative is
declining. The public sector was crucial
in both creating the conditions for
growth, and making investors – especially
those from overseas – aware of the
opportunities. But the retirement of Sir
Howard Bernstein, downfall of George
Osborne and resignation of Jim O’Neill
has robbed the Northern Powerhouse
of its main supporters, and the appetite
of Theresa May’s Government for the
project remains to be seen.
ave you seen Manchester?”
wrote Benjamin Disraeli in 1844.
“Manchester is as great a human
exploit as Athens.” The city he
described was very different to the one
we see today, but there can be little doubt
that its factories, warehouses, docks and
railways were something to behold.
Like many such places, the post-war
period was less than kind to Manchester,
but perhaps uniquely among its peers
the last 25 years have seen something
of a renaissance. A focus on inward
investment from both the public and
private sectors – in the UK and overseas
– has brought an economic vibrancy that
has eluded many regional cities. Indeed,
such factors influenced Gerald Eve’s
decision to base its thriving national
planning and development team in the city.
“Where once it was the factories that
drew people to Manchester, today it is
professional firms such as lawyers,
accountants, consultancies and tech
start-ups that are leading the charge. It is
the UK economy in microcosm, the shift
from manufacturing to service industries,
and Manchester is riding that wave.”
Those seeking political leadership put
great store in the forthcoming election of
the Mayor of Greater Manchester to fill the
void. City residents actually voted against
having a mayor in a 2012 referendum,
but polls showed a majority in favour of
a similar position for the wider Greater
But Manchester finds itself at a crossroads. Manchester metropolitan area and the
Sir Howard Bernstein, the catalyst behind role was subsequently created. The
Mayor will boast powers that exceed
much of the city’s recent improvement,
even those of the London equivalent,
stands down as chief executive of the
overseeing areas including transport,
council next spring. May 2017 will see
housing, policing, planning and health.
the election of the first Mayor of Greater
Manchester, but the winner will take office
Bricks and clicks
at a time when central Government’s
enthusiasm for the ‘Northern Powerhouse’ The performance of Manchester’s
economy in the coming years will be
project appears to be on the wane.
reflected in its property market, but as
And then there’s the Brexit question:
things stand there are reasons to be
is the overseas investment that has so
optimistic about its resilience. In the city
benefitted Manchester about to dry up?
centre, demand for office space has
remained robust following the Brexit vote
Fundamental strengths
and availability is close to an all-time low.
Mark Walsh, head of Gerald Eve’s
Industrial and logistics property in the
Manchester office, remains bullish.
region is likewise seeing high levels
“The fundamentals that underpinned
of take-up and facing a distinct lack
investment and the city’s renaissance
of supply, especially for prime sites.
haven’t changed,” he says. “Nearly three
Typographic illustration: Oliver Frappe
13
FEATURE
AUTUMN 2016
New infrastructure projects will also have
a positive impact, particularly on the
industrial sector. At the time of going to
press Liverpool2, the new deep-water
port, was on the cusp of opening, and the
ribbon will be cut on the second Mersey
crossing at Widnes during 2017. Both of
these will have benefits across the region.
Jason Print, industrial partner at
Gerald Eve, said: “The North West, with
its concentration of motorway links and
population centres, has always been
popular among logistics occupiers,
and that demand continues to be seen.
Internet retailers such as Amazon are
underpinning much of this take-up, and
with development activity somewhat
subdued the current record low level of
availability looks set to continue. High
occupier demand, putting upward
pressure on rents, allied to a general
shortage of stock, continues to make it
an attractive asset class for investors.”
While it seems likely that the uncertainty
surrounding Brexit will have some impact
on overseas investor interest, it is also true
that the recent devaluation of the pound
has made the city’s real estate that much
cheaper to those from outside the UK.
If Manchester can continue to demonstrate
the fundamentals that have made it a
good investment destination in recent
years, there’s no reason it can’t continue
to attract capital.
Callum Robertson, a partner in Gerald Eve’s
Manchester capital markets team, added:
“The strengths of Manchester real estate
remain – robust occupier demand and
forward thinking landlords. The devaluation
of the pound will attract overseas capital to
the Manchester, however their investment
criteria is sometimes challenging to
satisfy. The North West has exposure
to a broad spectrum of occupiers and this
is why we consider the North West will
remain resilient.”
In the 2002 film 24 Hour Party People
about Manchester’s legendary Factory
Records, the main protagonist Tony Wilson
tells viewers “This is Manchester. We do
things differently here.” For 25 years,
Manchester has set itself apart by doing
things differently, and few would bet
against this most independent-minded
of cities continuing in that vein.
For further information please contact
Mark Walsh on +44 (0)161 830 7091
or email [email protected]
WWW.GERALDEVE.COM
14
ENGAGE
ISSUE ELEVEN
FEATURE
AUTUMN 2016
FEATURE
AUTUMN 2016
ENGAGE
ISSUE ELEVEN
15
Growing the network is
central to Regus’ business
strategy and this applies
as much to mature
markets such as the UK
as it does to emerging
markets such as China
and India.
Spaceworks, London
Spaceworks, London
GROWING PLACES
FOLLOWING GERALD EVE’S RECENT APPOINTMENT
TO MANAGE ALL RATING SERVICES FOR WORKSPACE
PROVIDER, REGUS, ENGAGE SPEAKS TO ITS FOUNDER
AND CEO MARK DIXON ABOUT HIS AMBITIOUS
EXPANSION PLANS AND THE PROSPECTS FOR THE
SECTOR AS A WHOLE.
S
Mark Dixon
Regus Founder and CEO
ince its launch in 1989 Regus
has become the world’s largest
provider of flexible workspace
solutions. With a FTSE 250 listing
and a market capitalisation of £2.89bn,
Regus is very much the established player
in an arena that continues to spawn
rivals. Despite this, its founder and CEO,
Mark Dixon, remains unashamedly
focussed on further growth and is clearly
energised by the ongoing digital and
workplace revolution.
“The serviced office model becomes
more and more relevant with each
passing year. The two key drivers – the
growth of outsourcing and the advance
of digital industries – are fuelling demand
like never before and pushing growth
upwards,” he says. This growth has
helped swell Regus’ global revenues
to £1.1bn in the six months to
30 June 2016, resulting in pre-tax
profits of £84.3m.
With some 400 centres in over 100 towns
and cities throughout the UK, Dixon is not
about to rest on his laurels.
“There’s a big opportunity in the regions.
We have customers asking why we
haven’t covered certain locations outside
London. In this respect, we’re striving to
be more like Vodafone than a traditional
landlord. We already have the customer
base, but need to offer them access to
our services from a wider network across
the country,” he says.
When asked about the threat of emerging
rivals such as WeWork and other shared
workspace providers, Dixon is typically
sure of the Regus proposition. “All too
often people assume serviced offices are
a start-up product, when in fact they are
more typically used by corporates and
established SME’s. There is clearly a
market for co-working space in the digital
era and it is why we have launched our
Spaces service line, but this is not where
we anticipate the bulk of our growth will
come from across the network,” he adds.
Over and above its traditional serviced
office product, Regus has also
experienced a surge in demand for its
outsourcing services. This is proving
especially popular in markets such as
India or China where a corporate client
might need to accommodate 200 staff
for a particular project at short notice
and lacks the experience and resources
to do this in-house. Instead, it instructs
Regus to find, operate and manage
a suitable building.
Continued >
This revenue is generated from a network
of some 850 centres in 107 countries.
Yet, according to Dixon, this is just the tip
of the iceberg and there is plenty more
still to come.
“Our challenge is no longer selling the
concept,” says Dixon. “The workplace
has changed immeasurably over the
past two decades. There are fewer
corporate monoliths and far more, smaller
service providers across all industries.
This has created a more dynamic and
opportunistic business culture that
demands easy to use, flexible space,
where and when they need it. Our
challenge is achieving the scale to satisfy
that demand.”
Growing the network is central to Regus’
business strategy and this applies as
much to mature markets such as the
UK as it does to emerging markets such
as China and India.
Spaceworks, London
WWW.GERALDEVE.COM
16
ENGAGE
ISSUE ELEVEN
FEATURE
AUTUMN 2016
FEATURE
AUTUMN 2016
REGUS’
RATES
RIDDLE
ENGAGE
ISSUE ELEVEN
17
HOW DO YOU MANAGE
THE RATES PAYMENTS
FOR OVER 300 REGUS
LOCATIONS THROUGHOUT
THE UK? GERALD EVE
PARTNER STEVE HILE
GIVES ENGAGE THE
INSIDE TRACK.
Central to Gerald Eve’s capacity to
manage a portfolio of this size and
complexity is its Rates Payment
Management Service (RPMS), it’s
market-leading offering that currently
oversees business rates payments
totalling in excess of £1.1bn every
year – including audit and recovery
– for 45,000 properties across the UK.
Spaceworks, London
In the current macroeconomic climate, the
only way we can maintain
our projected rate of
growth is by spreading
some of the risk.
“This,” says Dixon, “comes at a price in
terms of a premium on a traditional rent,
but in return you get to significantly
de-risk a project and access to a vastly
enhanced service.”
Regus expects to deliver much of its
ambitious growth plans via its partnership
model, which allows it to mitigate risk
and grow in a more capital efficient way.
Increasingly, by partnering with real estate
owners, Regus brings together investors
in property and its fast-growing global
customer base to continue to generate
attractive returns on its investments.”
“In the current macro-economic climate,
the only way we can maintain our
projected rate of growth is by spreading
some of the risk.”
“The administrative and financial burden
of operating from long-leases on all of our
locations would inevitably cause some
drag, but this model allows us to work
with like-minded partners and focus on
revenue-generating activities,” says Dixon.
Despite outlining his ambitious growth
plans, Dixon is not without his fears for
the global economic outlook and has
been taking measures to protect the
business in the event of any significant
downturn. “We have planned prudently
during 2016 and taken action to improve
efficiencies along with adopting a more
cautious approach to lease renewals,”
he says.
For the short-term at least, it looks as
though Regus’ continued expansion
drive will be tempered with some caution,
although we shouldn’t expect this to
hold it back for too long. Already a familiar
brand across most of the UK’s major
towns and cities, its presence will only
increase and Regus is, quite literally,
coming to a town near you soon.
T
o the uninitiated, Regus’ UK
business centre network appears
similar to any other large office
portfolio. But scratch beneath
the surface and it is many times more
complicated than that; around 50 times
more complicated, in fact.
While the casual observer would count
over 300 separate office properties, from
a business rates perspective it is in fact
over 15,000 individual assessments. With
each separate rental agreement having it’s
own rateable value – even if it is only a
single occupancy office taken for a couple
of weeks – the portfolio is one of the UK’s
largest when measured by number of
assessments.
“The benefits are clear,” says Gerald Eve’s
Steve Hile, who alongside Paul Messiter
oversees the management of Regus UK’s
business rates liabilities. “There are reliefs
of up to 100% available for the smallest
properties, and each time a contract
finishes there is a period of empty
rates relief that can be claimed. Splitting
the offices in this way may create
an administrative headache, but the
savings available are significant.”
The ‘churn’ – the rate at which each
office changes hands – creates empty
rates relief opportunities but also requires
near-constant monitoring to ensure the
current rating liabilities are up to date.
“We have our systems in parallel to
Regus’ protocols,” says Steve Hile,
“which allows any changes to be instantly
visible and acted upon as necessary.”
Photography: David Hares taken at SpaceWorks – Mappin House, 4 Winsley Street, London W1W 8HF
Steve adds: “By having our own rates
payment management service alongside
Regus’ in-house system not only
allows for an effective appeals and
reliefs process, but also enables far
more detailed reporting, budgeting
and forecasting. It is details such as
these – combined with our unrivalled
understanding of the wider business rates
system – that truly stands Gerald Eve
apart when managing such portfolios.”
But there is one thing that remains outside
of Gerald Eve’s control: the Valuation
Office Agency. “Getting a speedy
response from the VOA has always been
tricky, and the Regus portfolio – with its
raft of assessments, appeals and reliefs
– is particularly dependent on swiftness.
But we have one final string to our bow
– our strong professional relationship with
the VOA and this can pay real dividends
when time is tight.”
For further information please contact
Steve Hile on +44 (0)20 7653 6841,
or email [email protected]
Paul Messiter on +44 (0)20 7653 6845,
or email [email protected]
WWW.GERALDEVE.COM
18
ENGAGE
ISSUE ELEVEN
FEATURE
AUTUMN 2016
FEATURE
AUTUMN 2016
A TALE OF
THREE CITIES
19
ENGAGE SPEAKS TO TRANSATLANTIC
COLLEAGUES AT LEE & ASSOCIATES
FOR THEIR VIEWS ON THE USA’S
MOST EXCITING REAL ESTATE
MARKETS IN 2016.
T
he top spot for global real
estate investment usually comes
down to a straight shoot-out
between London and New York.
However, recent figures from data-house
Real Capital Analytics show that Los
Angeles has edged London out to
become the world’s second-largest city
for investment activity during 2016.
Figures for the first quarter of 2016 reveal
New York to have achieved $14.3bn in
sales, with Los Angeles and London
some distance behind at $7.25bn and
$6.5bn respectively.
Atlanta, whilst not quite offering the global
presence of the three top-tier cities, still
achieved an impressive haul of some
$2.58bn of investment transactions.
This places it behind cities such as San
Francisco, Hong Kong, Chicago, Tokyo
and Berlin but ahead of Paris, Shanghai,
Amsterdam, Berlin and Frankfurt.
As the largest broker-owned practice in
the USA with 56 offices throughout the
country, Gerald Eve international alliance
partner Lee & Associates is well placed
to provide some insights into these key
markets and has shared their thoughts
on these three key cities with us.
New York
Although New York has enjoyed significant
investment activity during 2016, there
has been evidence of a slow-down in
activity during the second quarter with
transactions dropping by some 20%.
This reduction has created a gulf between
seller and buyer expectations, according
to Kenneth Salzman of Lee & Associates.
“Notwithstanding this new dynamic, we
can expect trophy assets to continue
trading at a premium as the downside risk
is limited. These assets aside, we have not
seen much activity from US investors and
the market has been buoyed by overseas
investors,” says Salzman. Some of New
York’s biggest investors during 2016
have included Caisse de Depot, Qatar
Investment Authority, Anbang Insurance
Illustration: Martin O’Neill
ENGAGE
ISSUE ELEVEN
Group and Norges Bank. New York is
also currently experiencing something of
an office development boom with some
13.3m sq ft currently under construction.
“Perhaps surprisingly, the average age of
an office building in midtown Manhattan
is 72 years old. Technology and the
demand for modern infrastructure is
driving demand for new buildings,”
says Salzman.
Retail remains a key market for New York
and is partly responsible for attracting
around 55 million tourists annually.
This has led to it being considered as
a showcase for brands – no better
illustrated than in the case of Apple’s
flagship Fifth Avenue store, which turns
over $750m annually. This trend has led
to some aggressive rental growth in
Manhattan with many observers believing
retail rents have now reached their peak.
“We are beginning to see luxury retail
rents in places like Madison Avenue
soften as key brands begin to hold off
expansion. With many brands facing
increased pressure from online retailers,
there is a limit to what they will pay for a
physical brand presence – even in
Manhattan – and ultimately rents will have to
recalibrate at a lower level,” adds Salzman.
Los Angeles
With London’s reputation as a global
investment hot-spot, Los Angeles has
done well to leap-frog into second place.
There is a sense that the city may
have benefitted as traditional US and
Canadian investors have become priced
out of New York, while geography also
works in its favour as it is particularly
favoured by Asian investors. Some of
the largest net investors into the city this
year have included GIC, CPPIB, UBS
and Onni Group.
Another factor in LA’s favour is that the
sheer size of its metropolitan area makes
for a very diverse make-up. In addition to
the obvious flagship offices, retail and
hotel assets it is also a large manufacturing
hub. As Jeff Rinkov of Lee & Associates
explains: “The strength of the LA basin’s
distribution sector means that industrial
rents are beginning to experience
meaningful growth.” We are currently
experiencing historic net absorption rates
and shockingly low vacancy rates of
around 2%. These fundamentals are
making Los Angeles industrial a very
attractive asset class.”
Atlanta
While in recent years foreign money has
poured into gateway markets (New York,
Los Angeles, San Francisco, Boston),
Atlanta has not traditionally been
considered in the same league. Yet it
boasts the highest concentration of
Fortune 500 companies outside of New
York and Houston and offers important
transport connections, a good quality of
life and a pro-business (and cost effective)
environment. These factors have helped
attract major international corporate
occupiers including Mercedes Benz,
Porsche and Honeywell. The strength
of Atlanta’s occupier market, coupled with
the prospect of better yields, is beginning
to attract both domestic and foreign
investors with acquisitions made by
the likes of Hines and CW Capital Asset
Management in the past 12 months.
Lee & Associates’ John DeCouto is
optimistic about the city’s prospects:
“By many measures, Atlanta is a city
on the up. Rising office rents, strength
of take-up and the current construction
pipeline are all encouraging signs.
A shortage of investment and building
starts across all sectors post recession
has fuelled 20-30% rental increases in
office, retail and multi-family rents. There is
also plenty of scope for future development
activity, although the biggest challenge
here will be availability of skilled labour
as public sector projects have absorbed
much of the available resources.”
For further information please
contact Patricia LeMarechal
on +44 (0)20 7653 6851 or email
[email protected]
WWW.GERALDEVE.COM
ENGAGE
ISSUE ELEVEN
MARKET FACTS
AUTUMN 2016
M
AR
KE
T
FA
CT
S
20
0.5
23
LONDON
FLOOR REVIEW
bps
$1.22 USD
%
UK GDP growth
Q3 2016 (ONS)
£58 bn
9.2
A floor-by-floor analysis of the
London office market
Q3 2016
Average yield inflation
between July and
September 2016 (MSCI
Monthly Digest)
Quarterly gross
mortgage advances
Q2 2016
(Bank of England)
%
Average house price growth
in England (August 2015
– August 2016) (Land
Registry)
13.8
Value of £1 Sterling
(Year-low October
2015-2016)
(Bank of England)
0.25
%
Bank of England
base rate
QUARTERLY SUMMARY
• London take-up rises by 1%
in Q3
• Take-up drops 17% in the East,
yet prime rents stable at £70 per
sq ft
• Take-up increases 25% in the
West, but prime rents fall to £120
per
sq ft
• London availability rises by 17%
as developments complete
• However, supply remains low
in historic terms and this will help
insulate the market
• Occupiers place increased emph
asis on lease flexibility
• Some landlords postpone deve
lopment plans to protect short term
income
m
Sq ft of logistics space taken-up
in the UK during Q3, marking
the largest quarterly volume
on record
For more information please contact
Stephen Peers
+44 (0)20 3486 3450
[email protected]
WWW.GERALDEVE.COM
We are proud of our
ENGAGE content. To ensure
that the magazine remains
relevant and interesting,
we would welcome your
feedback. For all comments
please contact:
[email protected]
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London EC4M 9DL
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Tel. +44 (0)161 830 7070
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Bank House
8 Cherry Street
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Avebury House
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Tel. +44 (0)1908 685950
Cardiff
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Cardiff CF10 3BZ
Tel. +44 (0)29 2038 8044
West Malling
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West Malling
Kent ME19 4DN
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Glasgow G2 2HG
Tel. +44 (0)141 221 6397
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The views expressed in this magazine are
those of the contributors for which Gerald
Eve accepts no responsibility. Readers
should take appropriate professional
advice before acting on any issue raised.
This magazine is a short summary and
is not intended to be definitive advice.
No responsibility can be accepted for loss
or damage caused by reliance on it.
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