Business parks are reinventing themselves, attracting a wider range of occupiers and providing amenities with appeal to modern workforces. Shifting demand in the post-COVID-19 era may even provide a further boost to business park activity.
BACK IN BUSINESS
Business parks have risked being left behind in recent years, with investment and regeneration activity focused on town and city centres; and younger workforces increasingly favouring urban locations that provide easy access to leisure and retail amenities.
A number of major business park owners across the South East have recognised this shift in attention and have revitalised their parks via significant investments in the upgrading of facilities and amenities. This is helping to attract new demand, and shifting the dynamic between town centre and out of town locations.
The changing nature of demand is demonstrated by LSH data, which shows that the average deal size in South East out of town markets has progressively fallen in recent years, while it has risen in town centres. In Q1 2020, deals were, on average, larger in town centres than in out of town locations.
The traditional role of business parks, as locations primarily providing corporate headquarter buildings with large floor plates, is changing. Landlords are offering more varied accommodation suitable to a multitude of occupiers, ranging from large corporate buildings through to small, flexible incubator space.
As well as needing to provide a more flexible range of accommodation, successful business parks have had to improve on-site amenities so that they are attuned to the demands of millennial workers. Attractive amenities are needed if business parks are to compete successfully with city centre offices that have the advantage of leisure and entertainment facilities on their doorsteps.
Landlords able to offer high quality amenities such as gyms, cafés and crèches have been able to build on the existing strengths of business parks – such as access to arterial routes, generous car parking ratios and pleasant, landscaped environments – to create attractive workplaces that support employee wellbeing.
Chiswick Park was at the vanguard of the business park revolution, offering a true ‘service’ culture, and providing a quality and range of amenities that would be hard to find in many town centres. While it has taken some time for Chiswick Park’s philosophy to ripple outwards, a growing number of South East business parks are now being transformed and repositioned through new investment, and the landlords of these parks are reaping the rewards.
Among the recent success stories are Oxford Business Park, which has seen the recent launch of amenities such as the Oxford Factory restaurant and the Oxford Works community hub; Arlington Business Park near Reading, where extensively upgraded facilities include a floating pavilion, café and gym; and Croxley Park, Watford, where the centrepiece of recent improvements is The Hive, an impressive amenity building that features a gym, café and flexible event space.
FLEXIBILITY IS KEY
Recent improvements to Oxford Business Park and Arlington Business Park have challenged the misconception that landlords need 100% ownership of a park in order to control its strategy and to make the introduction of amenity and community infrastructure viable. In both cases, landlords recognised that investment was required for the greater good of the parks.
Landlords’ willingness to listen to the requirements of occupiers and adapt accordingly is crucial. This may include being flexible over lease structures; considering occupiers with lower covenant strengths; or being prepared to offer Cat B solutions. A key concept is that while business parks can provide large headquarter buildings for blue chip occupiers, they can also be incubation centres for smaller, more nimble occupiers that have the potential to grow with the support of a trusted landlord team.
Hanging over everything is the question of what impact COVID-19 will have on the future of office workplaces. In the short term, at least, business parks may have an advantage over city centre offices, as it will be easier and safer for their workforces to return from lockdown, as they are generally less reliant on public transport and thus at lower risk of infection.
It should also be easier to maintain social distancing on business parks, as they provide more controllable, lower density environments than busy city centres. The ability to drive or cycle to a working environment that offers plenty of open space could have great appeal in the postpandemic world. Business park landlords able to respond quickly to changing demand should be well placed to prosper.
CASE STUDY: OXFORD BUSINESS PARK
A recent influx of investment from TPG has given the Arlington team the firepower to reposition Oxford Business Park into a true urban business park, as the only managed commercial business location within the Oxford ring road. New amenities include the Oxford Factory restaurant; the Oxford Works co-working and seminar centre; and the Market Place, a landscaped ‘piazza’.
These have been crucial in attracting a number of high-tech occupiers, who would have otherwise sought space in the city centre. Over the past 18 months, deals have been struck with Oxbotica, Animal Dynamics, Perspecum Diagnostics and Ultromics.
The quality of refurbished buildings has also been a key factor in drawing occupiers. The newly-refurbished Building 5520 has set a new benchmark for quality in the Oxford market, and prime rents for Oxford Business Park are now at £31.00 per sq ft.