Viewpoint - 04/09/2018

Channel 4 HQ relocation: Which city will prevail?

Birmingham, Greater Manchester and Leeds are all in the running to host Channel 4's new national headquarters, but which city will succeed in landing the requirement?

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The broadcaster has pledged to move some 300 staff to a new HQ outside of London by 2019 in a bid to improve its regional presence and no doubt reduce its ever-increasing overheads. But, with each of the shortlisted cities a worthy contender, what factors will Channel 4 need to take into consideration when making its final decision?

Cost comparison

Office space in Central London has always commanded a premium over elsewhere, although this has become more substantial on the back of strong rental growth in recent years, leading to a wave of high-profile relocations including the BBC in Manchester, Sky’s Academy in Leeds and, most recently, the Office of Government Property’s (OGP) commitment to 2m sq ft of space across Birmingham, Leeds, Liverpool and Manchester.

Significant as property costs are to a business, as a general rule, staff costs typically account for around three quarters of a business’ expenditure. Considered overall, the total cost of a single office workstation (i.e. staff and property) in a brand new building within London’s Westminster, where Channel 4 is currently located, stands at £62,779 per annum, compared with £38,871 in Manchester/Salford, £36,562 in Birmingham and £31,184 per annum in Leeds.

For a new-build office totalling 30,000 sq ft with 300 staff, the above equates to an annual cost of £11.66m in Manchester/Salford, £10.96m in Birmingham and £9.35m in Leeds. Over a period of five years, the effective ‘saving’ from being located in one of the shortlisted cities as opposed to London’s Westminster amounts to £35.8m in Manchester/Salford, £39.3m in Birmingham and £48m in Leeds.

Office cost per workstation (£000s per annum)

Channel 4_Office cost per workstation (£000s per annum)

Source: Lambert Smith Hampton / EMSI

London-based office workers may command markedly higher salaries than their regional counterparts but, for the majority, this is more than offset by the eye-watering cost of housing. Businesses looking to relocate outside of the capital should therefore consider the long-term impact of such costs on the supply of talent.

By way of comparison, the current average cost of a house in London’s inner boroughs stands at well over seven times the average combined salary of a cohabiting couple. In contrast, housing costs in Leeds, which is the ‘least affordable’ of the shortlisted cities, stand at only four times combined salary.

Average house price to dual income* ratio

Channel 4_Average house price to dual income ratio

*Dual income expressed as 1.75 average mean salary

Source: ONS / Land Registry

Availability of office space

The availability of suitable office space capable of accommodating c. 300 employees will be one of the main drivers behind Channel 4’s relocation decision. Of the three shortlisted cities, Birmingham is the most well-supplied, with just over 4m sq ft and Leeds the tightest supplied, at a fraction under 2.3m sq ft.

However, recent high levels of take-up across each of the three cities is placing increasing pressure on availability, with grade A supply equating to 23%, 19% and 12% of overall stock on the market across Birmingham, Leeds and Manchester respectively.

Availability of office space (000s sq ft)

Channel 4_Availability of office space (000s sq ft)

Source: Lambert Smith Hampton

Established media base

Each of the cities already has an established media presence, with existing occupiers including the BBC, ITV, Space Studios and Made Television to name but a few. Combine that with their readily available talent pools and proximity to world-class universities offering a wide-range of creative specialisms, and it’s easy to see why they made the shortlist.

Greater Manchester, however, is the clear front-runner in this respect, with over 7,300 people currently employed within the creative industries, the majority of which are located at MediaCity in Salford.  

Creative industry jobs (000s)

Channel 4_Creative industry jobs

Source: EMSI

Digital and transport connectivity

As Channel 4 plans to retain up to 500 employees in the capital, transport links between the selected location and London will be crucial. Each of the cities are well-connected in this respect, with train journey times ranging from 1 hour 22 minutes from Birmingham and 2 hours 11 minutes in Leeds. The arrival of HS2 in Birmingham in 2023 and Leeds/Manchester in 2033 will reduce journey times by as much as 48% and significantly increase capacity.

While good physical connectivity is an important consideration, robust digital infrastructure is also crucial, particularly for businesses in the creative industries where fast broadband speeds are essential. Each of the shortlisted cities has superfast broadband coverage above the UK average, with both Leeds and Manchester pilot locations for a new ultra-fast broadband technology that provides data at speeds approaching one gigabit per second (gbps). At 5.74%, Manchester also has a significantly higher percentage of Fibre-to-the-Premises (FTTP) coverage, which is currently only available to circa 3.9% of premises in the UK.

Only one winner

More than 30 bids were submitted from around the UK and the three-competing cities have done extremely well to come this far. But there can only be one winner.

Channel 4 will need to base its final decision on robust, detailed and impartial intelligence and our regional network combined with our unrivalled understanding of our markets makes us the most knowledgeable consultants in the industry. And it’s why Channel 4 should speak to us.

Image source: By Tim Benedict Pou (Flickr) [CC BY 2.0], via Wikimedia Commons


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