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Of course, back then property companies did not even have leasing directors. But today they do and that word ‘eclectic’ was used by British Land’s James Danby when announcing the final letting at 10 Brock Place in the company’s Regent’sPlace development in London.
It speaks volumes about the new attitudes to tenant mix - and the landscape of currently active occupiers in London - that ‘eclectic’ can be used positively.
When Santander Asset Management signed up for 25,000 sq ft at 10 Brock Street, it completed a tenant line-up that also included digital communications group, Aegis; natural gas giant, Gazprom; retailer, Debenhams; Facebook and Manchester City Football Club. Eclectic, indeed.
Danby observes: “You’ve got seven different business sectors who have taken space at Regent’s Place in the last four years: it is an eclectic mix. There aren’t many locations in London where a collection of buildings in a small area can foster that kind of variety”.
Not bad for a development whose biggest challenge initially was getting the world to understand exactly where it was.
“If you talk to someone about Paddington, or King’s Cross or Waterloo or even generic areas like the South Bank, they know where you mean,” says Danby.
“But Regent’s Place doesn’t benefit from being on top of a mainline station, so the biggest challenge that we’ve had is getting public perception aligned with the location. You have to take time to explain it to people. Once you do, it’s very quickly evident that it’s fantastically well located in terms of connectivity.”
It sounds like a basic point but it is at the heart of the ‘placemaking process’ on which the office sector is so focused at present.
Danby explains: “What you tend to find when people come on viewing tours is that they’ll probably be escorted by an agent, and if they’re in a taxi or car between properties then they’re probably chatting rather than registering where they actually are. So when they arrive they’re often completely disorientated, especially if they’re not a Londoner. So it’s very obvious – but important – to emphasise the location in the first instance”.
Regent’s Place – a 13-acre mixed-use scheme of offices, shops, restaurants,bars, and residential – is now firmly on the map in every sense (just ask a cabbie), and Danby is now beginning to see the fruits of that painstaking placemaking process.
“We had an occupier who ended up taking space last year who when they first came for a viewing suddenly looked quizzical and said: ‘Do you have a food market here?’. It transpired that lots of their staff had been coming to the Thursday food market for the past 3-4 years and she’d just made the connection.
It’s a good example of how people see environments in different contexts: her staff saw food market not major office development, but it was great in this instance because straight away there was a personal connection so when it came to selling the location to their staff they were completely onside because they’d already ‘discovered’ it.”
The different contexts of an office campus environment is something that British Land has worked on constantly.
“The old adage is that ‘architects create spaces, but people create places’. It’s so true. We can create spaces with our architects and intelligent design, but ultimately it comes down to the people who inhabit those spaces to bring them alive. That human factor is what makes the spaces live and breathe. And it’s something that’s never complete: you’ve got to keep re-inventing; you’ve got to keep the place interesting and innovative.”
With so much new London office development competing for occupiers, it is vital to find something that makes you different.
At Regent’s Place, Danby uses the example of the New Diorama Theatre which opened in Regent’s Place in 2010.
“It’s only an 80-seat theatre, but in its first two years it welcomed close to 30,000 people to theatre productions, readings and other events. The theatre has about 15,000 Twitter followers and has won numerous high-profile awards. That’s a tremendous benefit for us; to have people coming to Regent’s Place and discovering it.”
The vitality of the development is further enhanced by a constant programme of events: the regular foodmarket, open-air televising of Wimbledon, fitness events (‘City chicks get fit’ was on the programme at the time of writing), and book fairs among others.
This level of activity takes commitment – and resource. Danby says that at no time – even during the recession – was British Land prepared to compromise on either the quality of the buildings or the place-making process.
“We started the first phase – 10 & 20 Triton Street - at the beginning of 2007; then there was Lehman’s and the world had changed. Changing tack on a development is a bit like trying to stop an oil tanker, so we were committed but even so took the decision to not start value-engineering the project.
“We didn’t cut back on the landscaping, we didn’t lower the spec, we didn’t water down the management vision. We focused our energies on our little bit of London and made sure it was the best it could possibly be.
“That paid dividends because we got some traction with occupiers like Aegis and Gazprom, and then the rest of it all flowed very quickly thereafter. That gave us confidence that, yes, we were doing the right thing, and that meant we could crack on with a further 500,000 sq ft at Brock Street which was finished last summer and fully let three months after completion.”
With in-house leasing directors being very much de rigeur at property companies these days, is the writing on the wall for agents? Danby thinks not.
“Agents remain an absolutely essential part of the process. For a start, they are very much the gatekeepers to the occupiers. An occupier will probably pick up the phone to their agent or their advisor before they would pick up the phone to us. And even if they do call us first, invariably they will then bring in an agent to provide them with market advice.
“And from a British Land leasing perspective, agents are a vital part in the messaging process. There’s only one of me, but we’ve had, collectively, probably 15 individuals along the way working on the Regent’s Place buildings. So that’s 15 people out there talking to the market and conveying the messages about what we’ve got and what we’re doing. They’re our eyes and ears in the market and are absolutely crucial in that respect.”
With Regent’s Place moving from the leasing stage to the active management category, Danby’s attention is now increasingly on Paddington Central - the office campus that British Land bought for £450m last year.
The mixed-use development occupies an 11-acre site next to Paddington station. It currently comprises eight separate modern buildings totalling 1.2m sq ft, but there are further development opportunities on-site which could add a further 400,000 sq ft of space.
Having once been the preferred location for occupiers who wanted large-scale modern offices with good links to Heathrow and rents that substantially undercut the West End, the shine has somewhat gone off the Paddington office market in recent years. It faces more competition from other emergent locations, but Danby – while not underestimating the challenge at Paddington – sees the current market landscape as an opportunity.
“Rental profile has always been a factor at Paddington. If you go back to before the crash, Paddington Central could command higher rents than Regent’s Place because it was shiny and new and Regent’s Place hadn’t undergone the evolution that it has done now. However, that always seemed a bit illogical to me seeing that Regent’s Place is so much closer to the heart of the West End.
“Fast forward to today and what you’ll see is that Paddington has suffered a bit from the emergence of other sub-markets: the repositioning of Regent’s Place, King’s Cross and also the Southbank. However, with rents at Regent’s Place hitting £70 per sq ft and £65 per sq ft rumoured to have been achieved at King’s Cross, Paddington is now, for the first time in a long time, looking more competitive in terms of rent. So we see that very much as an opportunity.
“Supply remains very tight in the West End. We know there are a lot of business that want to be on single floors so Paddington Central’s ability to provide bigger floors, and more flexible office buildings, is also an attractive proposition.”
Price is not the only factor that Danby cites as a driver behind the Paddington market: the advent of Crossrail will transform links with the West End and a new entrance to Paddington tube station literally on the doorstep of BL’s estate will improve connectivity hugely.
Major improvements to the public realm on the estate and the reinvigoration of its environment generally are also planned.
“It’s a fantastic opportunity for us to take our knowledge and skill-set and apply that to the existing estate and the new buildings that will be created in the next phase of development.
“So you mix all that together and it does feel like we’re in a good position to create something really quite special.”
With major office developments taking place at all points of the London compass, the central question is who will occupy all this space? Last year, was all about the fast-growing TMT companies that seemed to be behind just about every deal of magnitude. Danby does not believe the TMT phenomena has run its course but thinks it is necessary to take a more analytic approach to where demand is coming from.
“When we talk about the ‘TMT sector’, it’s easy to forget how diverse it is. It’s not one sector, it’s three and they’re all interlinked with other business sectors because all business today is reliant on technology. The way we work with technology compared to 10-15 years ago is very, very different so on a macro-level, yes, the TMT sector and its demand for offices is definitely here to stay.
“I think people will look back at 2013 and be reminded of what a fundamental shift there was during the year with TMTs going from being a very acquisitive sector, to being the most acquisitive sector. It’s incredible to think that in 1998 Google had only eight employees worldwide – by 2018 they could well have around 10,000 workers in King’s Cross alone.
“It will certainly be interesting to see whether 2014 witnesses a similar level of TMT activity. It could do, but I suspect that it might slow down a little bit, however I do think that 2014 is going to be a year for businesses in other sectors to catch-up, upsize and upgrade as the economy continues to grow.”