Warrington's local economy has proved in recent times a honey pot for four particular business sectors, namely logistics and distribution; business services; telecommunications and software; and nuclear, writes Peter Crompton.
Together they have represented half of all the deal transactions in the last five years, accounting for 60% of the total take-up. In recognition of its centre of excellence role for the nuclear sector, 2011 saw the formation in Warrington of the Nuclear Forum. Although centred in Birchwood, and led by Birchwood-based Amec, the Forum's membership includes nuclear-sector related businesses from across the North West. And the value to Warrington's local economy associated with the nuclear sector is clearly illustrated by the recently announced investment programme of Tier 1 Contractor, Sellafield. They estimate this could generate around £300m a year for each of the next 15 years for Warrington's economy.
There was however one note of caution, highlighted in BNP Paribas' Retail Risk Index which assessed the financial health of the UK's top 100 town centres. The purpose was to provide a guide to those centres that might be vulnerable to the weakening retail economy. The good news is Warrington features in the top 100. The bad news is that Warrington featured in the 10 centres with the highest risk ranking. It also suggests we have a higher than average retail floorspace supply when compared to towns of a similar population size.
In part this is explained by the expansion of Golden Square, which has attracted new retailers that have widened the level of choice for shoppers. The challenge is to ensure the more secondary areas don't become run down and that other facilities are introduced – something Muse are addressing for the Bridge Street area. The Government has also awarded Warrington £100,000 from its High Street Innovation Fund. And the decision is awaited on the outcome of a bid made to be one of the Mary Portas Town Centre Pilots.
Whilst the number of sales matched 2010, they only realised around £30m. This is the lowest figure recorded during the 14-year history of the Warrington Annual Property Report. It is only one quarter of the record high set in 2006, and only 40% of the annual average achieved since 1998.
The sales involved six offices, two industrial and one leisure deal.
Familiar Warrington names led the way.
Marshall CDP again accounted for the biggest transaction. The sale of Apollo Park on the site of the former Burtonwood Services achieved a net initial yield of 6.55%, generating £7m. Marshall also sold Phoenix House at Centre Park. The sale was to London & Cambridge Properties, another familiar face in Warrington's property investment market.
Langtree also made two purchases – Central Trading Estate, close to the Halliwell Jones Stadium, was acquired at a yield of just over 8.5%. St James Court was purchased as one of three sales by LPA Receivers.
Out at Birchwood, Washington and Allday House were bought by Cantt Pak for £4.3m. This sale illustrates the downturn in fortunes of some commercial property investors, as the investment was previously sold four years ago at £16m.
Like Cantt Pak, which already owns other property in Birchwood, Orbit added to its Birchwood holdings – as a result of Fircroft brokering a sale and leaseback of Lingley House at Birchwood Point.
In the town centre, the Academy building was sold 30 years after it hit the headlines when it was literally jacked up and moved lock stock and barrel from where it had been built 225 years before in order to allow Bridgefoot to be widened.
Having reported that 2010 was the worst year on record for office transactions, surely things could only get better? They did and 2011 saw take-up almost double to nearly 190,000 sq ft. But this figure demonstrates the continuing fragile state of the office market, as it is still the second lowest total recorded. In total 27 deals were done for properties over 2,00 sq ft. This is the most recorded since the onset of the recession in 2008. And for the first time in six years two transactions involved properties in excess of 25,000 sq ft. Fircroft bought at Birchwood Point before completing a sale and leaseback and Serco took a pre-let at Bridgewater Place, at just under £200 per sq m.
After the previous year's 'sabbatical', Birchwood once more outstripped all other areas of Warrington in the amount of floorspace taken and number of deals completed. Around 75% of all the deals were Birchwood-based. The four largest transactions, representing almost half the year's total take-up, were in Birchwood. Over 100,000 sq ft of the take-up involved companies already in Birchwood, relocating or expanding.
Owner occupation was a feature of the year, as companies looked to make the most of the fall in property values. One in four of deals involved freehold or long leasehold sales. Olympic Park featured in these, as the LPA receiver for the previous owners sold buildings at around two thirds of the original asking price.
However, beyond the success stories, there remains a large oversupply of what is now poor quality office space. On current take-up, much of this will be around for some years to come.
Industrial & Distribution
The industrial and distributions sector success in 2011 can be linked to the information superhighway or in Warrington's case information super motorway. The growth of online purchasing, and resulting logistics and delivery services, featured in another strong year for the industrial and warehousing sector. Take up for the year was just over 1.1m sq ft, which, based on other reports of the North West's performance, represents just under one fifth of the region's total.
The 10 largest transactions to occupiers were in distribution and logistics, and this is reflected right through the size range. Eddie Stobart and Unitrunk both acquired buildings in excess of 100,000 sq ft. Others capitalising on the Warrington super motorway network connection included The Hut, DHL, Petit Forestier, Secured Mail Group, Vanarak, Primeline Logistics, Breezemount, and E Parcels.
On average industrial rents have held up well, achieving £55-70 per sq m on newer properties. The headline rent for the year was £73 per sq m, achieved at Greys Court, Woolston. There were some freehold deals, with process varying widely. Whilst Petit Forestier paid £485 per sq m at Woolston, Bracken Properties paid just £127 per sq m at Risley – although the latter will be refurbishing the space before putting it back on the market.
Without doubt the performance of the past two years has impacted on Warrington's available supply of industrial and warehouse properties. Were take up to continue at this pace then the supply side would all but dry up within two years.
Our town centres are facing radical re-invention as the pace of change in shopping patterns accelerates. The last year saw familiar retail names including TJ Hughes, Jane Norman, La Senza, Barratts and Peacocks either close or prepare for closure as they were placed into administration, with others adapting to the difficult trading conditions. The circumstances surrounding Peacocks is particularly sad for Warrington as the company was founded in the town in 1884, originally trading as Peacock's Penny Bazaar.
But the retail picture was not all gloom and doom. Around 136,000 sq ft of floorspace was let or sold for new trading outlets. Golden Square saw five new occupiers sign, including a new Boots outlet dedicated to their optician business. TK Maxx moved into Sports Direct's space, as they in turn moved to new premises in the Old Market Place. And during the year Golden Square welcomed 12.5 million visitors.
Footfall figures also saw a double-digit growth at Birchwood Shopping Centre, where construction also began on reconfiguration and expansion of the eastern end of the mall.
Out of the town centre, Go Outdoors purchased the former MFI store on Wilson Patten Street and French operator Decathlon opened a new 25,000 sq ft store on Winwick Road, at the entrance to Orford Park.
And as 2011 came to an end, Bents Garden & Home secured planning for a £10m development programme aimed at creating a larger contemporary retail space that will be a destination for garden, home and lifestyle products.
Looking to the future, 2012 will see the first new speculative office development in the town for three years when MEPC Birchwood Park commences construction of 47,500 sq ft at 305 Bridgewater Place. This is underpinned by a pre-let of two thirds to Serco.
Elsewhere, Derwent Holdings is seeking planning consent for the former Fiat complex, which includes proposals for 17 new industrial units. Time will tell whether these are built speculatively.
Beyond this there remains little appetite for speculative development, especially offices – as the office market is struggling with oversupply, calculated to be around five years' forward supply based on 2011 take-up figures. Rather, the emphasis remains on refurbishment of some of this stock to upgrade it to meet occupiers' standards.
In 2011, MEPC Birchwood Park invested in new meeting, conference and restaurant facilities as well as refurbishment programmes for Chadwick House and Thomson House. Cantt Pak will be refurbishing Allday House, also in Birchwood. On the edge of the town centre RAM Properties is refurbishing Ribban Court.
For the industrial sector the issue is different. By the end of 2011 there were only three modern large speculative schemes providing space in excess of 100,000 sq ft remaining vacant in the whole of the North West. None were in Warrington.
Whilst speculative warehouse development is not on the cards the current demand weighed against the lack of quality supply should see some new build on prime sites ready for development as occupiers turn top design and build solutions. In Warrington, Omega North, and Birchwood Park are the only locations that could meet these needs at present.
Both Omega and Birchwood now form part of one of the NW's Atlantic Gateway's emerging priority areas for investment, known collectively as Warrington North.
This is one of two such priority areas identified for the borough, the other being Warrington Waters.
Warrington Waters incorporates part of the town centre, the waterfront along the River Mersey and Port Warrington. The latter has the greater development potential in the short term. Peel Holdings will have a lead role in this initiative as owners of Port Warrington, which they see as an integral part of their ambitious plans along the length of the Manchester Ship Canal.
Five years ago of the 15 strategic sites listed in the borough, only two were either public or a public-private joint venture. Today one third of them are. So whilst in the boom of the late Noughties it was the private sector which led the way, over the next few years it seems it will again be the public sector that will lead the way on development in Warrington.
Peter Crompton is director of BE Group, chairman of Warrington & Co and chairman of Birchwood Forum. This is an edited version of his speech at the review launch on Thursday 26 April.