‘Office market is better than I’ve ever known,’ says Bruntwood chief

Chris Oglesby, chief executive of the family-owned developer and investor, whose portfolio valuation broke through £1bn for the first time this year, talks to Paul Unger about suburban town centre markets, office-to-resi sales and the best office market he’s ever known in Manchester.

In March this year, during his welcoming speech to guests at the Neo launch, Oglesby hinted that Bruntwood would return to buying office buildings in town centres around Greater Manchester, where the portfolio already includes around 20 assets in Cheadle, Bolton, Salford, Altrincham, Old Trafford, Sale, and Bredbury.

Speaking to Place North West since Neo opened, Oglesby said no new acquisitions had happened yet but are in the plan. He explained: “We see it developing over a period of time, we will be looking to make further acquisitions. In the first instance, it’s about getting it absolutely clear that we’re aligned with the local authorities in the towns.”

Oglesby explained the approach in Old Trafford as an example of the strategy already getting traction. “If you look at our concentration close to Trafford Town Hall, we’ve got a couple of assets which aren’t in the city centre but are close and would be better linked into the events we’ve got there, such as introducing the shared space at Neo. We are in the process of remodelling Trafford House with the same lounge facilities, cycle facilities, gym, that you would put into the city centre buildings, with a view to attracting businesses that otherwise potentially would have gone into the centre but are looking for a lower cost option. We are working with Trafford Council on that part of Trafford and wider amenities to support the business community there.”

The Trafford House remodelling was triggered by the exit of AJ Bell from 70,000 sq ft across about 12 different suites when the financial advisor consolidated to Exchange Quay in Salford.

However, the city centre-style polish won’t be limited to Trafford House. Oglesby added: “We have got a number of assets that we’re looking to reposition and have started conversations with the local authorities in those towns. The key thing is there is an absolute focus on those town centres and it’s as much about what you don’t do as about what you do; promoting the town centre but ensuring that other activity that has drained out of the town centre such as retail and offices isn’t then promoted through further out-of-town retail and out-of-town office development as well.”

On disposals

Bruntwood has sold a handful of buildings in the past couple of years including office buildings that have been converted to apartments.

“There’s very little left [to sell] – we did a number of office-to-resi conversions such as Orleans House [in Liverpool] which we sold on to Delph after developing it ourself, Fairbairn House in Sale, Trafford Plaza in Trafford. Furness House has just completed in Salford Quays.

“Pretty well everything that we own now you would call core, maybe a couple of smaller ones at some point. But particularly having got clear now what our strategy is for those properties that we own in those suburban town centre markets, whereas we might have looked to have exited those properties two years ago we are clear now that we have a strategy for those properties and what the occupier demand will be for them going forward.

“Because we had that suck into the city centre for such a long period there was a point where you thought it was one-way traffic. The city is growing very fast and will continue to grow. Those markets [outside the city centre] provide a good additional proposition to the city. And having strong town centres surrounding the city is very important.”

Follow the transport money

“It keeps it balanced so the market in the city will continue to grow but at a more sustainable pace. We have got some infrastructure challenges which have got to be addressed in the city. We have got to sort out the big strategic transport projects, having had real success with the local public transport network, with Metrolink, the reregulation of the buses is going to be very important to ensure they’re working effectively. Ensuring we’ve got future residential development that’s aligned with the public transport network that we’ve got is key. So, where we’ve got Metrolink working under capacity in a number of locations, that we’re putting the residential development in where we’ve put the transport investment, as opposed to developing further residential property in unsustainable locations where we’re just going to load up the roads even further.

“And we know that solving those issues on the roads is far longer term and more difficult, so the infrastructure challenges of the city mean that in the short term it plays further into the outlying town centres. But the last thing we need to be doing is then building further out-of-town offices in those locations where already the roads can’t handle it.”

On this point in the cycle

“I don’t think we’re at what you would call the top of the market. We’re not banking on the market giving us a significant additional push above and beyond the returns that we generate out of our own activity. Bruntwood has grown over the years by creating value itself and then by generating revenue returns through the letting of our property. When we look at our business and planning it going forward we don’t assume yields are going to compress or rents are going to grow. We are looking at generating value as a result of the activity that we are undertaking to the portfolio.

“At the moment, I still think we’ve got further rental growth in the city until there’s such a pipeline of development that we oversupply slightly and I don’t know when that is going to be at the moment. The pace at which we’re taking up space is faster and the quality of that demand is better than I’ve ever known it. But equally the supply pipeline is significantly greater than I’ve ever known it as well.”

Bruntwood at a glance:

• £86m spent in 2016 on new and refurbished space
• £1.4bn value of planned development by 2020 totalling 1.8m sq ft
• 860,000 sq ft of lettings concluded in 2016
• £473m net worth
• £67.9m pre-tax profit
• 4.1m sq ft, office stock owned in Manchester city centre alone
• 400,000 sq ft approved new lab and offices at Alderley Park, Cheshire
• 4m sq ft, overall size of mixed-use Circle Square joint venture with Select Property Group, currently on site on Oxford Road

Developments launching in autumn 2017

• 120,000 sq ft ‘Platform’ in Leeds city centre
• 110,000 sq ft ‘Cornerblock’ in Birmingham city centre
• 52,000 sq ft ‘Union’ in Manchester city centre
• 70,000 sq ft ‘Bright Building’ at Manchester Science Park

Pipeline for 2018/19

• 230,000 sq ft ‘No.2 Circle Square’, Oxford Road Manchester
• 40,000 sq ft total for University Green retail at Manchester Business School
• 220,000 sq ft total for Citylabs 2.0 and 3.0, Oxford Road Manchester
• 155,000 sq ft total for Siemens site development, Didsbury