Refurbished offices give new buildings a run for their money

Jul 18 2007 by Tony McDonough, Liverpool Daily Post

As Liverpool shows a new face to the world, Tony McDonough talks to the biggest players

DOWNING and Bruntwood are by far the two biggest players in Liverpool’s office market and both companies will tighten their grip as they prepare to spend war chests containing almost £300m.

Much has been said and written about how vital it is for Liverpool city centre to have a steady stream of quality office space to meet rising demand from potential occupiers.

Discussion often concentrates on the availability of new-build Grade A accommodation, with sites like Rumford’s 20 Chapel Street development or English Cities Fund’s St Paul’s Square scheme cited as premium locations.

However, the quality threshold in the market for secondary office space is also being raised.

UK Land and Property is quietly beavering away bringing the magnificent Exchange Flags complex back up to scratch, but its Liverpool’s own Downing and Manchester-based Bruntwood that are the clear leaders of the pack.

Both companies already own substantial portfolios in and around the city and they both boast of war chests worth £140m and £150m respectively, to fund further acquisitions.

They claim they are refurbishing their properties to very high standards yet offering space at rents of between £15.50 and £18 per sq ft, below the current headline rent for brand new space of £20 per sq ft.

At the end of last month Downing founder, George Downing, picked up the Businessperson of the Year accolade at the Daily Post Regional Business Awards. It was well deserved.

His company is now the biggest commercial landlord in the city, with almost 1m sq ft under management. Its portfolio includes the Port of Liverpool Building, Wellington Building on the Strand, and No 1 Old Hall Street.

Last year the company paid £51m, a record for the city centre, for the Royal and Sun Alliance building in Old Hall Street, known locally as the “Sandcastle”.

Downing has renamed it The Capital and is currently spending well in excess of £10m upgrading and refurbishing the inside to standard it claims will be as good as, if not better, than Grade A space currently available. Floorplates are being made available to cater for lettings from 10,000 sq ft right up to 50,000 sq ft.

“I believe you will not see anything better in Liverpool than the space we have refurbished at The Capital,” said Downing’s development director, Paul Houghton. “We think this is better than the new space.

“The space there can accommodate a proper corporate headquarters, and we believe the tenants are out there, and that The Capital will be on everyone’s shortlist.”

Bruntwood is equally bullish about the quality of The Plaza, the former Littlewoods headquarters, also in Old Hall Street.

It acquired The Plaza for £24.5m more than three years ago and has since spent a further £20m refurbishing it. A number of new tenants have been attracted to the 350,000 sq ft building which is being refurbished floor by floor, and further space is being added to take the floor-space beyond 400,000 sq ft.

Bruntwood is also moving the main entrance to face onto the fast emerging St Paul’s Square, and creating office space for short-term use as well as providing meeting rooms for hire. Companies attracted to the building include the corporate operations of Alliance and Leicester and Co-operative Bank. Royal Bank of Scotland is due to move into 21,000 sq ft of space later this year.

The company’s regional director for Liverpool, David Guest, said quality of product was just one aspect of the overall package which had made The Plaza a real draw for top-tier tenants.

“When potential occupiers are considering a location they don’t just consider the quality of the space but the overall value of what is on offer,” he added. “They look for flexibility in the contract and they look for a level of service. They will always need to tick more than one box.”

Bruntwood sales and development surveyor in Liverpool, Colin Forshaw, insisted, like Downing, the company was giving new-build a real run for its money.

“With the quality of refurbishment and service offered in The Plaza I think we are creating a benchmark in Liverpool and we are competing head-to-head with new space,” he said.

In the last couple of weeks Bruntwood has also completed the £20m purchase of the Cotton Exchange and Cotton House in Old Hall Street, and will spend a further £3m on refurbishment.

This means that in Liverpool and Merseyside, between them the two companies are managing almost 2m sq ft of office space. The question is are the occupiers out there to fill it? Mr Houghton believes they are. “There is currently sufficient supply for the demand out there, but I think we need to start thinking bigger as a city because I think we can all go a lot further,” he said.

“I think agencies like The Mersey Partnership have a responsibility to get potential inward investors to the city’s front door, and it’s the responsibility of companies such as ourselves to make sure the stock is available when they do come.

“We need to let the major professional services firms know Liverpool is now as good a destination, if not better, than Manchester or Leeds. It’s all about confidence.”

The manager of Downing’s Liverpool portfolio, John Clegg, agreed, but added that although they and Bruntwood were rivals, the success of both firms would benefit the city as a whole.

“While we are competing with Bruntwood on a case by case basis, collectively, we are helping to create more demand.”

Mr Guest said a correct balance of supply was important: “You don’t want too little, but you don’t want too much either. I think the balance in the city is right at the moment and I think there is capacity there to meet rising demand.”

One of Liverpool’s leading commercial property agents, Chris Hennessey of CB Richard Ellis, said the benchmarks set by Bruntwood and Downing in the quality of their refurbishments was forcing other landlords to raise their game.

He added: “Property owners now know that if you fail to hit the level that is now being set for secondary space then you will struggle to find occupiers.

“We act for Bruntwood at the Plaza and last year around 110,000 sq ft was let, that is a quarter of all the space let in the city during that period.

“I think what they have done there has created a quality product and provided an excellent level of service. The rents are less than brand new Grade A space and a lot of flexibility in terms of tenure and suite size is being offered.

“Occupiers are now very discerning and they want to see the quality of the product before they commit, but if you are prepared to offer space of this kind of quality then there will be a demand for it.”

tonymcdonough