Watford’s office market is at a crossroads. One way leads to a strong development market, the other to stagnation. It all depends on this year’s rental uplift, as Charlie Jacoby finds out.
Prime office space is being swallowed up fast, but rents are hardly budging. Rents need a 50% uplift before developers will press ahead with new schemes in Watford and so the question is, will Watford get that uplift by 1997, or will it die as an office centre?
Naturally, agents go for the former. “I’ve got to say it because I’m optimistic,” says Stimpsons’ Jim Townsend, “but I think rents have got to go up.”
Knight Frank’s Nick Evamy agrees. “Watford is where Slough was two years ago. The new space has gradually been whittled down. I think there’s a good chance of somebody starting on site on Clarendon Road [the prime office pitch] this year. The trouble is, your net effective rent there is so low.”
Many people lame Legal & General for the local slump in rental values. At the height of the recession, L7G had more that 46,450m² (500,000 sq ft) of new office space in Hertfordshire which it was having trouble letting. It slashed quoting rents, which have never recovered. Nobody in Watford denies that rents should be cut during a recession, but this situation adds a dimension to the old argument of which is more important, turnover of value, by showing that the turnover solution is extremely short-termist.
L&G still has large holdings in Hertfordshire, all on the books of Lambert Smith Hampton and Weatherall Green & Smith. The Edward Hyde building on Clarendon Road has seen recent lettings, leaving 2,016m² (21,700 sq ft) to let. Wolsey Park has had no vacancies since the last 1,394m² (15,000 sq ft) went under offer at a headline rent of £135 per m² (£12.50 per sq ft). However, there is still 1,579m² (17,000 sq ft) to let at the Belfry at a quoting rent of £151 per m² (£14 per sq ft).
The belfry’s main rival is Standard Life’s 30.4ha (75 acre) Croxley Business Park. Here, a 4,181m² (45,000 sq ft) letting is about to take place on Malvern House, which has a quoting rent of £199 per m² (£18.50 per sq ft). “Croxley Park has gone through a difficult time,” admits Townsend, “but we’re now talking to someone on 4,181m² (45,000 sqft) and we have interest in two suites of 929m² (10,000 sq ft).
Croxley joint letting agents Stimpsons and Jones Lang Wootton are offering three-year leases on small suites from 129m² (1,389 sq ft) at £171 per m² (£15.90 per sq ft) for rents, rates and service charge. Construction of a dual-carriageway access road from the A412 to Croxley is due to begin this month, with completion by the end of the year.
According to Stimpsons’ figures, in the past year Watford has seen take-up of air-conditioned offices totalling 11,459m² (123,350 sq ft) in the town centre and 9,830m² (105,816 sq ft) out of town. Knight Frank research suggests that the town has 18,407m² (198,141 sq ft) of good-quality space available, of which 3,919m² (42,181 sq ft) is
grade A second-hand space. More that half of the new space is at Croxley. All this adds up to less that a year’s supply of good-quality space.
Even though demand is there, Watford has seen no identifiable demand trends. “Demand is all over the place,” says Stimpsons’ Paul Felton about Croxley. We’ve had people coming from Harrow, from Slough, we had an American mortgaging company, a printing equipment company, and a telephone supports operation for British Airways’ executive club. You would think we would have a lot of pharmaceutical and computer companies, but it had not been the case. We particularly concentrate our marketing on north-west London – people around the North Circular who want to move.”
Were rents to increase, two schemes might go ahead. The first is Sun Alliance’s plan for 3,307m² (35,600 sq ft) at 46 Clarendon Road. The second is Bowmer & Kirkland’s 2,787m² (30,000 sq ft) 10 Beechan Grove, available as a prelet. But, as Townsend says, with prime rents at on £108 to £129 per m² (310 to £12 per sq ft), nobody can afford to build. B&K wants at least £194 per m² (£18 per sq ft) before it starts on Beechan Grove. At the height of the boom, Watford achieved £334 per sq m² (£31 per sq ft).
The second-hand market needs a boost. Brown hopes that tenants wanting new space will settle for second-hand accommodation. “Nut if they’re very quality conscious, they may go altogether,” he warns.
There are glimmers of hope for those landlords prepared to partially refurbish and the let floor by floor. “They’re very little quality second-hand space,” says Townsend. “However, Southend Estates is refurbishing some of the space it owns at Gresham House, Clarendon Road, to get rents of £54 to £65 per m² (£5 to £6 per sq ft). It has reasonable facilities: you can park there, it’s clean, it’s bright.”
Shopping in Watford is now dominated by the 69,675m² (750,000 sq ft) Harlequin Shopping Centre, owned by Capital Shopping Centres. Lunson Mitchenall acts for CSC on the 160-unit centre, which last month saw a good letting to Virgin. “There is great demand for the Harlequin,” days Felton, “It’s a thriving centre.” CSC puts the rental tone in the centre at £1,668 per m² (£155 per sq ft) with turnover on top. But market sources suggest that top zone As are closer to £1,346 per m² (£125 per sq ft zone A).
The Harlequin has had an effect on the High Street. “Most of the top end is A3 now – pubs and restaurants,” observes Townsend.
For non-food retail, Townsend puts rental levels at £172 per m² (£16 per sq ft). Homebase is thought to be paying this figure for a 3,781m² (40,694 sq ft) unit to be developed by Hunting Group on St Albans Road. King Sturge & Co and Belcher Nurton Holt acted for HG. Two other non-food retail locations are The Arches on Lower High Street and Colne Bridge, both originally developed by Citigrove. The Arches, which opened three years ago, consists of 11,613m² (125,000 sq ft) anchored by B&Q. The 2,787m² (30,000 sq ft) Colne Bridge has been trading for two years and has seen letting to Fads, Tempo and Essex Furniture. “Watford has always been very good for non-food retail, and there are still a lot of names who aren’t represented in the area,” says Townsend.
Meanwhile, the industrial market hands on Slough Estates’ decision whether to go ahead with its plans for Aldenham bus station. Jones Lang Wootton is looking for prelets on the site, which has potential for 92,900m² (1m sq ft). “We’ve got clients building small industrial units in Watford [up to 232m² to 2,500 sq ft],” says Felton. “And we’re looking at rents of £86 per m² (£7.95 per sq ft). But, apart from that, the last industrial scheme was three years ago.”
“We really need new stock,” agrees Brown. “It may be that anyone with fairly immediate requirements is going to disappear elsewhere.”
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OFFICE TAKE -UP |
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1991 |
707m² |
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1992 |
5,090m² |
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1993 |
9,037m² |
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1994 |
3,902m² |
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1995 |
19,196m² |
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KEY TRANSACTIONS |
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